<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BECKMAN COULTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3826 95-1040600
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
CALIFORNIA BECKMAN INSTRUMENTS (NAGUABO) INC. 33-0593479
CALIFORNIA HYBRITECH INCORPORATED 33-0680402
DELAWARE SMITHKLINE DIAGNOSTICS, INC. 95-1898957
DELAWARE COULTER CORPORATION 59-1635784
(STATE OR OTHER JURISDICTION OF (EXACT NAME OF REGISTRANT (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) AS SPECIFIED IN ITS CHARTER) IDENTIFICATION NO.)
</TABLE>
------------------------
4300 NORTH HARBOR BOULEVARD
FULLERTON, CALIFORNIA 92835
(714) 871-4848
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM H. MAY
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
4300 NORTH HARBOR BOULEVARD
FULLERTON, CALIFORNIA 92835
(714) 871-4848
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
BRIAN G. CARTWRIGHT
LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
------------------------
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 statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(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
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<CAPTION>
========================================================================================================================
PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PROPOSED AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.10% Senior Notes due 2003...... $160,000,000 100% $160,000,000 $47,200
- ------------------------------------------------------------------------------------------------------------------------
7.45% Senior Notes due 2008...... $240,000,000 100% $240,000,000 $70,800
========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
BECKMAN COULTER, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<S> <C> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus........................... Outside Front Cover Page; Cross Reference Sheet;
Inside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Inside Front Cover Page; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information.......................... Prospectus Summary; Risk Factors; Selected
Historical Financial Information of Beckman;
Selected Historical Financial Information of Coulter
4. Terms of the Transaction............. The Exchange Offer; Certain Federal Tax
Considerations, Description of Notes
5. Pro Forma Financial Information...... Prospectus Summary; Pro Forma Financial Statements
6. Material Contacts with the Company
Being Acquired....................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............ Not Applicable
8. Interests of Named Experts and
Counsel.............................. Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... Not Applicable
10. Information with Respect to S-3
Registrants.......................... Prospectus Summary; The Acquisition; Capitalization;
Pro Forma Financial Statements; Selected Historical
Financial Information of Beckman; Selected
Historical Financial Information of Coulter;
Management's Discussion and Analysis of Financial
Conditions and Results of Operations; Business;
Management; Description of Credit Facility;
Description of Notes; Plan of Distribution;
Available Information; Incorporation of Certain
Documents By Reference; Legal Matters; Independent
Public Accountants; Financial Statements
11. Incorporation of Certain Information
by Reference......................... Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or
S-3 Registrants...................... Not Applicable
13. Incorporation of Certain Information
by Reference......................... Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants.......................... Not Applicable
15. Information with Respect to S-3
Companies............................ Not Applicable
16. Information with Respect to S-2 or
S-3 Companies........................ Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies...... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer.... Management; The Exchange Offer
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED APRIL 17, 1998
PROSPECTUS
OFFER TO EXCHANGE
7.10% SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003
AND
7.45% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008
OF
BECKMAN COULTER, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998 UNLESS EXTENDED.
------------------------
Beckman Coulter, Inc., a Delaware corporation (formerly known as Beckman
Instruments, Inc.) (the "Company"), hereby offers (the "Exchange Offer"), upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
(i) its outstanding 7.10% Senior Notes due 2003 (the "Initial 2003 Notes"), of
which an aggregate of $160,000,000 in principal amount is outstanding as of the
date hereof, for an equal principal amount of newly issued 7.10% Senior Notes
due 2003 (the "Exchange 2003 Notes") and (ii) its outstanding 7.45% Senior Notes
due 2008 (the "Initial 2008 Notes" and, together with the Initial 2003 Notes,
the "Initial Notes"), of which an aggregate of $240,000,000 in principal amount
is outstanding as of the date hereof, for an equal principal amount of newly
issued 7.45% Senior Notes due 2008 (the "Exchange 2008 Notes" and, together with
the Exchange 2003 Notes, the "Exchange Notes"). The form and terms of the
Exchange Notes are the same as the form and terms of the Initial Notes except
that (i) the Exchange Notes will have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a registration statement
of which this Prospectus is a part (the "Registration Statement") and,
therefore, the Exchange Notes will not bear legends restricting the transfer
thereof and (ii) holders of the Exchange Notes will not be entitled to certain
rights of holders of the Initial Notes under the Registration Rights Agreement
(as defined herein), which rights will terminate upon the consummation of the
Exchange Offer. The Exchange Notes will evidence the same debt as the Initial
Notes (which they replace) and will be entitled to the benefits of an indenture
dated as of March 4, 1998 governing the Initial Notes and the Exchange Notes
(the "Indenture"). The Initial Notes and the Exchange Notes are sometimes
referred to herein collectively as the "Notes." See "The Exchange Offer" and
"Description of Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Initial Notes. Consequently, interest on the Exchange Notes will be
payable semi-annually on March 4 and September 4 of each year, commencing
September 4, 1998. The Exchange Notes will be redeemable, in whole or in part,
at the option of the Company at any time at a redemption price equal to the
greater of (i) 100% of the principal amount of such Exchange Notes or (ii) as
determined by an Independent Investment Banker (as defined herein), the sum of
the present values of the remaining scheduled payments of principal and interest
thereon discounted to the redemption date on a semiannual basis at the Adjusted
Treasury Rate (as defined herein), plus, in each case, accrued interest thereon
to the date of redemption. See "Description of Notes -- Optional Redemption." In
addition, upon the occurrence of a Change of Control Triggering Event (as
defined herein), each holder of the Exchange Notes will have the right to
require that the Company repurchase all or any part of such holder's Exchange
Notes at a repurchase price in cash equal to 100% of the aggregate principal
amount thereof plus accrued interest, if any, to the date of such repurchase.
See "Description of Notes -- Change of Control."
The Exchange Notes will be unsecured senior obligations of the Company, and
the Indebtedness (as defined herein) evidenced by the Exchange Notes will rank
pari passu in right of payment with all other existing and future senior
obligations of the Company, including all borrowings under the Credit Facility
(as defined herein), and senior in right of payment to all future obligations of
the Company subordinated in right of payment to the Exchange Notes. As of
December 31, 1997, the outstanding Indebtedness of the Company and the Note
Guarantors (as defined herein) was $1,127.4 million (excluding capital lease
obligations), none of which was secured Indebtedness, and the outstanding
Indebtedness of the Company's subsidiaries (other than the Note Guarantors) was
approximately $98.2 million (excluding capital lease obligations). The Exchange
Notes will be fully and unconditionally guaranteed on an unsecured, senior basis
by Coulter Corporation and certain other subsidiaries of the Company. Each such
guarantee will be an unsecured, senior obligation of the respective Note
Guarantor and will rank pari passu in right of payment with all other existing
and future senior obligations of such Note Guarantor, including any guarantee of
borrowings under the Credit Facility, and senior in right of payment to all
future obligations of such Note Guarantor subordinated in right of payment to
the guarantee of the Exchange Notes. Each such guarantee will be subject to
release and discharge as provided in the Indenture.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND
AN INVESTMENT IN THE EXCHANGE NOTES.
------------------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Prospectus is , 1998
<PAGE> 4
The Company will accept for exchange any and all validly tendered Initial
Notes not withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Initial Notes may be withdrawn at
any time prior to the Expiration Date. Initial Notes may be tendered only in
integral multiples of $1,000. The Exchange Offer is subject to certain customary
conditions, but is not conditioned on any minimum principal amount of Initial
Notes being tendered for exchange. See "The Exchange Offer -- Conditions."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Initial Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act; provided that the holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Initial Notes
wishing to accept the Exchange Offer must represent to the Company, as required
by the Registration Rights Agreement, that such conditions have been met. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Initial Notes, where such Initial Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Company believes that none of the registered holders of the Initial
Notes is an affiliate (as such term is defined in Rule 405 under the Securities
Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Exchange Notes will not be listed on any securities exchange, but the
Initial Notes are eligible for trading in the National Association of Securities
Dealers, Inc.'s Private Offerings, Resales and Trading through Automatic
Linkages (PORTAL) market. There can be no assurance that an active market for
the Notes will develop. To the extent that a market for the Notes does develop,
the market value of the Notes will depend on market conditions (such as yields
on alternative investments), general economic conditions, the Company's
financial condition and certain other factors. Such conditions might cause the
Notes, to the extent that they are traded, to trade at a significant discount
from face value. See "Risk Factors -- Absence of Public Market; Restrictions on
Transfer."
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 such 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. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Initial Notes where such
Initial Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. See "The Exchange Offer -- Resale of the
Exchange Notes" and "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
this Exchange Offer. See "The Exchange Offer -- Resale of the Exchange Notes."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF INITIAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY
i
<PAGE> 5
EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to the Exchange Offer
will be issued in the form of one or more fully registered global notes that
will be deposited with, or on behalf of, the Depository Trust Company ("DTC" or
the "Depositary") and registered in its name or in the name of Cede & Co., as
its nominee. Beneficial interests in the global note representing the Exchange
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants. After the initial
issuance of such global note, Exchange Notes in certificated form will be issued
in exchange for the global note only in accordance with the terms and conditions
set forth in the Indenture. See "The Exchange Offer -- Book-Entry Transfer."
ii
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the related notes thereto, appearing elsewhere in this Prospectus. The
market share and competitive position data contained in this Prospectus are
based upon industry sources and Company estimates. Although such data are
inherently imprecise, based on its understanding of the markets in which the
Company competes, management believes that such data are generally indicative of
the Company's relative market share and competitive position. The term
"Coulter," as used herein, refers to Coulter Corporation and includes, unless
the context otherwise requires, all of its consolidated subsidiaries. The term
"Company," "Beckman" or "Beckman Coulter" refers to Beckman Coulter, Inc.,
(formerly known as Beckman Instruments, Inc.) and includes, unless the context
otherwise requires, all of its consolidated subsidiaries, including Coulter. The
term "Pro Forma 1997" refers to the fiscal year ended December 31, 1997 for
Beckman (which includes results for Coulter from November 1, 1997) and the ten
months ended October 31, 1997 for Coulter, on a pro forma basis giving effect to
the acquisition of Coulter by Beckman on October 31, 1997 (the "Acquisition"),
the offering of the Initial Notes (the "Offering") and the application of the
net proceeds therefrom. "Fiscal 1997" refers to Beckman's fiscal year ended
December 31, 1997. "Fiscal 1996" and "Fiscal 1995" refer to Beckman's fiscal
years ended December 31, 1996 and 1995, respectively, or Coulter's fiscal years
ended March 31, 1997 and 1996, respectively, as the context requires.
THE COMPANY
OVERVIEW
Beckman Coulter is a world leader in providing systems that simplify and
automate laboratory processes. The Company designs, manufactures and services a
broad range of laboratory systems consisting of instruments, reagents and
related products that customers use to conduct basic scientific research, drug
discovery research and diagnostic analysis of patient samples. Approximately 75%
of the Company's Pro Forma 1997 sales were for clinical diagnostics
applications, principally in hospital laboratories, while the remaining sales
were for life sciences and drug discovery applications in universities, medical
schools, and pharmaceutical and biotechnology companies. The Company's systems
address over 75% of the hospital laboratory test volume, including virtually all
routine laboratory tests. The Company believes that it is a worldwide market
leader in its primary markets, with well-recognized systems and a reputation for
high-quality, reliable service. After giving effect to the Acquisition, the
Company had sales and EBITDA of $1.8 billion and $278.2 million, respectively,
for Pro Forma 1997.
The Company's systems improve efficiency by integrating customer laboratory
operations. The design of these systems draws upon the Company's extensive
expertise in the chemical, biological, engineering and software sciences.
Beckman Coulter has an installed base of approximately 75,000 systems in over
120 countries, which the Company believes will provide a recurring stream of
revenue and cash flows from the sale of reagents, consumables and services after
initial system placement ("After Sales"). Approximately 67% of the Company's Pro
Forma 1997 sales were derived from After Sales, while the remaining 33% were
derived from the direct placement of systems.
On October 31, 1997, Beckman acquired all of the outstanding capital stock
of Coulter, which became a wholly owned subsidiary of Beckman. See "The
Acquisition." The acquisition of Coulter represents a significant milestone in
accomplishing the Company's strategy to solidify its position as a leading
provider of laboratory systems, adding Coulter's leading market position in
hematology and number two position in flow cytometry. Coulter is the world's
leading manufacturer of in vitro diagnostic ("IVD") systems for blood cell
analysis (hematology), with a market share in hematology approximately twice
that of its next largest competitor. Beckman and Coulter serve substantially the
same customer base but have essentially no overlap in their product offerings.
As a result, the Company expects to be able to enhance the operating efficiency
of the combined entities through cross-selling and reduced operating costs. The
Acquisition provides the Company with a significant opportunity to cross-sell
existing product lines between Beckman's and Coulter's existing customers.
1
<PAGE> 7
COMPETITIVE STRENGTHS
LEADING POSITION IN THE SIMPLIFICATION AND AUTOMATION OF LABORATORY
PROCESSES. The Acquisition significantly expanded Beckman's presence in the
clinical diagnostics and life sciences markets and combined Beckman and Coulter,
two of the most recognized global franchises and brand names in these markets.
In particular, Coulter's number one market position in hematology significantly
strengthens Beckman's global leadership in the clinical diagnostics market. This
will enhance the Company's ability to offer integrated testing capabilities and
automation options that can match a wider range of laboratory test volume,
capitalizing on the efforts of laboratories to improve productivity and reduce
costs.
RECURRING AFTER SALES FROM SUBSTANTIAL INSTALLED BASE. The Company
generates a recurring stream of revenues and cash flows from its large installed
base of approximately 75,000 systems, which require the ongoing consumption of
various reagents, consumables and services. After Sales revenue accounted for
approximately 67% of the Company's Pro Forma 1997 sales. In addition, the
Company's large installed base provides a strong foundation for new product
introductions and upgrades, since many customers tend to remain with an existing
supplier who can reliably provide quality products and services.
BROAD PRODUCT OFFERING. The Company manufactures and markets a more
comprehensive range of laboratory systems than any of its competitors. In
hospitals, the Company's broad product line addresses approximately 75% of all
testing volume, including virtually all routine laboratory tests. This
broad-based capability allows the Company to capitalize on the trend among
hospitals and laboratories toward preferred supplier arrangements and combined
product purchases. The Company offers more than 180 different clinical
diagnostics tests and a full range of hematology capabilities, giving customers
the ability to diagnose and monitor a wide variety of diseases and conditions.
The Company also provides a wide range of systems for life sciences applications
and is the industry leader in centrifugation, capillary electrophoresis and high
throughput screening for drug discovery. The Company believes that broadening
its product portfolio targeted to its existing laboratory customer base will
allow it to leverage its manufacturing and distribution capabilities, extensive
worldwide sales and service infrastructure and product development capabilities
as well as finance and administration activities.
WORLDWIDE SALES AND SERVICE NETWORK. Beckman Coulter maintains an extensive
worldwide sales, service and distribution network, generating approximately
one-half of the Company's Pro Forma 1997 sales outside the United States. This
sales and service network, furnishing service to customers in more than 120
countries, provides Beckman Coulter with recurring revenues and cash flows,
access to new product and application ideas, and sales opportunities from new
and existing customers.
BUSINESS STRATEGY
Beckman Coulter's goal is to profitably gain and retain customers by
providing quality products and services that simplify and automate biochemical
analyses across the technological continuum that extends from academic and
commercial research to clinical diagnostics laboratories. In pursuit of this
goal, the Company focuses on the following key initiatives:
IMPROVE LABORATORY PRODUCTIVITY. By integrating its systems into customer
processes, Beckman Coulter improves productivity and reduces costs in
laboratories worldwide. Laboratories are increasingly focused on automation as a
means of controlling labor costs, which typically account for over 50% of total
laboratory costs. Marketed as "The Power of Process," the Company's approach is
to link pre-analytical and analytical steps with robotics systems to automate
nearly the entire testing process. The Company will continue to focus on its
customers' needs to maximize laboratory operating efficiencies.
EXPAND MARKET SHARE THROUGH PRODUCT DEVELOPMENT. The Company's expertise in
simplifying and automating processes for biological laboratories forms a
technological continuum, which Beckman Coulter can broadly apply to develop a
range of products that are configured to meet specific customer needs in both
the clinical diagnostics and life sciences markets. The Company believes that
its close relationships with research laboratories allow the Company to identify
and commercialize new research techniques. Once brought to the marketplace, the
Company is in a position to translate technology into systems targeted for
2
<PAGE> 8
diagnostic needs. Both Beckman and Coulter historically have invested
considerable capital on research and development efforts, contributing to their
leadership in their respective markets and allowing them to consistently provide
new products. In Fiscal 1997, Beckman invested $123.6 million, or 10.3% of
sales, on research and development.
INCREASE INSTALLED BASE TO GENERATE AFTER SALES. One of the Company's
primary objectives is to maximize systems installations to generate future After
Sales revenue. Over the last six years, Beckman has ranked first in total
systems placements in automated clinical chemistry, its largest product
category. The Company believes that increasing its installed base of instruments
will generate increased reagent, consumables and service revenue, and expand
opportunities for new product sales and systems upgrades. In addition,
management believes that providing a fully integrated system that is reliable
and easy to use results in high switching costs and loyalty among customers who
value consistency and accuracy in test results.
PURSUE SELECTED ACQUISITION OPPORTUNITIES. The primary focus of Beckman's
acquisition strategy has been to broaden its product offerings. Beckman
significantly strengthened its diagnostic immunochemistry offerings, including
products for cancer diagnostics, through the acquisitions of Hybritech
Incorporated in January 1996 and the Access immunoassay product line of Sanofi
Diagnostics Pasteur in April 1997. Beckman also acquired high throughput
screening and robotics technology for drug discovery from Sagian, Inc. in
December 1996 and DNA sequencing technology through the acquisition of Genomyx
Inc. in October 1996. The acquisition of Coulter represents a significant
milestone in accomplishing the Company's strategy to solidify its position as a
leading provider of laboratory systems through Coulter's leading market position
in hematology and number two position in flow cytometry.
CONTINUE TO MAXIMIZE OPERATING EFFICIENCY. Beckman has a proven track
record of managing costs and improving operating efficiency through integrating
acquisitions, consolidating redundant functions and realizing potential
synergies in its business. For example, during 1993, Beckman strategically
repositioned itself in response to changes in the worldwide healthcare market by
consolidating redundant functions and improving overall efficiency. This
resulted in annualized savings of over $50 million in 1996. In connection with
the Acquisition, management believes annual synergies of at least $60 million
can be achieved by 1999 with further gains anticipated in 2000, stemming from a
combination of increased revenues related to cross-selling opportunities as well
as reduced operating costs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Summary of Effects of the
Acquisition." No assurances can be given as to whether and to what extent such
annual synergies may be actually realized in the future. See "Risk
Factors -- Ability to Successfully Integrate Coulter."
RECENT DEVELOPMENTS
SUCCESSFUL CONSUMMATION OF THE COULTER ACQUISITION
On October 31, 1997, Beckman acquired all of the outstanding capital stock
of Coulter, which became a wholly owned subsidiary of the Company. The
Acquisition joins two of the most recognized global franchises in clinical
diagnostics and life sciences and is a major part of Beckman's initiative to
become a broad-based world leader in IVD testing. The purchase price for the
Acquisition totaled $1,178.0 million, consisting of $875.0 million in cash,
assumed liabilities of $170.0 million and purchase liabilities of $133.0
million. See "The Acquisition."
DELEVERAGING INITIATIVES ACHIEVED AND ANTICIPATED
Since the Acquisition, the Company has commenced a debt reduction plan. The
Company's plan includes selling certain financial assets (primarily consisting
of lease receivables and equipment subject to customer leases) and real estate
assets to reduce debt and provide funds for integration purposes. During
December 1997, the Company sold financial assets having a net book value of
approximately $71 million and received approximately $75 million in cash
proceeds. The Company applied these proceeds, together with funds from
operations, to reduce the Company's debt by $100 million to approximately $1,250
million at December 31, 1997. The Company intends to consummate sale-leaseback
transactions with respect to some of its real estate
3
<PAGE> 9
assets which the Company expects will generate proceeds of approximately $150
million in 1998 and approximately $40 million in 1999. Further, the Company
expects to sell an additional $30 million of lease receivables in 1998. See
"Management's Discussion of Financial Condition and Results of
Operations -- Events Impacting Comparability -- Sale of Assets; -- Financial
Condition -- Liquidity and Capital Resources -- Future Financing Sources and
Cash Flows."
OTHER MANAGEMENT INITIATIVES
The Company has announced cost-saving initiatives that are designed to
rationalize manufacturing capacity, close duplicate field offices, align
distribution networks, combine administrative functions and size the Company to
match market conditions. The first of these changes has been announced and
includes staff reductions in Florida, California and Europe, along with the
termination of manufacturing at a Coulter facility in Luton, England. This first
initiative affects approximately 600 positions. These cost-saving initiatives,
together with anticipated cross-selling opportunities, are part of the Company's
plan to realize at least $60 million in annual synergies by 1999. See
"Management's Discussion of Financial Condition and Results of Operations --
Summary of Effects of the Acquisition."
THE OFFERING AND THE TENDER OFFER
On March 4, 1998, the Company completed the Offering of the Initial Notes.
On March 6, 1998, the Company launched a tender offer (the "Tender Offer") for
the purchase of any and all of its outstanding 7.05% Debentures due 2026 (the
"Old Debentures") at a purchase price of $1,000 per $1,000 principal amount of
Old Debentures tendered. Immediately prior to the launch of the Tender Offer,
the Company amended the indenture governing the Old Debentures to increase the
2006 put price to a price of 103.900% of the principal amount of the Old
Debentures and to provide guarantees, such that the Old Debentures are
guaranteed in the same manner and to the same extent as the Notes and the
borrowings under the Credit Facility. No Old Debentures were tendered in the
Tender Offer which expired on March 13, 1998.
4
<PAGE> 10
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Initial Notes that are properly
tendered and accepted. The Company will issue
Exchange Notes on or promptly after the Expiration
Date. There are $160,000,000 aggregate principal
amount of Initial 2003 Notes outstanding and
$240,000,000 aggregate principal amount of Initial
2008 Notes outstanding. See "The Exchange
Offer -- Purpose of the Exchange Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Initial Notes may be offered
for resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the
Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act
or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery provisions of
the Securities Act; provided that the holder is
acquiring Exchange Notes in the ordinary course of
its business and is not participating, and had no
arrangement or understanding with any person to
participate, in the distribution of the Exchange
Notes. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Initial
Notes, where such Initial Notes were acquired by
such broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
See "The Exchange Offer -- Resale of the Exchange
Notes."
Registration Rights
Agreement................ The Initial Notes were sold by the Company on March
4, 1998 (the "Offering") to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Salomon Brothers Inc,
Citicorp Securities, Inc., Credit Suisse First
Boston, Morgan Stanley Dean Witter, BancAmerica
Robertson Stephens, First Chicago Capital Markets,
Inc. and Goldman, Sachs & Co. (collectively, the
"Initial Purchasers") pursuant to a Purchase
Agreement, dated February 25, 1998, by and among
the Company and the Initial Purchasers (the
"Purchase Agreement"). Pursuant to the Purchase
Agreement, the Company and the Initial Purchasers
entered into a Registration Rights Agreement, dated
as of March 4, 1998 (the "Registration Rights
Agreement"), which grants the holders of the
Initial Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy
such rights, which will terminate upon the
consummation of the Exchange Offer. See "The
Exchange Offer -- Termination of Certain Rights."
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless the
Exchange Offer is extended by the Company in its
sole discretion, in which case the term "Expiration
Date" shall mean the latest date and time to which
the Exchange Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
5
<PAGE> 11
Accrued Interest on the
Exchange Notes and the
Initial Notes............ The Exchange Notes will bear interest from and
including the date of issuance of the Initial Notes
(March 4, 1998). Holders whose Initial Notes are
accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the
Initial Notes. See "The Exchange Offer -- Interest
on the Exchange Notes."
Conditions to the Exchange
Offer.................... Notwithstanding any other term of the Exchange
Offer, the Company shall not be required to accept
for exchange, or exchange the Exchange Notes for,
any Initial Notes, and may terminate the Exchange
Offer as provided herein before the acceptance of
such Initial Notes, if, in the reasonable judgment
of the Company, the Exchange Offer violates
applicable law, rules or regulations or an
applicable interpretation of the staff of the
Commission. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Initial Notes being tendered for exchange. See "The
Exchange Offer -- Conditions."
Procedures for Tendering
Initial Notes............ Each holder of Initial Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Initial Notes and any other required
documentation to The First National Bank of
Chicago, as exchange agent (the "Exchange Agent"),
at the address set forth herein. By executing the
Letter of Transmittal, the holder will represent to
and agree with the Company that, among other
things, (i) it is not an affiliate of the Company,
(ii) any Exchange Notes to be received by it are to
be acquired in the ordinary course of its business
and (iii) at the time of consummation of the
Exchange Offer, it has no arrangement with any
person to participate in the distribution (within
the meaning of the Securities Act) of the Exchange
Notes. In addition, in connection with the resale
of Exchange Notes, any broker-dealer (a
"Participating Broker-Dealer") who acquired the
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 Commission 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. Under the Registration
Rights Agreement, the Company is required to allow
Participating Broker-Dealers and other persons, if
any, subject to similar prospectus delivery
requirements to use the prospectus contained in the
Registration Statement in connection with the
resale of such Exchange Notes. See "The Exchange
Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Initial Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Initial Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial
6
<PAGE> 12
owner wishes to tender on such owner's own behalf,
such owner must, prior to completing and executing
the Letter of Transmittal and delivering such
owner's Initial Notes, either make appropriate
arrangements to register ownership of the Initial
Notes in such owner's name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Initial Notes who wish to tender their
Initial Notes and whose Initial Notes are not
immediately available or who cannot deliver their
Initial Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Initial Notes
according to the guaranteed delivery procedures set
forth under "The Exchange Offer -- Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the
Exchange Notes........... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Initial Notes that
are properly tendered in the Exchange Offer prior
to the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered on
the earliest practicable date following the
Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Withdrawal Rights.......... Tenders of Initial Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Certain Federal Tax
Considerations........... For a discussion of certain material federal income
tax considerations relating to the exchange of the
Exchange Notes for the Initial Notes, see "Certain
United States Federal Tax Considerations."
Exchange Agent............. The First National Bank of Chicago is serving as
the Exchange Agent in connection with the Exchange
Offer.
THE EXCHANGE NOTES
The Exchange Offer applies to $160,000,000 aggregate principal amount of
the Initial 2003 Notes and $240,000,000 aggregate principal amount of the
Initial 2008 Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Initial Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Initial Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Initial Notes (which they replace) and will be issued under, and be
entitled to the benefits of, the Indenture. For further information and for
definitions of certain capitalized terms used below, see "Description of Notes."
Notes Offered.............. $160,000,000 aggregate principal amount of 7.10%
Senior Notes due 2003 and $240,000,000 aggregate
principal amount of 7.45% Senior Notes due 2008.
7
<PAGE> 13
Interest Rate and Payment
Dates...................... The Exchange 2003 Notes will bear interest at the
rate of 7.10% per annum and the Exchange 2008 Notes
will bear interest at the rate of 7.45% per annum,
and such interest will be payable semi-annually in
arrears on March 4 and September 4, commencing
September 4, 1998.
Maturity Dates............. The Exchange 2003 Notes will mature on March 4,
2003 and the Exchange 2008 Notes will mature on
March 4, 2008.
Optional Redemption........ The Exchange Notes will be redeemable, in whole or
in part, at the option of the Company at any time
at a redemption price equal to the greater of (i)
100% of the principal amount of such Exchange Notes
or (ii) as determined by an Independent Investment
Banker, the sum of the present values of the
remaining scheduled payments of principal and
interest thereon discounted to the redemption date
on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued interest
thereon to the date of redemption. See "Description
of Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control
Triggering Event, each holder of the Exchange 2003
Notes and the Exchange 2008 Notes shall have the
right to require that the Company repurchase all or
any part of such holder's Exchange Notes at a
repurchase price in cash equal to 100% of the
aggregate principal amount thereof plus accrued
interest, if any, to the date of such repurchase.
See "Description of Notes -- Change of Control."
Note Guarantees............ The Indenture provides that the Company is required
to cause any of its Restricted Subsidiaries (as
defined herein) that guarantee Bank Indebtedness
(as defined herein) of the Company (including
indebtedness under the Credit Facility) to
irrevocably, fully and unconditionally guarantee
(the "Note Guarantees"), on an unsecured, senior
basis, the performance of all monetary obligations
of the Company under the Notes and the Indenture.
Any such Note Guarantee will be automatically and
unconditionally released and discharged upon the
release and discharge of all Guarantees by such
Restricted Subsidiaries of Bank Indebtedness of the
Company. The Indebtedness under the Credit Facility
and the Initial Notes is currently guaranteed by
Coulter Corporation and certain other domestic
subsidiaries of the Company.
Ranking.................... The Exchange Notes will be unsecured senior
obligations of the Company, and the Indebtedness
evidenced by the Exchange Notes will rank pari
passu in right of payment with all other existing
and future senior obligations of the Company,
including all borrowings under the Credit Facility,
and senior in right of payment to all future
obligations of the Company subordinated in right of
payment to the Exchange Notes. As of December 31,
1997, the outstanding Indebtedness of the Company
and the Note Guarantors was $1,127.4 million
(excluding capital lease obligations), none of
which was secured Indebtedness, and the outstanding
Indebtedness of the Company's subsidiaries (other
than the Note Guarantors) was approximately $98.2
million (excluding capital lease obligations). Each
Note Guarantee will be an unsecured, senior
obligation of the respective Note Guarantor and
will rank pari passu in right of payment with all
other existing and future senior obligations of
such
8
<PAGE> 14
Note Guarantor, including any guaranteed borrowings
under the Credit Facility, and senior in right of
payment to all future obligations of such Note
Guarantor subordinated in right of payment to its
Note Guarantee.
Restrictive Covenants...... The Indenture relating to the Exchange Notes
contains certain restrictive covenants, including,
but not limited to, covenants with respect to the
following matters: (i) limitation on liens, (ii)
limitation on sale and leaseback transactions,
(iii) limitation on incurrence of indebtedness and
(iv) limitation on restricted payments. The
covenants with respect to limitation on incurrence
of indebtedness and limitation on restricted
payments will cease to be effective upon the first
Investment Grade Rating Date (as defined herein).
See "Description of Notes -- Restrictive
Covenants."
Use of Proceeds............ The Company will not receive any cash proceeds from
the issuance of the Exchange Notes pursuant to this
Prospectus.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered carefully in evaluating the Exchange Offer.
9
<PAGE> 15
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth summary unaudited pro forma condensed
combined ("pro forma") data for the Company. The summary pro forma financial
data are derived from the unaudited pro forma financial statements included
elsewhere in this Prospectus, which give pro forma effect to the Acquisition,
the Offering and the application of the net proceeds therefrom. The pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable. The pro forma statement of operations gives
effect to the Acquisition, the Offering and the application of the net proceeds
therefrom as if they had occurred as of January 1, 1997. The pro forma balance
sheet gives effect to the Offering and the application of the net proceeds
therefrom as if they had occurred as of December 31, 1997. The pro forma
financial statements do not purport to represent what the financial position or
results of operations of the Company would actually have been had the
Acquisition, the Offering and the application of the net proceeds therefrom in
fact occurred on the assumed dates or to project the financial position or
results of operations of the Company for any future period or date. See "Pro
Forma Financial Statements."
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
DECEMBER 31, 1997(a)
--------------------
(DOLLARS IN
MILLIONS)
<S> <C>
OPERATING DATA:
Sales....................................................... $1,790.1
Gross profit................................................ 858.3
Marketing, general and administrative....................... 568.4
Research and development.................................... 188.4
Operating income............................................ 95.6
Interest expense............................................ 91.3
Net earnings................................................ 9.4
OTHER DATA:
Depreciation and amortization............................... $ 152.1
EBITDA(b)(c)................................................ 278.2
Ratio of EBITDA to interest expense(d)...................... 3.1x
Ratio of earnings to fixed charges(e)....................... 1.3
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................................... $ 47.4
Working capital............................................. 96.7
Total assets................................................ 2,349.4
Total debt.................................................. 1,270.2
Stockholders' equity........................................ 80.8
</TABLE>
- ---------------
(a) Historical financial data for the Company for the fiscal year ended December
31, 1997 includes results for Coulter from November 1, 1997. Pro forma
financial data for the Company for the year ended December 31, 1997 also
includes the results of Coulter for the ten-month period ended October 31,
1997.
(b) Coulter incurred a restructuring charge of $5.9 million during the fiscal
year ended March 31, 1997 with respect to the termination of certain
employees and the discontinuance of certain research and development
activities. This charge has been excluded from the calculation of EBITDA for
this presentation.
(c) EBITDA represents earnings before income taxes plus interest expense,
in-process research and development, restructuring charges, depreciation and
amortization. While EBITDA should not be construed as a substitute for
operating income or as a better indicator of liquidity than cash flows from
operating activities (both of which are determined in accordance with
generally accepted accounting principles) it is included herein to provide
additional information with respect to the ability of the Company to meet
its future debt service, capital expenditures and working capital
requirements.
(d) For purposes of calculating this ratio, interest expense excludes $0.7
million of amortization of debt financing fees and expenses for the year
ended December 31, 1997.
(e) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest expense
and a portion of rent expense deemed representative of the interest factor.
10
<PAGE> 16
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA OF BECKMAN AND
COULTER
The following summary historical financial and operating data of Beckman
and Coulter are derived from the consolidated financial statements of Beckman
and Coulter, including the related notes thereto, as well as the selected
financial and operating information included elsewhere in this Prospectus. The
information set forth below should be read in conjunction with the financial
statements and information and related notes included elsewhere in this
Prospectus. See "Selected Historical Financial Information of Beckman,"
"Selected Historical Financial Information of Coulter," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements of each of Beckman and Coulter and related
notes included elsewhere in this Prospectus (the "Consolidated Financial
Statements").
<TABLE>
<CAPTION>
BECKMAN
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997(A) 1996 1995 1994 1993
--------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales...................................... $1,198.0 $1,028.0 $930.1 $888.6 $875.7
Gross profit............................... 588.3 550.2 502.9 472.3 457.4
Marketing, general and administrative...... 360.3 319.3 300.4 281.9 278.5
Research and development................... 123.6 108.4 91.7 91.5 93.3
In-process research and development(b)..... 282.0 -- -- -- --
Restructuring charge(c).................... 59.4 -- 27.7 11.3 114.7
Operating (loss) income.................... (237.0) 122.5 83.1 87.6 (29.1)
Net (loss) earnings........................ (264.4) 74.7 48.9 42.2 (37.6)
OTHER DATA:
Depreciation and amortization.............. $ 109.1 $ 87.8 $ 79.1 $ 70.1 $ 63.5
Capital expenditures(d).................... 110.7 117.4 110.0 98.7 92.8
EBITDA(b)(c)(e)............................ 228.0 217.4 192.6 161.4 89.8
EBITDA margin(f)........................... 19.0% 21.1% 20.7% 18.2% 10.3%
Number of employees (unaudited)............ 11,171 6,079 5,702 5,963 6,689
Sales per employee (in thousands,
unaudited)(g)............................ $ -- $ 169.1 $163.1 $149.0 $130.9
Ratio of earnings to fixed charges(h)...... --(i) 5.0 4.1 4.5 --(i)
</TABLE>
<TABLE>
<CAPTION>
COULTER SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
-------------------- --------------------------------
1997 1996 1997 1996 1995
-------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales....................................... $330.3 $316.7 $ 700.9 $685.3 $654.3
Gross profit................................ 157.6 153.3 327.4 336.1 313.8
Selling, general and administrative
expenses.................................. 108.3 108.9 217.9 216.9 204.8
Research and development expenses........... 36.8 43.0 85.8 87.3 73.5
Restructuring charges(c).................... -- -- 5.9 -- --
Operating income............................ 12.5 1.4 17.8 31.9 35.5
Net income.................................. 6.4 0.3 14.6 33.0 17.3
OTHER DATA:
Depreciation and amortization............... $ 12.5 $ 11.8 $ 25.1 $ 23.7 $ 18.8
Capital expenditures(d)..................... 14.4 36.9 58.0 31.1 31.1
EBITDA(c)(e)................................ 27.8 18.2 64.8 72.6 57.6
EBITDA margin(f)............................ 8.4% 5.7% 9.2% 10.6% 8.8%
Number of employees (unaudited)............. 5,077 5,290 5,293 5,225 4,945
Sales per employee (in thousands,
unaudited)(g)............................. $ -- $ -- $ 132.4 $131.2 $132.3
</TABLE>
Footnotes to table appear on following page.
11
<PAGE> 17
Footnotes to table on prior page.
- ---------------
(a) Financial and operating data of Beckman for the year ended December 31, 1997
includes financial and operating data of Coulter from November 1, 1997.
(b) The Company's allocation of purchase price in the Acquisition resulted in
the allocation of $282.0 million of in-process research and development
which, under generally accepted accounting principles, was expensed
immediately after the Acquisition was completed. This charge has been
excluded from the calculation of EBITDA for these presentations.
(c) The 1997 Beckman restructuring charge of $59.4 million was taken in
conjunction with the Acquisition and includes costs associated with asset
redeployment, reduction of duplicate overhead and implementation of
operating efficiencies on a worldwide basis. The 1995 and 1994 Beckman
restructuring charges include costs for facility moves and transition costs
which were anticipated and directly associated with Beckman's 1993
restructuring plan but could not be recognized in establishment of the
original restructuring reserve under generally accepted accounting
principles. The Beckman restructuring in 1993 resulted from a redirected
business strategy in response to unfavorable market conditions caused by a
worldwide drive to contain healthcare costs and generally weak economic
conditions. Restructuring charges for Coulter for its fiscal year ended
March 31, 1997 represent costs incurred with respect to the termination of
certain employees and the discontinuance of certain research and development
activities. These charges have been excluded from the calculation of EBITDA
for these presentations.
(d) Capital expenditures include expenditures for customer leased equipment. For
Fiscal 1997, customer leased equipment accounted for approximately 85% of
Beckman's capital expenditures.
(e) EBITDA represents earnings before income taxes plus interest expense,
in-process research and development, restructuring charges, depreciation and
amortization. While EBITDA should not be construed as a substitute for
operating income or as a better indicator of liquidity than cash flows from
operating activities (both of which are determined in accordance with
generally accepted accounting principles), it is included herein to provide
additional information with respect to the ability of the Company to meet
its future debt service, capital expenditures and working capital
requirements.
(f) EBITDA margin represents EBITDA, as defined in footnote (e) above, expressed
as a percentage of sales.
(g) Sales per employee is calculated by dividing period sales by the number of
employees at period end. Sales per employee is not calculated for Beckman
for the year ended December 31, 1997 or Coulter for the six-months ended
September 30, 1997 and 1996 as the results are not meaningful.
(h) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest expense
and a portion of rent expense deemed representative of the interest factor.
(i) Earnings were inadequate to cover fixed charges for the years ended December
31, 1997 and 1993. The coverage deficiencies were approximately $251.9 and
$53.9, respectively.
12
<PAGE> 18
RISK FACTORS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Although the Company believes that its
plans, intentions and expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such plans, intentions or
expectations will be achieved. Important factors that could cause actual results
to differ materially from the Company's forward looking statements are set forth
below and elsewhere in this Prospectus. All forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements set forth below.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. At December 31, 1997, the Company had
$1,250.2 million of outstanding indebtedness and $81.8 million of stockholders'
equity. Prior to the Acquisition, Beckman was operated with a significantly
smaller degree of leverage. Management has extensive experience in operating
Beckman's business, but has not operated the Company with the level of
indebtedness that was incurred in connection with the Acquisition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition -- Liquidity and Capital Resources." Subject
to certain limitations, the Company and its subsidiaries may incur additional
indebtedness in the future. It is expected that the Company will be able to
incur approximately $670 million in additional indebtedness in compliance with a
financial ratio test provided under the Indenture, and the Company and its
subsidiaries will be able to incur certain other permitted indebtedness. See
"Capitalization," "Pro Forma Financial Statements," "Description of Credit
Facility" and "Description of Notes."
The Company's ability to make interest payments on or to refinance its
indebtedness (including the Notes), and to fund its operations, including
planned capital expenditures and research and development expense, depends on
its future performance and financial results, which, to a certain extent, are
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond its control. Based upon current levels of
operations, management believes that its cash flow from operations, together
with available borrowings under the Credit Facility, anticipated cost savings
and future growth, and other sources of liquidity, will be adequate to meet the
Company's anticipated requirements for interest payments and other debt service
obligations, working capital, capital expenditures, lease payments and other
operating needs, until the maturity of the Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition -- Liquidity and Capital Resources." There can
be no assurance, however, that the Company's business will continue to generate
cash flow at or above current levels or that anticipated cost savings or growth
can be achieved. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt and operate its business, including
making necessary capital expenditures, the Company may be required to refinance
all or a portion of its existing debt, including the Notes, to sell assets or to
obtain additional financing. There can be no assurance that any such action
would be successful.
The Company's high level of debt has several important effects on its
future operations, including but not limited to: (i) making it more difficult
for the Company to satisfy its obligations with respect to the Notes, (ii)
increasing the Company's vulnerability to general adverse economic and industry
conditions, (iii) limiting the Company's ability to obtain additional financing
to fund future working capital, capital expenditures, research and development
and other general corporate requirements, (iv) requiring the dedication of a
substantial portion of the Company's cash flow from operations to the payment of
principal of, and interest on, its indebtedness, thereby reducing the
availability of such cash flow to fund working capital, capital expenditures,
research and development or other operating needs and uses, (v) limiting the
Company's flexibility in planning for, or reacting to, changes in its business
and in the clinical diagnostics and life sciences markets, (vi) placing the
Company at a competitive disadvantage vis-a-vis less leveraged competitors and
(vii) exposing the Company to the risk of increased interest rates since certain
of the Company's borrowings are at variable rates of interest.
13
<PAGE> 19
ABILITY TO SUCCESSFULLY INTEGRATE COULTER
Since 1995, Beckman has acquired four businesses or product lines. However,
management does not have experience in acquiring and integrating a business the
size of Coulter. The integration and consolidation of Coulter will require
substantial management, financial and other resources. While the Company
believes that it has sufficient resources to manage the Acquisition, the
Acquisition involves a number of significant risks, including diversion of
management's attention, the inability to integrate successfully Coulter's
operations with those of Beckman, difficulties in assimilating the technologies,
services and products of Coulter, the inability to retain key management
employees of Coulter and unanticipated events or circumstances, some or all of
which could have a material adverse effect on the Company's business, financial
condition or results of operations. Moreover, there can be no assurance as to
the extent to which the anticipated benefits with respect to the Acquisition
will be realized, or the timing of any such realization. The inability of the
Company to integrate and manage Coulter successfully, or to achieve a
substantial portion of the anticipated benefits within the time frame
anticipated by management, could have a material adverse effect on the Company's
business, financial condition or results of operations. See "The Acquisition"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RESTRICTIVE FINANCING COVENANTS
The Credit Facility contains a number of covenants that significantly
restrict the operations of the Company. In addition, the Company is required to
comply with specified financial ratios and tests under the Credit Facility,
including minimum net worth, maximum capital expenditures, a debt to earnings
ratio, a minimum interest coverage ratio and a maximum amount of debt
incurrence. There can be no assurance that the Company will be able to comply
with such covenants or restrictions in the future. The Company's ability to
comply with such covenants and other restrictions may be affected by events
beyond its control, including prevailing economic, financial and industry
conditions. The breach of any such covenants or restrictions would result in a
default under the Credit Facility that would permit the lenders thereunder to
declare all amounts outstanding thereunder to be immediately due and payable,
together with accrued and unpaid interest, and terminate their commitments to
make further extensions of credit thereunder. See "Description of Credit
Facility." In addition, the Indenture contains a number of restrictive covenants
relating to the Company. These covenants, however, are significantly less
restrictive than those contained in the Credit Facility and are subject to a
number of important exceptions and limitations. See "Description of Notes."
HIGHLY COMPETITIVE INDUSTRIES
The clinical diagnostics and life sciences markets are each highly
competitive, and the Company encounters significant competition in each market
from many manufacturers, both domestic and from outside the United States. Many
of its competitors are larger and have greater financial resources than those of
the Company and are less leveraged than the Company. The Company has from time
to time experienced price pressures due to competition. Moreover, competitive
and regulatory conditions in many markets restrict the Company's ability to
fully recover, through price increases, higher costs of acquired goods and
services resulting from inflation.
The Company's 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 the Company believes that it has
certain technological and other advantages over its competitors, realizing and
maintaining these advantages will require continued investment by the Company in
research and development, sales and marketing and customer service and support.
There can be no assurance that the Company will have sufficient resources to
continue to make such investments or that the Company will be successful in
maintaining such advantages. See "-- Substantial Leverage; Ability to Service
Indebtedness," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Business Climate" and "Business -- Competition."
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DEPENDENCE ON CAPITAL SPENDING POLICIES AND GOVERNMENT FUNDING; EFFECT OF
POTENTIAL HEALTHCARE REFORM
The Company's customers include pharmaceutical, biotechnology and chemical
companies, clinical diagnostics laboratories and hospitals. The capital spending
policies of these companies and institutions have a significant effect on the
demand for the Company's products. Such policies are based on a wide variety of
factors, including the resources available to make such purchases, the spending
priorities among various types of equipment and the policies regarding capital
expenditures during industry downturns or recessionary periods. Any significant
decrease in capital spending by these companies or institutions could have a
material adverse effect on the Company's business, financial condition or
results of operations. The diagnostics and life sciences markets continue to be
unfavorably impacted by economic weakness in Europe and cost containment
initiatives in several European governmental and healthcare systems. The life
sciences market also continues to be affected by consolidation of pharmaceutical
companies and governmental constraints on research and development spending.
Cost containment initiatives in the U.S. and European healthcare systems are
expected to be continuing factors which may affect the Company's sales. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Business Climate" and "Business -- Customers and Markets."
Many of the Company's customers, including universities, medical schools
and research institutions, obtain funding for the purchase of the Company's
products from grants by governments or government agencies. If government
funding necessary to purchase the Company's products were to decrease, the
Company's business, financial condition or results of operations could be
materially adversely affected.
Healthcare reform and the growth of managed care organizations have been
and continue to be significant factors in the clinical diagnostics market. These
competitive forces place constraints on the levels of overall pricing, and thus
could have a material adverse effect on the profit margins of the Company's
products sold in clinical diagnostics markets. Such continuing changes in the
United States and European healthcare markets could also force the Company to
alter its approach in selling, marketing, distribution and servicing its
customers. See "Business -- Government Regulation."
RISK OF CURRENCY FLUCTUATION; FOREIGN OPERATIONS; RECENT ADVERSE ECONOMIC
CONDITIONS IN ASIA
Approximately 50% of the Company's Pro Forma 1997 sales were generated
outside of the United States. U.S. dollar denominated expenses represent a much
greater percentage of the Company's operating expenses than U.S. dollar
denominated sales represent of total net sales. As a result, appreciation of the
U.S. dollar against the Company's major trading currencies has a negative impact
on the Company's results of operations, and depreciation of the U.S. dollar has
a positive impact. The Company seeks to mitigate the effects of changing
currency exchange rates through hedging programs. However, long-term
appreciation of the U.S. dollar could have a material adverse effect on the
Company's business, financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Foreign Currency Exposure" and "-- Financial
Condition -- Liquidity and Capital Resources" and Note 7 to Beckman's
Consolidated Financial Statements and Note G to Coulter's Consolidated Financial
Statements, included elsewhere in this Prospectus.
In addition to the currency risks discussed above, the Company's
international operations are subject to the risk of new and different legal and
regulatory requirements in local jurisdictions, tariffs and trade barriers,
potential difficulties in staffing and managing local operations, credit risk of
local customers and distributors, potential difficulties in protecting
intellectual property, risk of nationalization of private enterprises, potential
imposition of restrictions on investments, potentially adverse tax consequences,
including imposition or increase of withholding and other taxes on remittances
and other payments by subsidiaries, and local economic, political and social
conditions, including the possibility of hyper-inflationary conditions, in
certain countries. There can be no assurance that one or a combination of these
factors will not have a material adverse impact on the Company's ability to
maintain or increase its foreign sales or on its business, financial condition
or results of operations.
The economic conditions in certain countries in Asia have worsened
significantly in recent months. Approximately 8% of the Company's Pro Forma 1997
sales were derived from the Asian markets other than Japan, and approximately
11% of the Company's Pro Forma 1997 sales were derived from Japan where the
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economic downturn has been less significant. Although the Company does not
anticipate that the Asian economic conditions will materially impact its
business, financial condition or results of operations, there can be no
assurance that the current economic conditions in Asia (including Japan) will
not worsen or that the situation will not negatively impact the Company's
business, financial condition or results of operations.
RELIANCE ON PATENTS AND OTHER INTELLECTUAL PROPERTY; RISK OF INTELLECTUAL
PROPERTY LITIGATION
The Company owns numerous United States and foreign patents, and has patent
applications pending in the United States and abroad. The Company also owns
numerous United States and foreign registered trademarks and trade names and has
applications for the registration of trademarks and trade names pending in the
United States and abroad. In addition, the Company possesses a wide array of
unpatented proprietary technology and know-how and licenses certain intellectual
property rights to and from third parties. The Company believes that its
intellectual property rights in the aggregate are of material importance in the
operation of the Company's business, but that no single patent or license is
material in relation to the Company's business as a whole. See
"Business -- Patents and Trademarks."
The Company's ability to compete effectively with other companies depends,
to some extent, on its ability to maintain the proprietary nature of its
intellectual property. There can be no assurance as to the degree of protection
offered by the claims of the various patents or the likelihood that patents will
be issued on pending patent applications. If the Company were unable to maintain
the proprietary nature of its intellectual property with respect to its
significant current or proposed products, the Company's business could be
materially adversely affected. There can be no assurance that the Company will
be able to obtain patent protection for products or processes discovered using
the Company's technologies. Furthermore, there can be no assurance that any
patents issued to the Company will not be challenged, invalidated, narrowed or
circumvented, or that the rights granted thereunder will provide significant
proprietary protection or competitive advantages to the Company. There can be no
assurance that, if challenged, the Company's patents would be held valid by a
court of competent jurisdiction. Legal standards relating to the breadth and
scope of patent claims are uncertain. Accordingly, the valid scope of patent
claims cannot be predicted. There can be no assurance that the claims of the
Company's patents will be interpreted by a court broadly enough to offer
significant patent protection to the Company, or that the claims of a third
party's patents will not be interpreted by a court broadly enough to cover some
of the Company's products. See "Business -- Patents and Trademarks."
Litigation, which could result in substantial costs to the Company, may be
necessary to enforce or defend the Company's patents or to determine the scope
and validity of third-party proprietary rights. Uncertainties resulting from the
initiation and continuation of any patent or related litigation could have a
material adverse effect on the Company's business, financial condition or
results of operations. An adverse outcome in connection with an infringement or
validity proceeding could subject the Company to significant liabilities and
expenses (e.g., reasonable royalties, lost profits, attorneys' fees, trebling of
damages for willfulness), require disputed rights to be licensed from third
parties or require the Company to cease using the disputed intellectual property
or cease the sale of a commercial product, any of which could have a material
adverse effect on the Company's business, financial condition or results of
operations. For a discussion of currently pending litigation relating to certain
of the Company's intellectual property, see "Business -- Legal Proceedings."
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations. Although the Company continues to make
expenditures for environmental protection, it does not anticipate any
significant expenditures in order to comply with such laws and regulations that
would have a material impact on the Company's operations or financial condition.
No assurance can be given, however, that no such expenditures will be incurred.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Environmental Matters and Litigation."
Management cannot predict with any certainty whether future events, such as
changes in existing laws and regulations or the discovery of conditions not
currently known to the Company, may give rise to additional environmental costs.
Furthermore, actions by federal, state, local and foreign governments concerning
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<PAGE> 22
environmental matters could result in laws or regulations that could increase
the costs of producing the Company's products or providing its services, or
otherwise adversely affect the demand for its products or services. See
"Business -- Environmental Matters."
FRAUDULENT TRANSFER CONSIDERATIONS RELATING TO GUARANTEES
The Company's obligations under the Notes are guaranteed on an unsecured,
senior basis by the Note Guarantors. If, under relevant federal and state
fraudulent transfer and conveyance statutes, in a bankruptcy or reorganization
case or a lawsuit by or on behalf of unpaid creditors of any Note Guarantor, a
court were to find that, at the time the Notes were guaranteed by such Note
Guarantor, such Note Guarantor (a) guaranteed the Notes with the intent of
hindering, delaying or defrauding current or future creditors or (b) (i)
received less than reasonably equivalent value or fair consideration for
guaranteeing the Notes, as applicable, and (ii)(A) was insolvent or was rendered
insolvent by reason of the guarantee of the indebtedness, (B) was engaged, or
about to engage, in a business or transaction for which its assets constituted
unreasonably small capital, (C) intended to incur, or believed that it would
incur, debts beyond its ability to pay as such debts matured (as all of the
foregoing terms are defined in or interpreted under the relevant fraudulent
transfer or conveyance statutes) or (D) was a defendant in an action for money
damages, or had a judgment for money damages docketed against it (if, in either
case, after final judgment the judgment is unsatisfied), such court could avoid
or subordinate such Note Guarantor's Note Guarantee to presently existing and
future indebtedness of such Note Guarantor and take other action detrimental to
the holders of the Notes, including, under certain circumstances, invalidating
the Note Guarantees. The measure of insolvency for purposes of the foregoing
considerations will vary depending upon the law of the jurisdiction that is
being applied in any such proceeding. There can be no assurance as to what
standards a court would use to determine whether a Note Guarantor was solvent at
the relevant time, or whether, whatever standard was used, the Note Guarantees
would not be avoided on another of the grounds set forth above.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON RESALE
The Initial Notes have not been registered under the Securities Act.
Accordingly, the Initial Notes may only be offered or sold pursuant to an
exemption from the registration requirements of the Securities Act or pursuant
to an effective registration statement. There is no existing market for the
Exchange Notes and, although the Exchange Notes are expected to be eligible for
trading in PORTAL, there can be no assurance as to the liquidity of any markets
that may develop for the Exchange Notes, the ability of holders of the Exchange
Notes to sell their Exchange Notes or the prices at which holders would be able
to sell their Exchange Notes. Future trading prices of the Exchange Notes will
depend on many factors, including, among other things, the Company's ability to
effect the Exchange Offer, prevailing interest rates, the Company's operating
results and the market for similar securities. The Company does not intend to
apply for listing of the Exchange Notes on any securities exchange or for
quotation of the Exchange Notes in any automated dealer quotation system. See
"Plan of Distribution."
FAILURE TO EXCHANGE INITIAL NOTES
Exchange Notes will be issued in exchange for Initial Notes only after
timely receipt by the Exchange Agent of such Initial Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, holders of Initial Notes desiring to tender such Initial Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Initial
Notes for exchange. Initial Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Initial Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Initial Notes, where such
Initial Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a
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<PAGE> 23
prospectus in connection with any resale of such Exchange Notes. To the extent
that Initial Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Initial Notes could be
adversely affected due to the limited amount, or "float," of the Initial Notes
that are expected to remain outstanding following the Exchange Offer. Generally,
a lower "float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such security. For the
same reason, to the extent that a large amount of Initial Notes are not tendered
or are tendered and not accepted in the Exchange Offer, the trading market for
the Exchange Notes could be adversely affected. See "Plan of Distribution" and
"The Exchange Offer."
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<PAGE> 24
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were issued by the Company on March 4, 1998 (the "Closing
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently sold the Initial Notes to "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule
144A"), in reliance on Rule 144A. As a condition to the sale of the Initial
Notes, the Company and the Initial Purchasers entered into the Registration
Rights Agreement on March 4, 1998. Pursuant to the Registration Rights
Agreement, the Company agreed that, unless the Exchange Offer is not permitted
by applicable law or Commission policy, it would (i) file with the Commission a
Registration Statement under the Securities Act with respect to the Exchange
Notes within 45 calendar days after the Closing Date, (ii) use its best efforts
to cause such Registration Statement to become effective under the Securities
Act within 120 calendar days after the Closing Date (iii) use its best efforts
to keep the Registration Statement effective until the closing of the Exchange
Offer and (iv) use its best efforts to cause the Exchange Offer to be
consummated within 150 calendar days after the Closing Date. Upon the
effectiveness of the Registration Statement, the Company will offer the Exchange
Notes in exchange for surrender of the Initial Notes. The Company will keep the
Exchange Offer open for not less than 30 calendar days after the date notice of
the Exchange Offer is mailed to the holders of the Notes (or longer if required
by applicable law). A copy of the Registration Rights Agreement has been filed
as an exhibit to the Registration Statement. The Registration Statement is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a Holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such Holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges Initial Notes for Exchange Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in a
distribution of the Exchange Notes, will be allowed to resell Exchange Notes to
the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any Holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of the Exchange Notes or is a broker-dealer,
such Holder cannot rely on the position of the staff of the Commission
enumerated in certain no-action letters issued to third parties 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 Initial Notes, where such Initial Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such 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. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Initial Notes where such Initial Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Initial
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Initial Notes surrendered pursuant
to the Exchange Offer. Initial Notes may be tendered only in integral multiples
of $1,000.
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The form and terms of the Exchange Notes are the same as the form and terms
of the Initial Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to any of the rights of holders of Initial Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as
the Initial Notes (which they replace) and will be issued under, and be entitled
to the benefits of, the Indenture, which also authorizes the issuance of the
Initial Notes, such that both series of Notes will be treated as a single class
of debt securities under the Indenture.
As of the date of this Prospectus, $160,000,000 in aggregate principal
amount of the Initial 2003 Notes are outstanding and registered in the name of
Cede & Co., as nominee for DTC and $240,000,000 in aggregate principal amount of
the Initial 2008 Notes are outstanding and registered in the name of Cede & Co.,
as nominee for DTC. Only a registered Holder of the Initial Notes (or such
Holder's legal representative or attorney-in-fact) as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer. There
will be no fixed record date for determining registered holders of the Initial
Notes entitled to participate in the Exchange Offer.
Holders of the Initial Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends 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 Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Initial Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Initial Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Initial Notes in the Exchange Offer 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 Initial
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice and (ii) mail to the
registered holders an announcement thereof which shall include disclosure of the
approximate number of Initial Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Initial Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "-- Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will 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 to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
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INTEREST ON THE EXCHANGE NOTES
The Exchange 2003 Notes will bear interest at a rate equal to 7.10% per
annum and the Exchange 2008 Notes will bear interest at a rate equal to 7.45%
per annum. Interest on the Exchange Notes will be payable semi-annually in
arrears on each March 4 and September 4, commencing September 4, 1998. Holders
of Exchange Notes will receive interest on September 4, 1998 from the date of
initial issuance of the Exchange Notes, plus an amount equal to the accrued
interest on the Initial Notes from the date of initial delivery to the date of
exchange thereof for Exchange Notes. Holders of Initial Notes that are accepted
for exchange will be deemed to have waived the right to receive any interest
accrued on the Initial Notes.
PROCEDURES FOR TENDERING
Only a registered Holder of Initial Notes may tender such Initial Notes in
the Exchange Offer. To tender in the Exchange Offer, a Holder of Initial Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "-- Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Initial Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Initial Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with
the guaranteed delivery procedures described below.
The tender by a Holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF INITIAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. 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. NO LETTER OF TRANSMITTAL OR INITIAL 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.
Any beneficial owner(s) of the Initial Notes whose Initial Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered Holder
promptly and instruct such registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Initial Notes, either make appropriate
arrangements to register ownership of the Initial Notes in such owner's name or
obtain a properly completed bond power from the registered Holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Initial Notes tendered
pursuant thereto are tendered (i) 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 (ii) for the account of
an Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be made by 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 which is a member of one of the recognized signature
guarantee programs identified in the Letter of Transmittal (an "Eligible
Institution").
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If the Letter of Transmittal is signed by a person other than the
registered holder of any Initial Notes listed therein, such Initial Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Initial
Notes.
If the Letter of Transmittal or any Initial 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 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 Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Initial Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Initial
Notes not properly tendered or any Initial 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 Initial 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 Initial 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 Initial Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Initial Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Company has no present plan to acquire any Initial Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Initial Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Initial Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "-- Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Initial
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
Each holder of the Notes who wishes to tender Notes in exchange for
Exchange Notes in the Exchange Offer will be required to represent that (i) it
is not an affiliate of the Company, (ii) any Exchange Notes to be received by it
are to be acquired in the ordinary course of its business and (iii) at the time
of consummation of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. In addition, in connection with the resale of Exchange
Notes, any Participating Broker-Dealer who acquired the 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 Commission 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 INITIAL NOTES
If any tendered Initial Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Initial Notes are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Initial Notes will be
returned without expense to the tendering Holder thereof (or, in the case of
Initial Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Initial Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
22
<PAGE> 28
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Initial 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 Initial Notes by causing the Depositary to transfer such
Initial Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Initial Notes may be effected through bookentry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under "--
Exchange Agent" on or prior to the Expiration Date or pursuant to the guaranteed
delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available or (ii) who cannot deliver their Initial Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Initial Notes and
the principal amount of Initial Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within three New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof), together with the certificate(s) representing the
Initial Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Initial
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Initial Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m. on the Expiration Date.
To withdraw a tender of Initial Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Initial Notes to be withdrawn (the "Depositor"), (ii) identify the Initial
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Initial Notes) and (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such
Initial 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 Initial Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer, and no Exchange Notes will be issued with respect thereto unless
the Initial Notes so withdrawn are validly retendered. Properly withdrawn
Initial Notes may be retendered by following one of the procedures described
above under "The Exchange Offer -- Procedures for Tendering" at any time prior
to the Expiration Date.
23
<PAGE> 29
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Initial Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Initial Notes, if, in the reasonable judgment of the
Company, the Exchange Offer violates applicable law, rules or regulations or an
applicable interpretation of the staff of the Commission.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Initial
Notes and return all tendered Initial Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Initial Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Initial Notes (see "-- Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Initial Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Initial Notes, and the Company 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 such
five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Initial Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to the Company's continuing obligations (i) to indemnify such holders (including
any broker-dealers) and certain parties related to such holders against certain
liabilities (including liabilities under the Securities Act) and (ii) to
provide, upon the request of any Holder of a transfer-restricted Initial Note,
the information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Initial Notes pursuant to Rule 144A.
SHELF REGISTRATION
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, (ii) for any other reason the Registration Statement is not declared
effective within 120 calendar days following the Closing Date or the Exchange
Offer is not consummated within 150 calendar days following the Closing Date,
(iii) upon the request of any of the Initial Purchasers or (iv) any holder of
the Notes is not permitted to participate in the Exchange Offer or does not
receive fully tradeable Exchange Notes pursuant to the Exchange Offer, the
Company will, at its cost, (a) as promptly as practicable, file a shelf
registration statement covering resales of the Notes (the "Shelf Registration"),
(b) use its best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act by the 150th calendar day after the
Closing Date and (c) use its best efforts to keep effective the Shelf
Registration Statement until two years after its effective date, or such shorter
period which will terminate when all the Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration or Rule 144 or cease
to be outstanding. The Company will, in the event of the filing of a Shelf
Registration Statement, provide to each holder of the Notes copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement for the Notes has become effective
and take certain other actions as are required to generally permit unrestricted
resales of the Notes. A holder of the Notes that sells such Notes pursuant to
the Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of the Notes will be required to deliver information to be used in connection
with the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Notes included in the Shelf Registration
Statement and
24
<PAGE> 30
to benefit from the provisions regarding liquidated damages ("Liquidated
Damages") set forth in the following paragraph.
LIQUIDATED DAMAGES
In the event that (i) the Registration Statement is not filed with the
Commission on or prior to the 45th calendar day following the Closing Date, (ii)
the Registration Statement is not declared effective on or prior to the 120th
calendar day following the Closing Date, (iii) the Exchange Offer is not
consummated, or, if required, a Shelf Registration Statement with respect to the
Notes is not declared effective, in either case, on or prior to the 150th
calendar day following the Closing Date or (iv) the Registration Statement is
declared effective but thereafter ceases to be effective or usable (each such
event referred to in clauses (i) through (iv) above, a "Registration Default"),
the interest rate borne by the Notes shall be increased by one-quarter of one
percent (0.25%) per annum upon the occurrence of each Registration Default,
which rate will increase by one-quarter of one percent (0.25%) each 90-day
period that such additional interest continues to accrue under any circumstance,
with an aggregate maximum increase in interest rate equal to one-half of one
percent (0.50%) per annum until such Registration Default has been cured. Upon
(w) the filing of the Registration Statement after the 45-day period described
in clause (i) above, (x) the effectiveness of the Registration Statement after
the 120-day period described in clause (ii) above, (y) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 150-day period described in clause (iii) above, or (z)
the cure of any Registration Default described in clause (iv) above, the
interest rate borne by the Notes from the date of such filing, effectiveness,
consummation or cure, as the case may be, will be reduced to the original
interest rate if the Company is otherwise in compliance with this paragraph;
provided, however, that if, after any such reduction in interest rate, a
different event specified in clause (i), (ii), (iii) or (iv) above occurs, the
interest rate will again be increased pursuant to the foregoing provisions.
EXCHANGE AGENT
The First National Bank of Chicago has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
The First National Bank of Chicago The First National Bank of Chicago
One North State Street One North State Street
9th Floor 9th Floor
Chicago, Illinois 60602 Chicago, Illinois 60602
By Overnight Delivery: By Facsimile:
The First National Bank of Chicago (312) 407-4656
One North State Street Confirm by Telephone:
9th Floor (312) 407-2068
Chicago, Illinois 60602
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
25
<PAGE> 31
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has 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. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$200,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Initial Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Initial Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Initial
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Initial Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Initial
Notes may be resold only (i) to a person whom the seller reasonably believes is
a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes in the Offering
were approximately $394.3 million (after deducting Offering expenses and the
Initial Purchasers' discount). Net proceeds from the Offering of $300.0 million
were used to prepay all Term Loan borrowings, net proceeds of $80.0 million were
used to repay a portion of the Revolving Credit Facility and the remaining net
proceeds of $14.3 million were used for operating purposes.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes. In consideration for issuing the Exchange Notes as contemplated
in this Prospectus, the Company will receive in exchange Initial Notes in like
principal amount, which will be canceled and as such will not result in any
increase in indebtedness of the Company.
26
<PAGE> 32
THE ACQUISITION
On October 31, 1997, Beckman acquired all of the outstanding capital stock
of Coulter, which became a wholly owned subsidiary of Beckman. The purchase
price for the Acquisition totaled $1,178.0 million, consisting of $875.0 million
in cash, assumed liabilities of $170.0 million and purchase liabilities of
$133.0 million. Purchase liabilities recorded included approximately $110.0
million for severance and related costs and approximately $23.0 million for
costs associated with the closure of certain offices and manufacturing
facilities. The Company expects to complete its termination of certain employees
and closure of certain facilities in 1998. Assumed liabilities recorded included
approximately $103.0 million of contractual obligations of Coulter to its
employees, $36.0 million of change in control payments and $31.0 million of
other assumed liabilities. The Company expects to pay for such liabilities
throughout 1998. See Note 3 to Consolidated Financial Statements of Beckman.
The stock purchase agreement (the "Stock Purchase Agreement") between
Beckman, Coulter and the former stockholders of Coulter contains customary
representations, warranties, covenants and agreements for the transactions
contemplated therein. Subject to certain restrictions and limitations, the
parties have agreed to indemnify a non-breaching party against certain
liabilities associated therewith. Generally, a non-breaching party is entitled
to indemnification of up to $50.0 million in respect of aggregate damages and
claims that exceed $10.0 million. In addition, at the consummation of the
Acquisition, Beckman, the former stockholders of Coulter and an escrow agent
entered into an escrow agreement with customary terms and conditions whereby
$50.0 million of the $875.0 million cash portion of the purchase price was
deposited into an escrow account to secure the obligations of the former
stockholders of Coulter to Beckman under the Stock Purchase Agreement. The $50.0
million of funds in the escrow are available to Beckman, subject to certain
conditions, for aggregate damages and claims that exceed $10.0 million. One-half
of the proceeds in the escrow will be distributed to the former stockholders of
Coulter two years following the consummation of the Acquisition, less any
reserves subject to indemnification, and the remaining proceeds will be
distributed to the former stockholders of Coulter three years following the
consummation of the Acquisition, less any reserves subject to indemnification.
Concurrently with the consummation of the Acquisition, the Company entered
into a credit facility (the "Credit Facility") which provides for aggregate
commitments not exceeding $1.3 billion, including $800.0 million of commitments
under an unsecured revolving credit facility (the "Revolving Credit Facility")
and $500.0 million of commitments under an unsecured term loan facility (the
"Term Loan"). On October 31, 1997, the Company borrowed $600.0 million under the
Revolving Credit Facility and $500.0 million under the Term Loan to finance the
Acquisition in part. Net proceeds from the Offering of $300.0 million were used
to prepay all Term Loan borrowings, net proceeds of $80.0 million were used to
repay a portion of the Revolving Credit Facility and the remaining net proceeds
of $14.3 million were used for operating purposes. As of April 1, 1998, there
were no amounts outstanding under the Term Loan and $670.0 million outstanding
under the Revolving Credit Facility. See "Description of Credit Facility."
27
<PAGE> 33
CAPITALIZATION
The following table sets forth as of December 31, 1997 (i) the historical
capitalization of the Company and (ii) the pro forma capitalization of the
Company, adjusted to give effect to the Offering and the application of the net
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Pro Forma Financial Statements including the related notes
thereto and the historical financial statements and information of both Beckman
and Coulter and the related notes thereto included elsewhere in this Prospectus.
See "Pro Forma Financial Statements," "Selected Historical Financial Information
of Beckman," "Selected Historical Financial Information of Coulter" and the
Consolidated Financial Statements of Beckman and Coulter.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
--------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN MILLIONS)
<S> <C> <C>
Cash and equivalents(a)..................................... $ 33.1 $ 47.4
======== ========
Short-term borrowings....................................... $ 49.0 $ 49.0
Current portion of long-term debt........................... 19.9 19.9
-------- --------
Total short-term debt.................................. 68.9 68.9
Long-term debt, net of current portion:
Revolving Credit Facility(b)........................... 600.0 520.0
Term Loan(b)........................................... 400.0 100.0
Initial 2003 Notes..................................... -- 160.0
Initial 2008 Notes..................................... -- 239.9
7.05% Debentures due 2026.............................. 100.0 100.0
Other long-term debt................................... 81.3 81.3
-------- --------
Total long-term debt, net of current portion........... 1,181.3 1,201.2
-------- --------
Total debt............................................. 1,250.2 1,270.1
Stockholders' equity(c)..................................... 81.8 80.8
-------- --------
Total capitalization................................... $1,332.0 $1,350.9
======== ========
</TABLE>
- ---------------
(a) The as adjusted amount reflects net cash proceeds of $19.9 (after paydown of
debt) less $5.6 million of cash used to pay fees and expenses associated
with the issuance of the Initial Notes.
(b) In January 1998 the Company borrowed an additional $150.0 million of
indebtedness under the Revolving Credit Facility, $100.0 million of which
was used to reduce outstanding commitments under the Term Loan. As of April
1, 1998, there were no amounts outstanding under the Term Loan and $670.0
million outstanding under the Revolving Credit Facility. As of such date,
the Company was able to borrow up to an additional $130.0 million under the
Revolving Credit Facility.
(c) Does not include options to purchase 2.9 million shares of common stock of
the Company. See Note 10 to Consolidated Financial Statements of Beckman.
Included in the as adjusted amount is the effect of an extraordinary charge
of $1.0 million, net of tax, which will be recognized upon the early
extinguishment of the Term Loan.
28
<PAGE> 34
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet as of December 31, 1997 has
been prepared to illustrate the effect of the Offering and the application of
the net proceeds therefrom, as if they had occurred on December 31, 1997. The
following unaudited pro forma statement of operations of Beckman and Coulter for
the year ended December 31, 1997 has been prepared to illustrate the effect of
the Acquisition, the Offering and the application of the net proceeds therefrom,
as if they had occurred as of January 1, 1997. The pro forma statement of
operations for the year ended December 31, 1997 includes the results of Coulter
for the ten months ended October 31, 1997. The results of Coulter for the two
months ended December 31, 1997 are included in Beckman's consolidated statement
of operations for the year ended December 31, 1997. The pro forma adjustments
also give effect to the spin-off of Coulter's interest in Coulter
Pharmaceutical, Inc. ("Coulter Pharmaceutical") and a spin-off of a portion of
the capital stock of Coulter Cellular Therapies, Inc. ("Coulter Cellular"),
which were completed prior to the Acquisition, as if such spin-offs were
completed prior to January 1, 1997. The pro forma adjustments, and the
assumptions on which they are based, are described in the accompanying notes to
the Pro Forma Financial Statements.
The unaudited pro forma financial statements are presented for illustrative
purposes only and are not necessarily indicative of the consolidated financial
position or consolidated results of operations of the Company that would have
been reported had the Acquisition, the Offering and the application of the net
proceeds therefrom occurred on the dates indicated, nor do they represent a
forecast of the consolidated financial position of the Company at any future
date or the consolidated results of operations of the Company for any future
period. Furthermore, no effect has been given in the pro forma statement of
operations for synergies or costs, if any, that may be realized through the
combination of Beckman and Coulter. The pro forma financial statements,
including the notes thereto, should be read in conjunction with the Consolidated
Financial Statements of Beckman and Coulter.
29
<PAGE> 35
PRO FORMA BALANCE SHEET
(DOLLARS IN MILLIONS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
BECKMAN PRO FORMA PRO FORMA
DECEMBER 31, 1997 ADJUSTMENTS COMBINED
------------------ ----------- ----------
<S> <C> <C> <C>
Current assets:
Cash and equivalents............................... $ 33.1 $ 19.9(a) $ 47.4
(5.6)(b)
Short-term investments............................. 0.4 0.4
Trade receivables and other........................ 524.6 524.6
Inventories........................................ 332.3 332.3
Deferred income taxes.............................. 53.0 53.0
Other current assets............................... 33.3 33.3
-------- -------- --------
Total current assets............................ 976.7 14.3 991.0
Property, plant and equipment, net................... 410.9 410.9
Intangible assets.................................... 444.9 444.9
Goodwill............................................. 402.8 402.8
Deferred income taxes................................ -- --
Other assets......................................... 95.7 5.6(b) 99.7
(1.6)(c)
-------- -------- --------
Total assets............................... $2,331.0 $ 18.3 $2,349.3
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable...................................... $ 49.0 $ $ 49.0
Current maturities of long-term debt............... 19.9 19.9
Accounts payable................................... 96.3 96.3
Accrued compensation............................... 84.6 84.6
Other accrued expenses............................. 575.5 575.5
Income taxes....................................... 69.6 (0.6)(d) 69.0
-------- -------- --------
Total current liabilities....................... 894.9 (0.6) 894.3
Long-term debt, less current maturities.............. 1,181.3 399.9(e) 1,201.2
(380.0)(e)
Deferred income taxes................................ 40.3 40.3
Other liabilities.................................... 132.7 132.7
-------- -------- --------
Total liabilities............................... 2,249.2 19.3 2,268.5
Stockholders' equity................................. 81.8 (1.6)(c) 80.8
0.6(d)
-------- -------- --------
Total liabilities and stockholders'
equity................................... $2,331.0 $ 18.3 $2,349.3
======== ======== ========
</TABLE>
See Notes to Pro Forma Financial Statements.
30
<PAGE> 36
PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
BECKMAN COULTER
YEAR ENDED 10 MONTHS ENDED PRO FORMA PRO FORMA
DECEMBER 31, 1997 OCTOBER 31, 1997(F) ADJUSTMENTS(G) COMBINED
----------------- ------------------- -------------- ------------
<S> <C> <C> <C> <C>
Sales............................. $1,198.0 $592.1 $1,790.1
Operating costs and expenses:
Cost of sales................... 609.7 316.4 5.7(h) 931.8
Marketing, general and
administrative............... 360.3 186.8 7.8(i) 568.4
13.5(i)
Research and development........ 123.6 64.8 188.4
In-process research and
development.................. 282.0 (282.0)(j) --
Restructuring charge............ 59.4 5.9 (59.4)(k) 5.9
-------- ------ ------ --------
Operating (loss) income........... (237.0) 18.2 314.4 95.6
Nonoperating expense:
Interest income................. (6.1) (6.5) (12.6)
Interest expense................ 29.4 10.6 50.6(l) 91.3
0.7(m)
Other, net...................... (8.4) (8.3) 4.7(n) (12.0)
-------- ------ ------ --------
Nonoperating expense, net......... 14.9 (4.2) 56.0 66.7
-------- ------ ------ --------
(Loss) earnings before income
taxes........................... (251.9) 22.4 258.4 28.9
Income tax provision (benefit).... 12.5 13.0 (6.0)(d) 19.5
-------- ------ ------ --------
Net (loss) earnings............... $ (264.4) $ 9.4 $264.4 $ 9.4
======== ====== ====== ========
Basic (loss) earnings per share... $ (9.58) $ 0.34
======== ========
Weighted average number of shares
outstanding..................... 27.6 27.6
======== ========
Diluted (loss) earnings per
share........................... $ (9.58) $ 0.33
======== ========
Weighted average number of shares
outstanding..................... 27.6 28.6
======== ========
</TABLE>
See Notes to Pro Forma Financial Statements.
31
<PAGE> 37
NOTES TO PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements and related notes give effect to the
Acquisition accounted for as a purchase. The pro forma balance sheet assumes
that the Offering and the application of the net proceeds therefrom were
completed as of December 31, 1997 and the pro forma statement of operations
assumes that the Acquisition, the Offering and the application of the net
proceeds therefrom were completed on January 1, 1997. The Acquisition was
consummated on October 31, 1997. Accordingly, the historical financial
statements for the Company for the fiscal year ended December 31, 1997 include
the results of Coulter from November 1, 1997, and the pro forma statement of
operations for the year ended December 31, 1997 also includes the results of
Coulter for the ten months ended October 31, 1997.
All interim financial data used to develop the pro forma balance sheet and
statement of operations are unaudited, but in the opinion of management, reflect
all adjustments necessary (consisting only of normal recurring entries) for a
fair presentation thereof.
The unaudited pro forma statement of operations is not necessarily
indicative of operating results which would have been achieved had the
Acquisition, the Offering and the application of the net proceeds therefrom been
consummated as of January 1, 1997 and should not be construed as representative
of future earnings.
Under purchase accounting, the total acquisition cost was allocated to
Coulter's assets and liabilities based on their relative fair values. The final
allocations may be different from the amounts reflected herein. The Company does
not believe that the final purchase price allocation will differ significantly
from the preliminary purchase price allocation recorded in Fiscal 1997. The
Company's analysis resulted in an allocation of $282.0 million to in-process
research and development which, under generally accepted accounting principles,
was expensed immediately after the Acquisition was completed. For additional
information on the allocation of the purchase price, see Note 3 to Consolidated
Financial Statements of Beckman.
The pro forma statement of operations for the year ended December 31, 1997
excludes the $282.0 million write-off of in-process research and development and
the $59.4 million restructuring charge, as they are non-recurring charges
associated with the Acquisition.
The pro forma basic net earnings per share is based on the weighted average
number of common shares of Beckman during the period ended December 31, 1997 and
the pro forma diluted net earnings per share reflects the impact of dilutive
securities issued and outstanding.
The following adjustments were recorded in the pro forma financial
statements:
(a) Reflects cash proceeds from the Offering less amounts used to pay
down existing debt.
(b) Reflects financing fees and expenses related to the Notes
estimated to be $5.6 million, which will be capitalized and amortized over
the term of such debt.
(c) To write-off unamortized financing fees and expenses on
refinanced debt of Beckman and Coulter.
(d) Reflects the tax effect of the pro forma adjustments. Pro forma
goodwill amortization of $7.8 million and the $282.0 million write-off of
in-process research and development are not deductible for tax purposes. An
assumed effective tax rate of 38%, giving effect to the Acquisition, was
applied to the other pro forma adjustments described.
(e) Reflects the increase in debt as a result of the Offering and the
reduction in debt upon application of the proceeds from the Offering to pay
down the existing Term Loan and the Revolving Credit Facility. The
adjustment also reflects the $0.1 original issue discount incurred on the
Initial 2008 Notes.
(f) Reflects ten months of operations for the period ended October
31, 1997.
32
<PAGE> 38
NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(g) The pro forma adjustments to the statement of operations do not
reflect the write-off of financing fees and expenses on refinanced debt of
Beckman and Coulter as they will be recorded as extraordinary charges, net
of tax. See (b), above.
(h) Represents additional cost of sales as a result of a step-up in
the basis of Coulter's inventory upon allocation of the acquisition cost.
(i) Reflects the pro forma amortization of goodwill of $7.8 million
and intangible assets of $13.5 million recorded as a result of the
Acquisition. Amortization of intangible assets was calculated on a
straight-line basis over periods ranging from 15-30 years. Amortization of
goodwill was calculated on a straight-line basis over 40 years.
(j) To eliminate the one-time write-off of $282.0 million of
in-process research and development identified in the purchase price
allocation of the Acquisition. The in-process research and development is
based upon the economic value of projects in process, which cannot be
capitalized under generally accepted accounting principles.
(k) To eliminate a non-recurring restructuring charge of $59.4
million recorded in Fiscal 1997 for estimated costs for closing duplicate
facilities of Beckman which, in the opinion of management, have no further
useful life as a result of the Acquisition, and for implementation of
operating efficiencies, and certain other costs.
(l) Reflects interest expense for ten months at an assumed average
rate of 7.25% on approximately $1,100 million of additional outstanding
debt incurred to complete the Acquisition less amounts of Beckman and
Coulter debt repaid with the proceeds of such additional debt. Also gives
effect to the Offering and the application of the net proceeds therefrom as
described in "Use of Proceeds," using the same assumed average rate of
7.25%. Excludes approximately $4.5 million of interest expense due to the
fact that the incremental debt was assumed to be net of the $75.0 million
paydown resulting from the Company's sale of financial assets, primarily
consisting of equipment subject to customer leases and lease receivables.
For each 0.25% change in assumed average interest expense on the
outstanding indebtedness, annual pro forma interest expense would change by
$2.3 million.
(m) Reflects the amortization of $5.6 million of debt financing fees
and expenses incurred in connection with the Offering over an assumed
7 1/2-year term.
(n) Reflects the elimination of Coulter's proportionate share of the
results of operations of Coulter Pharmaceutical and Coulter Cellular (net
of the portion of Coulter Cellular which was retained) included in
Coulter's historical results of operations. Prior to the Acquisition,
Coulter distributed as dividends to its stockholders 100% of its interest
in Coulter Pharmaceutical and two-thirds of its 68% equity interest in
Coulter Cellular.
33
<PAGE> 39
SELECTED HISTORICAL FINANCIAL INFORMATION OF BECKMAN
The Selected Historical Financial Information and Other Data below should
be read in conjunction with the Consolidated Financial Statements of the Company
included elsewhere in this Prospectus, and the information contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Selected Historical Financial Information for each of the years
in the five-year period ended December 31, 1997 have been derived from audited
financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(A) 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Sales..................................................... $1,198.0 $1,028.0 $ 930.1 $ 888.6 $ 875.7
Costs of sales............................................ 609.7 477.8 427.2 416.3 418.3
Marketing, general and administrative..................... 360.3 319.3 300.4 281.9 278.5
Research and development.................................. 123.6 108.4 91.7 91.5 93.3
In-process research and development(b).................... 282.0 -- -- -- --
Restructuring charge(c)................................... 59.4 -- 27.7 11.3 114.7
-------- -------- -------- -------- --------
Operating (loss) income................................... (237.0) 122.5 83.1 87.6 (29.1)
Nonoperating expense, net................................. 14.9 11.0 10.7 12.7 24.8
-------- -------- -------- -------- --------
(Loss) earnings before income taxes....................... (251.9) 111.5 72.4 74.9 (53.9)
Net (loss) earnings before accounting changes............. (264.4) 74.7 48.9 47.3 (33.6)
Net (loss) earnings....................................... $ (264.4) $ 74.7 $ 48.9 $ 42.2 $ (37.6)
======== ======== ======== ======== ========
Weighted average common shares and dilutive common share
equivalents (in millions)(d).............................. 27.6 28.9 28.8 28.1 27.8
Return on average stockholders' equity...................... (110.0%) 20.0% 14.7% 14.2% 11.9%
Diluted (loss) earnings per share before accounting
changes................................................... $ (9.58) $ 2.58 $ 1.70 $ 1.68 $ (1.21)
Diluted (loss) earnings per share........................... (9.58) 2.58 1.70 1.50 (1.35)
Dividends paid per share of common stock.................... $ 0.60 $ 0.52 $ 0.44 $ 0.40 $ 0.36
FINANCIAL POSITION (END OF YEAR):
Current assets............................................ $ 976.7 $ 579.4 $ 533.3 $ 512.0 $ 544.5
Current liabilities....................................... 894.9 279.3 251.2 268.8 323.3
Working capital........................................... 81.8 300.1 282.1 243.2 221.2
Property, plant and equipment, net........................ 410.9 263.5 252.1 232.6 216.8
Total assets.............................................. 2,331.0 960.1 907.8 829.1 820.0
Long-term debt, less current maturities................... 1,181.3 176.6 162.7 117.3 113.7
Stockholders' equity...................................... 81.8 398.9 347.9 317.0 275.5
OTHER DATA:
Capital expenditures(e)................................... $ 110.7 $ 117.4 $ 110.0 $ 98.7 $ 92.8
Depreciation and amortization............................. 109.1 87.8 79.1 70.1 63.5
Number of employees (unaudited)........................... 11,171 6,079 5,702 5,963 6,689
Ratio of earnings to fixed charges(f)..................... --(g) 5.0 4.1 4.5 --(g)
</TABLE>
- ---------------
(a) Historical financial information of the Company for the fiscal year ended
December 31, 1997 includes results for Coulter from November 1, 1997.
(b) The Company's allocation of purchase price in the Acquisition resulted in
the allocation of $282.0 million of in-process research and development
which, under generally accepted accounting principles, was expensed
immediately after the Acquisition was completed.
(c) The 1997 Beckman restructuring charge of $59.4 million was taken in
conjunction with the Acquisition and includes costs associated with asset
redeployment, reduction of duplicate overhead and implementation of
operating efficiencies on a worldwide basis. The 1995 and 1994 Beckman
restructuring charges include costs for facility moves and transition costs
which were anticipated and directly associated with Beckman's 1993
restructuring plan but could not be recognized in establishment of the
original restructuring reserve under generally accepted accounting
principles. The Beckman restructuring in 1993 resulted from a redirected
business strategy in response to unfavorable market conditions caused by a
worldwide drive to contain healthcare costs and generally weak economic
conditions.
(d) Common share equivalents were not included prior to 1995 as the dilutive
effect was not significant.
(e) Capital expenditures include expenditures for customer leased equipment. For
Fiscal 1997, customer leased equipment accounted for approximately 85% of
Beckman's capital expenditures.
(f) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest expense
and a portion of rent expense deemed representative of the interest factor.
(g) Earnings were inadequate to cover fixed charges for the years ended December
31, 1997 and 1993. The coverage deficiencies were approximately $251.9 and
$53.9, respectively.
34
<PAGE> 40
SELECTED HISTORICAL FINANCIAL INFORMATION OF COULTER
The Selected Historical Financial Information below should be read in
conjunction with the Consolidated Financial Statements of Coulter included
elsewhere in this Prospectus, and the information contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Selected Historical Financial Information for each of the years in the
three-year period ended March 31, 1997 have been derived from audited financial
statements. The Selected Historical Financial Information for the six-month
periods ended September 30, 1997 and 1996 are derived from unaudited financial
statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
data for such periods.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
------------------ ------------------------------
1997 1996 1997 1996 1995
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Sales..................................................... $330.3 $316.7 $700.9 $685.3 $654.3
Cost of sales............................................. 172.7 163.4 373.5 349.2 340.5
Selling, general and administrative expenses.............. 108.3 108.9 217.9 216.9 204.8
Research and development expenses......................... 36.8 43.0 85.8 87.3 73.5
Restructuring charges(a).................................. -- -- 5.9 -- --
------ ------ ------ ------ ------
Operating income.......................................... 12.5 1.4 17.8 31.9 35.5
Other expense (income), net............................... 3.7 1.0 (2.3) (5.8) 10.7
------ ------ ------ ------ ------
Income before income taxes................................ 8.8 0.4 20.1 37.7 24.8
------ ------ ------ ------ ------
Net income................................................ $ 6.4 $ 0.3 $ 14.6 $ 33.0 $ 17.3
====== ====== ====== ====== ======
FINANCIAL POSITION (END OF PERIOD):
Current assets............................................ $355.6 $346.0 $381.0 $360.0 $347.0
Current liabilities....................................... 274.8 277.8 245.1 271.5 253.8
Working capital........................................... 80.8 68.2 135.9 88.5 93.2
Property, plant and equipment, net........................ 129.8 126.3 131.1 105.9 93.9
Total assets.............................................. 576.0 565.7 599.0 560.0 530.8
Long-term debt, less current maturities................... 83.0 84.6 135.5 71.9 72.5
Stockholders' equity...................................... 152.9 137.0 149.1 145.1 118.1
OTHER DATA:
Capital expenditures...................................... $ 14.4 $ 36.9 $ 58.0 $ 31.1 $ 31.1
Depreciation and amortization............................. 12.5 11.8 25.1 23.7 18.8
Number of employees (unaudited)........................... 5,077 5,290 5,293 5,225 4,945
</TABLE>
- ---------------
(a) Restructuring charges represent costs for the termination of certain
employees and the discontinuance of certain research and development
activities.
35
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
Consolidated Financial Statements of Beckman and Coulter. The following
discussion and analysis covers certain periods before completion of the
Acquisition, and unless otherwise indicated, the following discussion does not
include pro forma financial information or adjustments. Accordingly, the
discussion and analysis of such periods does not reflect the significant impact
that the Acquisition will have on the Company. Historical results are not
necessarily indicative of operating results for any future periods. See "Risk
Factors," "Pro Forma Financial Statements" and the discussion below under
"-- Summary of Effects of the Acquisition" and "-- Financial Condition."
OVERVIEW
Beckman Coulter is a world leader in providing systems that simplify and
automate laboratory processes. The Company designs, manufactures and services a
broad range of laboratory systems consisting of instruments, reagents and
related products that customers use to conduct basic scientific research, drug
discovery research and diagnostic analysis of patient samples. Approximately 75%
of the Company's Pro Forma 1997 sales were for clinical diagnostics
applications, principally in hospital laboratories, while the remaining sales
were for life sciences and drug discovery applications in universities, medical
schools, and pharmaceutical and biotechnology companies. The Company's
diagnostics systems address over 75% of the hospital laboratory test volume,
including virtually all routine laboratory tests. The Company believes that it
is a worldwide market leader in its primary markets, with well-recognized
systems and a reputation for high-quality, reliable service.
THE ACQUISITION AND OTHER RECENT ACQUISITION ACTIVITIES
The primary focus of Beckman's acquisition strategy has been to broaden its
product offerings. Beckman significantly strengthened its diagnostic
immunochemistry offerings, including products for cancer diagnostics, through
the acquisition of Hybritech Incorporated in January 1996 and the Access
immunoassay product line of Sanofi Diagnostics Pasteur in April 1997. Beckman
also acquired high throughput screening and robotics technology for drug
discovery from Sagian, Inc. in December 1996 and DNA sequencing technology
through the acquisition of Genomyx Inc. in October 1996. The Acquisition
represents a significant milestone in accomplishing the Company's strategy to
solidify its position as a leading provider of laboratory systems, adding
Coulter's leading market position in hematology and number two position in flow
cytometry. The purchase price of the Acquisition totaled $1,178.0 million,
consisting of $875.0 million in cash, assumed liabilities of $170.0 million and
purchase liabilities of $133.0 million. See "-- Other Acquisition Activities."
SUMMARY OF EFFECTS OF THE ACQUISITION
The Acquisition and the related financings are expected to lower the net
earnings of the Company through 1998 as a result of a substantial increase in
interest expense, amortization of intangible assets and goodwill and various
other adjustments resulting from purchase accounting. Pro Forma 1997 net
earnings before nonrecurring charges would have been approximately $9.4 million,
which is approximately 90% less than Beckman's actual historical results for
1996. See "Pro Forma Financial Statements" and "-- Financial Condition." Going
forward, annual synergies from the Acquisition are expected to exceed $60
million in 1999, with further gains anticipated in 2000. These synergies are
expected to be realized through both cost savings and increased revenues related
to cross selling. Cost-saving initiatives are designed to rationalize
manufacturing capacity, close duplicate field offices, align distribution
networks, combine administrative functions and size the Company to match market
conditions. The first of these changes has been announced and includes staff
reductions in Florida, California and Europe, along with the termination of
manufacturing at a Coulter facility in Luton, England. This first initiative
affects about 600 positions. The Company believes that earnings beyond 1998
should improve as a result of these synergies as well as contemplated
initiatives to reduce indebtedness and continued growth in its operations. No
assurances can be given as to the amount or timing of
36
<PAGE> 42
any synergies or debt reduction, if any, that may actually be realized or that
any such growth may occur. See "Risk Factors -- Ability to Successfully
Integrate Coulter."
Purchase Accounting. The Acquisition was accounted for as a purchase. Under
purchase accounting, the total purchase cost and fair value of liabilities
assumed was allocated to the tangible and intangible assets of the Company based
upon their respective fair values as of the closing of the Acquisition.
Accordingly, the Company recorded $374.4 million in goodwill, and allocated
$282.0 million to in-process research and development which was charged to
expense in the fourth quarter of 1997. In addition, $17 million was allocated to
the revaluation of inventories and is being charged to cost of sales over the
period in which the inventories are sold, which is expected to be two quarters
following the consummation of the Acquisition. Purchase liabilities recorded
included approximately $110.0 million for severance and related costs and $23.0
million for costs associated with the closure of certain offices and
manufacturing facilities. The Company expects to complete its termination of
certain employees and closure of certain facilities in fiscal 1998. Assumed
liabilities recorded included approximately $103.0 million of contractual
obligations of Coulter to its employees, $36.0 million of change in control
payments and $31.0 million of other assumed liabilities. The Company expects to
pay for these obligations throughout fiscal 1998. At December 31, 1997
substantially all of the purchase liabilities and $150.4 million of the assumed
liabilities remained on the balance sheet. The Company does not believe that the
final purchase price allocation will differ significantly from the preliminary
purchase price allocation recorded in Fiscal 1997. Future cost of sales and
operating expenses may temporarily be substantially higher and income from
operations may be substantially lower as a result of the effects of purchase
accounting, as compared with the Company's historical results.
EVENTS IMPACTING COMPARABILITY
Acquired Research and Development. As a direct result of the Acquisition,
the Company recorded a $282.0 million charge for purchased in-process research
and development. This charge relates to projects that have economic value but
cannot be capitalized under generally accepted accounting principles.
Intangible Assets and Goodwill. As a result of the Acquisition, $404.0
million was recorded as the fair value of patents, trademarks and other
intangibles ("Intangible Assets") and $374.4 million was recorded as the excess
of purchase price, purchase liabilities and liabilities assumed over the fair
value of identifiable net assets acquired and in-process research and
development projects acquired ("Goodwill"). Intangible Assets are amortized
using the straight-line method over their expected useful lives, over periods
ranging from 15 to 30 years. Goodwill is amortized on a straight-line basis over
40 years. See Note 3 to Consolidated Financial Statements of Beckman.
Restructuring Charges. The Company recorded a $59.4 million restructuring
charge in the fourth quarter of 1997. This charge is the result of a
restructuring plan focused on asset redeployment, reduction of duplicate
overhead and improved operating efficiency, on a worldwide basis. On an
after-tax basis, the restructuring charge was $36.4 million or $1.32 per share.
The restructuring charges recorded in 1995 and 1994 were for facility moves and
transition costs that were anticipated and directly associated with the
Company's 1993 restructuring plan, but which could not be recognized in the
establishment of the original restructuring reserve under generally accepted
accounting principles. See Note 4 to Consolidated Financial Statements of
Beckman.
Sale of Assets. The Company has sold certain financial assets (primarily
consisting of equipment subject to customer leases and lease receivables) as
part of its plan to reduce debt and provide funds for integration purposes. The
net book value of financial assets sold was approximately $71 million for which
the Company received approximately $75 million in cash proceeds. The Company
will continue to evaluate opportunities to provide additional cash flow by
monetizing other assets during 1998 and beyond. The Company intends to
consummate sale-leaseback transactions with respect to some of its real estate
assets which the Company expects will generate proceeds to the Company of
approximately $150 million in 1998 and approximately $40 million in 1999.
Further, the Company expects to sell an additional $30 million of lease
receivables in 1998. These sales are expected to marginally reduce operating
income while decreasing nonoperating expenses, resulting in a slightly negative
impact on the Company's pretax results. See Note 5 to Consolidated Financial
Statements of Beckman.
37
<PAGE> 43
Tax Aspects. As a result of expenses related to the Acquisition, including
the Coulter bonus sharing plan payments, deductions for interest on indebtedness
and certain other expenses incurred in connection with the Acquisition, the
Company does not expect that it will have to pay federal income taxes for the
next several years. The deferred income tax liability of $153.5 million, which
is related to the intangible assets acquired, will be reduced by the tax effect
of the amortization of the intangible assets, which is not deductible for income
tax purposes. The amortization of goodwill of $1.6 million is not deductible for
income tax purposes, which has the impact of increasing the effective tax rate
by approximately 0.2 percentage points for Fiscal 1997.
FOREIGN CURRENCY EXPOSURE
During Fiscal 1997, approximately 50% of the Company's sales were generated
outside the United States. Revenues from non-U.S. sales fluctuate with changes
in foreign currency exchange rates. U.S. dollar-denominated costs and expenses
represent a much greater percentage of the Company's operating costs and
expenses than U.S. dollar-denominated sales represent of total net sales. As a
result, appreciation of the U.S. dollar against the Company's major trading
currencies has a negative impact on the Company's results of operations, and
depreciation of the U.S. dollar against such currencies has a positive impact.
Since the Company actively hedges its foreign currency exposure, the relative
strength or weakness of the U.S. dollar is not likely to have a material
short-term effect on the Company's business decisions. Long-term appreciation of
the U.S. dollar could have a material adverse effect on the Company's business,
financial condition or results of operations. The Company may adjust certain
aspects of its operations in the event of a sustained material change in such
exchange rates. Appreciation of the U.S. dollar over the last year has had a
negative impact on the Company's sales in comparison to its costs, which has
adversely affected gross profit. See "-- Results of Operations -- Beckman,"
"-- Results of Operations -- Coulter" and "-- Financial Instruments."
OTHER NONOPERATING INCOME AND EXPENSES
Other nonoperating income and expenses for the Company are generally
comprised of five primary items: (i) interest expense, (ii) interest income,
(iii) foreign exchange gains or losses, (iv) investments that are non-core or
are accounted for as a minority interest and (v) nonoperating gains or losses.
Interest income typically includes income from sales-type leases and interest on
cash equivalents and other investments. Foreign exchange gains or losses are
primarily the result of the Company's hedging activities (net of revaluation)
and are recorded net of premiums paid. Other income, net as reported by Coulter
includes the results of operations of two investments, Coulter Pharmaceutical
and Coulter Cellular, which (except for a minority interest in Coulter Cellular)
have been eliminated in the Pro Forma Financial Statements as a result of their
spin-off prior to the Acquisition. See "Pro Forma Financial Statements." Other
nonoperating gains and losses are most frequently the result of one-time items
such as asset sales or other items.
RESULTS OF OPERATIONS -- BECKMAN
The following table sets forth, for the periods indicated, the results of
operations as a percentage of sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997(a) 1996 1995
------- ----- -----
<S> <C> <C> <C>
Sales....................................................... 100.0% 100.0% 100.0%
Operating costs and expenses
Cost of sales............................................. 50.9 46.5 45.9
Marketing, general and administrative..................... 30.1 31.1 32.3
Operating income before research and development(b)......... 19.0 22.4 21.8
Research and development(b)................................. 10.3 10.5 9.9
Operating income(b)......................................... 8.7 11.9 11.9
Net nonoperating expense.................................... 1.2 1.0 1.1
Earnings before income taxes(b)............................. 7.5 10.9 10.8
Net earnings(b)............................................. 4.5 7.3 7.1
</TABLE>
38
<PAGE> 44
- ---------------
(a) Results of operations of Beckman for the fiscal year ended December 31, 1997
include results for Coulter from November 1, 1997.
(b) Amounts exclude special charges. Special charges include a write-off of
in-process research and development projects acquired of $282.0 million,
23.5% of sales, in 1997 and restructuring charges of $59.4 million, 5.0% of
sales, in 1997 and $27.7 million, 3.0% of sales, in 1995. See
"Business -- Business Strategy." Including the special charges, operating
(loss) income was ($237.0) million in 1997 and $83.1 million, 8.9% of sales,
in 1995. Including special charges, Beckman reported (losses) earnings
before income taxes of ($251.9) million in 1997 and $72.4 million, 7.8% of
sales, in 1995.
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996
Sales for 1997 were $1,198.0 million, an increase of 16.5% over the
$1,028.0 million reported in 1996. The sales growth in constant currency over
the prior year was 20.2%. More than half of the growth resulted from the
Acquisition. Despite continuing market-driven pricing pressures and adverse
currency fluctuations, core businesses grew in all geographic areas. As an
example, the Company was able to leverage its product offerings that reduce
total laboratory cost, provide workstation consolidation and progressive
automation, into a $100.0 million, five-year contract signed with AmeriNet,
Inc., one of the largest healthcare purchasing organizations in the United
States. In addition, a new contract was signed with University Healthsystem
Consortium ("UHC"). The UHC agreement will complement the existing agreement
with Voluntary Hospitals of America ("VHA"), which has recently acquired UHC. In
1997 as in 1996, international sales accounted for approximately 50% of total
sales.
Gross profit at 49.1% of sales was 4.4 percentage points lower than the
1996 level of 53.5%. Cost of sales resulting from the inventory written-up to
market value in connection with the Acquisition accounted for $11.3 million or
one percentage point of the reduction. Unfavorable foreign currency fluctuations
contributed another one percentage point. Lower margins for Coulter products and
competitive pricing pressures made up the balance of the percentage reduction.
Marketing, general and administrative expenses at 30.1% of sales were one
percentage point lower than the 1996 level of 31.1%, despite the costs of
acquisition activities incurred during the year. Research and development
expenses remained at last year's levels, at just over 10% of sales.
As a result, operating income before pretax special charges was $104.4
million or 8.7% of sales in 1997, compared with operating income of $122.5
million and 11.9%, respectively, in 1996. However, the 1997 operating income
before pretax special charges was reduced by charges for inventory recorded at
fair value and on-going goodwill and intangible amortization expenses arising
out of the Acquisition. Without these items, the 1997 operating income margin
would have been 10.0%.
One-time charges of $282.0 million for in-process research and development
expenses and restructuring charges of $59.4 million contributed significantly to
the reported operating loss of $237.0 million.
Incremental interest expense associated with the debt incurred by the
Company to fund the Acquisition increased nonoperating expenses, but was
partially offset by gains due to hedging activities.
The net loss for the year was $264.4 million compared with net earnings of
$74.7 million in 1996 due principally to the charges discussed above.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Sales growth of 11%, 13% in constant currency, over the prior year was
attributable to increased market share in diagnostics products, primarily in the
North American and European markets; increased market share in life sciences
products, primarily in non-European international markets; continued success
from Beckman's SmithKline Diagnostics subsidiary's HEMOCCULT product; and sales
from Hybritech products (Hybritech was acquired effective January 2, 1996).
International sales represented approximately 50% of total sales.
The gross profit percentage decrease resulted from changes in product mix,
unfavorable foreign currency fluctuations and competitive pricing pressures.
39
<PAGE> 45
The increase in operating costs was due to a higher rate of investment in
research and development costs related to Hybritech products.
Earnings before income taxes for the year ended December 31, 1996 compared
to the same period of the prior year increased to $111.5 million from $72.4
million (1995 included a restructuring charge of $27.7 million).
Net earnings for the year ended December 31, 1996 were $74.7 million or
$2.58 per share, representing an increase of 53% and 52%, respectively, over the
prior year. Net earnings in 1995 included a $17.2 million after tax
restructuring charge which decreased net earnings per share by $0.59.
RESULTS OF OPERATIONS -- COULTER
The following table sets forth, for the period indicated, the results of
operations as a percentage of sales:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
-------------- --------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales............................................... 100% 100% 100% 100% 100%
Operating costs and expenses
Cost of sales..................................... 52.3 51.6 53.3 51.0 52.0
Selling, general and administrative expenses...... 32.8 34.4 31.1 31.6 31.3
Operating income before research and development
expense(a)........................................ 14.9 14.0 15.6 17.4 16.7
Research and development............................ 11.1 13.6 12.2 12.8 11.2
Operating income(a)................................. 3.8 0.4 3.4 4.6 5.4
Other (income) expense.............................. 1.1 0.3 (0.3) (0.8) 1.6
Income before income taxes(a)....................... 2.7 0.1 3.7 5.4 3.8
Net earnings(a)..................................... 1.9 0.1 2.7 4.8 2.6
</TABLE>
- ---------------
(a) Amounts exclude restructuring charges of $5.9 million, 0.8% of sales for the
year ended March 31, 1997. Including the restructuring charges, operating
income was $17.8 million, 2.5% of sales for the year ended March 31, 1997.
Income before income taxes was $20.1 million, 2.9% of sales for the year
ended March 31, 1997.
Six Months Ended September 30, 1997 as Compared to Six Months Ended September
30, 1996
Coulter experienced net sales growth of 4.3% compared to the comparable
period in the prior year. Instrument sales increased 16.0% while reagent sales
were relatively unchanged. The release of the GEN*S and AC*T series of
hematology products during 1997 mainly accounted for the increase in instrument
sales, while reagent sales were adversely affected by increased discounting in
the U.S. and a strengthening dollar in overseas markets.
Gross profit margin as a percentage of sales decreased by less than 1% as
higher selling prices on GEN*S products were offset by increased warranty costs
in direct sales markets. In addition, competitive market pressures in the U.S.
and international markets contributed to overall lower sales prices on
instrument and reagent products, resulting in a decrease in gross profit.
Selling, general, and administrative expenses as a percentage of sales
decreased by 1.6% primarily due to reduced expenses in the international
operations resulting from cost reduction measures and a strengthening U.S.
dollar. Research and development expenses as a percentage of sales decreased
2.5%, and in absolute dollars $6.2 million, due to a reorganization to improve
productivity and efficiency.
The net increase in non-operating expense of $2.7 million is attributable
to an increase in foreign exchange gains in the U.S., offset by Coulter's
portion of expenses relating to its investments in two development stage
companies.
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For the six months ended September 30, 1997, Coulter's income before
provision of income taxes and net income increased $8.4 million and $6.1
million, respectively, compared to the comparable period in the prior year.
Year Ended March 31, 1997 as Compared to Year Ended March 31, 1996
Sales grew 2% over the prior year driven primarily by the full year's
impact of Coulter's June 1995 acquisition of Immunotech S.A. and increases in
sales of P-24 Reagents, offset by unfavorable foreign currency fluctuations and
continued pricing pressures.
Gross profit as a percentage of sales decreased as a result of unfavorable
foreign currency fluctuations and continued pricing pressures.
Operating costs, excluding the $5.9 million restructuring charge described
below, were essentially flat compared to the prior year. Currency fluctuations
and lower variable compensation expense had a positive impact on operating
costs.
Operating income for Fiscal 1996 was also affected by a restructuring
charge of $5.9 million to cover the costs associated with a reduction in its
workforce across all functional areas.
As a result of the foregoing, income before provision for income taxes for
Fiscal 1996 decreased $17.6 million from the $37.7 million achieved in Fiscal
1995 to $20.1 million in Fiscal 1996. The effective tax rate increased to 27.5%
from 12.3% in the prior year as a result of a change in the geographic mix of
income, and to a lesser extent, the recognition of fewer deferred tax items than
in the prior year. Net income for Fiscal 1996 was $14.6 million, representing a
decrease of 55.8% from Fiscal 1995.
Year Ended March 31, 1996 as Compared to Year Ended March 31, 1995
Sales grew nearly 5% over the prior year. Sales growth was positively
affected by the acquisition of Immunotech S.A., partially offset by competitive
pricing pressures.
Gross profit as a percentage of sales increased during the period due to a
favorable shift in product mix reflecting relatively more sales of reagents.
Selling, general and administrative expenses increased as a percentage of
sales due to inflationary pressures and increased operating costs resulting from
the acquisition of Immunotech. The investment in research and development was
higher due to the acquisition of Immunotech and the development of a new
generation hematology analyzer.
Other (income) expense increased over the prior year as a result of
favorable currency gains on hedging contracts and the recognition of a gain on
the termination of Coulter's domestic defined benefit plan of $3.8 million.
As a result of the foregoing, income before provision for income taxes for
Fiscal 1995 increased by $12.9 million or 52% from the prior year. The effective
tax rate decreased to 12.3% from 30.2% in the prior year as a result of a change
in geographic mix of income and recognition of certain deferred tax items. Net
income for Fiscal 1995 was $33.0 million, representing an increase of 90.7% from
Fiscal 1994.
FINANCIAL CONDITION
CASH FLOWS
Beckman.
For the year ended December 31, 1997, operating activities generated $137.8
million of cash flows compared with $139.1 million in 1996 and $60.2 million in
1995. The 1997 results were primarily achieved through net results from
operations, after adding back the effects of depreciation, amortization and
special charges, including the write-off of acquired in-process research and
development in connection with the Acquisition. Additionally, the Company
received $35.7 million in cash proceeds from the sale of sales-type lease
receivables. See Note 5 to Consolidated Financial Statements of Beckman.
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Investing activities used $929.1 million of cash. Investments and
acquisitions used $893.9 million primarily relating to the Acquisition. Capital
expenditures used $100.9 million of cash which is consistent with historical
levels. The Company plans to invest at approximately the same level in 1998 and
intends to finance this capital spending primarily through cash provided by
operating activities. An additional $39.6 million of cash proceeds was provided
through the sale and leaseback of instruments. See Note 5 to Consolidated
Financial Statements of Beckman.
Financing activities provided $790.6 million of cash. This was achieved
primarily through borrowings of $827.8 million, net of repayments, under short
term notes payable, long term debt, and credit facilities. These proceeds were
primarily used to fund the Acquisition. Purchases of treasury stock used $20.6
million, net of proceeds from sales of treasury stock, and dividends to
stockholders used $16.6 million.
Coulter.
For the six months ended September 30, 1997, net cash provided by operating
activities was $29.8 million compared with $38.0 million of cash used in
operating activities for the comparable period in the prior year. An increase in
net income of $6.1 million and fluctuations in accounts receivable, inventories,
other assets, and accrued liabilities accounted for the increase. A significant
decrease in collection days in the U.S. contributed to a $28.9 decrease in
accounts receivable compared to a $16.6 million decrease in the comparable
period of the prior year. Inventory growth was $10.3 million, compared to $27.9
million in the prior year period, as inventory build up was reduced due to the
release of the GEN*S and AC*T products in fiscal year 1997. In addition, a
stronger U.S. dollar in overseas markets, especially Europe and Japan, also
contributed to the reduction in inventory. Other assets increased $2.2 million,
primarily due to a $3.0 million investment by Coulter for a 6.6% interest in
Lab-Interlink, Inc. Accrued liabilities decreased $0.5 million, compared to a
decrease of $26.6 million in the prior year period. Payments relating to the
Success Sharing bonus program and the termination of Coulter's defined benefit
plan accounted for the decrease in the comparable period of the prior year.
For the six months ended September 30, 1997, net cash used in investing
activities was $13.4 million compared with $27.9 million of cash used in
investing activities for the comparable period in the prior year. Capital
expenditures were $14.4 million, a reduction of $22.5 million from the prior
year period, mainly caused by a decrease in spending for computer hardware and
software. Offsetting the decrease in capital expenditures was an increase of
$6.2 million in cash used from investing activities resulting from an increase
in Coulter's leasing business due to the release of new products during the six
months ended September 30, 1997.
Net cash used in financing activities for the six months ended September
30, 1997 was $16.2 million compared to $47.9 million of net cash provided by
financing activities for the comparable period in the prior year. A reduction of
$54.0 million in proceeds from long-term debt coupled with an increase of $17.7
million in principal payments largely accounted for the increase in cash used in
financing activities.
LIQUIDITY AND CAPITAL RESOURCES
General. The Company broadly defines liquidity as its ability to generate
sufficient cash flow from operating activities to meet its obligations and
commitments. In addition, liquidity includes the ability to obtain appropriate
financing and to convert into cash those assets that are no longer required to
meet existing strategic and financial objectives. Therefore, liquidity cannot be
considered separately from capital resources that consist of current or
potentially available funds for use in achieving long-range business objectives
and meeting debt service commitments.
Currently, the Company's liquidity needs arise primarily from debt service
on the substantial indebtedness incurred in connection with the Acquisition, and
the funding of costs of integrating the operations of Beckman and Coulter, as
well as its working capital requirements and capital expenditures.
Debt Service. The Company is highly leveraged. As of December 31, 1997, the
outstanding indebtedness of the Company was $1,250.2 million, primarily
consisting of $400.0 million in Term Loan borrowings under the $500.0 million
Term Loan and $600.0 million of revolving credit borrowings under the $800.0
million
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Revolving Credit Facility. Net proceeds from the Offering of $300.0 million were
used to prepay all Term Loan borrowings, net proceeds of $80.0 million were used
to repay a portion of the Revolving Credit Facility and the remaining net
proceeds of $14.3 million were used for operating purposes. See "Risk Factors --
Substantial Leverage; Ability to Service Indebtedness," "The Acquisition" and
"Use of Proceeds." As of April 1, 1998, there were no amounts outstanding under
the Term Loan and $670.0 million outstanding under the Revolving Credit
Facility. Principal and interest payments under the Credit Facility and interest
payments on the Notes represent significant liquidity requirements for the
Company. The Credit Facility provides for mandatory prepayment of revolving
credit borrowings (and, to the extent provided, reductions in commitments)
thereunder from excess cash flow (as defined therein), and from proceeds of
certain equity or debt offerings, asset sales and extraordinary receipts. The
Revolving Credit Facility is not subject to any scheduled principal amortization
and has a five year term, maturing in October 2002, with all amounts then
outstanding becoming due. See "Description of Credit Facility" and "Use of
Proceeds."
The loans under the Credit Facility bear interest at floating rates based
upon the interest rate option elected by the Company (except in the case of
competitive bid advances (as defined therein) which may bear interest at a fixed
rate of interest), and the Company is accordingly subject to fluctuations in
such interest rates, which could cause its interest expense to increase or
decrease in the future. As a result of the substantial indebtedness incurred in
connection with the Acquisition, the Company's interest expense will be higher
and will have a much greater proportionate impact on net earnings in comparison
to pre-Acquisition periods.
Each holder of Old Debentures has the right to require the Company to
redeem such holder's Old Debentures in June 2006.
Certain Post-Acquisition Costs. The Company estimates, based upon current
exchange rates, that its cash funding requirements for the costs associated with
the Acquisition will amount to approximately $180.0 million from the
consummation of the Acquisition through the end of 1998, and approximately $50.0
million to $65.0 million in each of the following two years. This includes up to
$103.0 million of sharing bonus plan payments which will be made to Coulter's
employees.
Stock Repurchases and Dividends. The Company repurchased 998,936 shares of
its common stock during 1997 and 991,543 shares during 1996. The Company elected
to discontinue this stock repurchase program in connection with the Acquisition.
The Credit Facility generally prohibits market repurchases of the Company's
stock.
Under the Company's dividend policy, the Company pays a regular quarterly
dividend to its stockholders which amounted to approximately $16.6 million in
1997 and approximately $14.7 million in 1996. In February of 1998, the Board of
Directors declared a quarterly dividend of $0.15 per share, which approximates
$4.1 million in total. This dividend is payable April 2, 1998 to stockholders of
record on February 3, 1998. The Company anticipates that it will continue to pay
dividends at similar levels for the foreseeable future. The Credit Facility
restricts and the Indenture will restrict (but, in each case, not prohibit) the
Company's ability to pay dividends.
Future Financing Sources and Cash Flows. As of April 1, 1998, the Company's
remaining borrowing availability under the Revolving Credit Facility was $130.0
million. Undrawn amounts under the Revolving Credit Facility will be available
to meet future working capital and other business needs of the Company. See
"Description of Credit Facility."
At December 31, 1997, no events of default existed under any of the then
existing debt agreements of the Company. The Company maintains working capital
facilities for its operations outside the United States. In June 1996, the
Company issued $100.0 million of Old Debentures bearing an interest rate of
7.05% due June 1, 2026 ($100.0 million of which were outstanding as of April 1,
1998). The net proceeds received of $98.5 million were used to repay amounts
then outstanding under the Company's commercial paper program. The Company also
has the ability to issue up to $100.0 million of additional debt under a Form
S-3 Registration Statement filed with the Securities and Exchange Commission,
which was declared effective on April 16, 1996.
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Subsequent to the consummation of the Acquisition, the Company has pursued
sales of certain financial assets (primarily consisting of lease receivables and
equipment subject to customer leases) and real estate assets, as part of its
plan to reduce debt and provide funds for integration purposes. The Company has
sold approximately $71 million of financial assets for cash proceeds of
approximately $75 million and intends to consummate several sale leaseback
transactions with respect to some of its real estate assets during 1998 and
1999, which the Company expects will generate proceeds of approximately $150
million in 1998 and approximately $40 million in 1999. Further, the Company
expects to sell an additional $30 million of lease receivables in 1998. In
addition to these asset sales, the Company's capital expenditures include
expenditures for customer leased equipment. Such expenditures in the future may
be reduced by increased reliance on third party leasing arrangements, which
would accordingly reduce the Company's liquidity needs. See "-- Events Impacting
Comparability -- Sale of Assets."
Based upon current levels of operations and anticipated cost savings and
future growth, the Company believes that its cash flow from operations, together
with available borrowings under the Revolving Credit Facility and its other
sources of liquidity (including leases, any other available financing sources,
and the proceeds of the planned asset sales discussed above), will be adequate
to meet its anticipated requirements for interest payments and other debt
service obligations, working capital, capital expenditures, lease payments and
other operating needs, until the maturity of the Revolving Credit Facility in
2002. There can be no assurance, however, that the Company's business will
continue to generate cash flow at or above current levels or that estimated cost
savings or growth can be achieved. The Company's future operating performance
and ability to service or refinance the Notes and to repay, extend or refinance
the Credit Facility will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond the Company's
control. See "Risk Factors."
Financing Covenant Restrictions. The Credit Facility imposes restrictions
on the Company's ability to make capital expenditures and both the Credit
Facility and the Indenture governing the Notes limit the Company's ability to
incur additional indebtedness. In addition, the Company is required to comply
with specified financial ratios and tests under the Credit Facility, including
minimum net worth, a minimum interest coverage ratio and a maximum leverage
ratio. Such restrictions, together with the highly leveraged nature of the
Company, could limit the Company's ability to respond to market conditions, to
provide for capital investments or to take advantage of business opportunities.
The covenants contained in the Credit Facility and the Indenture also impose
restrictions on the operation of the Company's businesses. See "Risk
Factors -- Restrictive Financing Covenants," "Description of Credit Facility"
and "Description of Notes."
INFLATION
Inflation and the effects of changing prices are monitored continually by
the Company. Inflation increases the cost of goods and services used by the
Company. Competitive and regulatory conditions in many markets restrict the
Company's ability to fully recover the higher costs of acquired goods and
services through price increases. The Company attempts to mitigate the impact of
inflation by implementing continuous process improvement solutions to enhance
productivity and efficiency and, as a result, lower costs and operating
expenses. The effects of inflation have, in the Company's opinion, been managed
appropriately and as a result have not had a material impact on its operations
and resulting financial position.
FINANCIAL INSTRUMENTS
The Company pursues a currency hedging program which utilizes derivatives
in order to limit the impact of foreign currency exchange fluctuations on its
financial results. Under this program, the Company enters into forward exchange
and option contracts in the normal course of business to hedge certain foreign
currency denominated transactions. Realized and unrealized gains and losses on
these contracts are included in nonoperating (income) expense or other (income)
expense in the Company's consolidated statements of earnings. The discount or
premium on a forward exchange contract is included in the measurement of the
basis of the related foreign currency transaction when recorded. The premium on
an option contract is accounted for separately and amortized to nonoperating
(income) expense or other (income) expense over the term of the contract. These
instruments involve, to varying degrees, elements of market and credit risk in
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excess of the amounts recognized in the consolidated balance sheets. The Company
does not hold or issue financial instruments for trading purposes. See Note 7 to
the Consolidated Financial Statements of Beckman, and Note G to the Consolidated
Financial Statements of Coulter. In addition, the Company also selectively
enters into certain financial instruments to manage its exposure to interest
rate changes on its floating rate debt. These instruments are held for hedging
purposes only and include interest rate swap agreements.
OTHER ACQUISITION ACTIVITIES
In April 1997, the Company acquired the Access immunoassay product line and
related manufacturing facility of Sanofi Diagnostics Pasteur. The Access product
line, together with the earlier acquisition of Hybritech Incorporated
("Hybritech") and the Company's own immunochemistry/protein products, created a
major presence in immunochemistry. The acquisition was accounted for as a
purchase.
In December 1996, the Company acquired the assets and assumed certain of
the liabilities of the laboratory robotics division of Sagian Inc. of
Indianapolis, Indiana. By combining Sagian's scheduling software and robotics
with its own biorobotics systems, the Company enhanced its ability to serve the
pharmaceutical industry's need for high-throughput screening of candidate
compounds for new drugs. The acquisition was accounted for as a purchase.
In January 1996, the Company acquired the assets and assumed the
liabilities of Hybritech, a San Diego-based diagnostics company. The acquisition
expanded the Company's ability to develop and manufacture high sensitivity
immunoassays, including cancer tests. The acquisition was accounted for as a
purchase.
In May 1995, the Company agreed to acquire Genomyx Corporation of Foster
City, California. Genomyx is a developer and manufacturer of advanced DNA
sequencing products and complements the Company's biotechnology business. The
acquisition was completed on October 21, 1996 and was accounted for as a
purchase.
The purchase prices for these acquisitions and the results of operations
from the acquired businesses were not material to the Company individually or in
the aggregate.
BUSINESS CLIMATE
The clinical diagnostics and life sciences markets are each highly
competitive and the Company encounters significant competition in each market
from many manufacturers, both domestic and outside the United States.
Competitive and regulatory conditions in many markets restrict the Company's
ability to fully recover through price increases any increase in higher costs of
acquired goods and services resulting from inflation. The Company historically
has been able to partially offset the adverse impact of these competitive
factors by improving productivity.
The diagnostics and life sciences markets continue to be unfavorably
affected by the economic weakness in Europe and Asia and by the cost containment
initiatives in several European governmental and healthcare systems. The life
sciences market also continues to be affected by consolidation of pharmaceutical
companies and governmental constraints on research and development spending. In
the United States, attempts to lower costs and increase efficiencies have led to
consolidation among healthcare providers resulting in more powerful provider
groups that leverage their purchasing power with suppliers to contain costs.
Cost containment initiatives in U.S. and European healthcare systems are
expected to be continuing factors which may affect the Company's ability to
maintain or increase sales.
The Company intends to grow its business through increased internal
development efforts, and in part through collaborations that will help to expand
its technology base. The continuing consolidation trend among United States
healthcare providers has increased pressure on diagnostic equipment
manufacturers to broaden their product offerings to encompass a wider range of
testing capability, greater automation and higher volume capacity. The
Acquisition was a clear indicator of the Company's resolve to complete a key
initiative to become a broad-based world leader in IVD testing, by expanding its
product offering.
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The consolidation trend among U.S. healthcare providers has put pressure on
diagnostic equipment manufacturers to broaden their product offerings to
encompass a wider range of testing capability, greater automation and higher
volume capacity. The Company offers a broad range of products that customers can
utilize to meet a wide range of testing needs.
TAXES
The Company is subject to taxation in many jurisdictions throughout the
world. The Company's effective tax rate and tax liability will be affected by a
number of factors, such as the amount of taxable income in particular
jurisdictions, the tax rates in such jurisdictions, tax treaties between
jurisdictions, the extent to which the Company transfers funds between
jurisdictions and income is repatriated, and future changes in the law.
Generally, the tax liability for each legal entity is determined either (i) on a
non-consolidated basis or (ii) on a consolidated basis only with other entities
incorporated in the same jurisdiction, in either case without regard to the
taxable losses of nonconsolidated affiliated entities. As a result, the Company
may pay income taxes in certain jurisdictions even though the Company on an
overall basis incurs a net loss for the period.
YEAR 2000 CONVERSION
The Company is in the process of modifying, upgrading or replacing its
internal computer software applications and information systems. The Company is
also in the process of evaluating all currently marketed and leased products and
will upgrade those products that are intended for continued marketing and
leasing beyond the year 1999. The Company is currently evaluating possible
strategies to accommodate its installed analytical instrument systems owned by
its customers.
These tasks have been assigned to a senior executive of the Company who has
established three projects: (i) product related matters; (ii) mainframe
management information systems and software; and (iii) all other systems (e.g.
personal computers, office machines and supplier systems). Each project is led
by a project manager and staffed by software experts to perform the evaluation
process. Analysis and evaluation activities were begun in 1996 and are in
varying stages of completion as of the date of this Prospectus. The Company
recently expended approximately $250,000 on new software that provides a suite
of tools to assist in the year 2000 remediation process. Remediation activities
have begun and are planned and expected to be completed by the end of 1998.
Testing and validation of the remediated systems and any final revisions needed
will be conducted in 1999.
The Company does not expect that the cost of its year 2000 compliance
program will be material to its business, results of operations or financial
condition. The Company believes that it will be able to achieve compliance by
the end of 1999 and does not currently anticipate any material disruption of its
operations as the result of any failure by the Company to be in compliance.
Although the impact on the Company caused by the failure of the Company's
significant suppliers or customers to achieve year 2000 compliance in a timely
or effective manner is uncertain, the Company's business and results of
operations could be materially adversely affected by such failure.
ENVIRONMENTAL MATTERS AND LITIGATION
Environmental Matters. The Company is subject to federal, state, local and
foreign environmental laws and regulations. Although the Company continues to
make expenditures for environmental protection, it does not anticipate any
significant expenditures in order to comply with such laws and regulations that
would have a material impact on its operations or financial position. The
Company believes that its operations comply in all material respects with
applicable federal, state and local environmental laws and regulations. To
address contingent environmental costs, the Company establishes reserves when
such costs are probable and can be reasonably estimated. The Company believes
that, based on current information and regulatory requirements (and taking third
party indemnities into consideration), the reserves established by the Company
for environmental expenditures are adequate. Based on current knowledge, to the
extent that additional costs may be incurred that exceed the accrued reserves,
such amounts are not expected to have a material impact on the
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Company's operations or financial condition, although no assurance can be given
in this regard. See "Risk Factors -- Environmental Matters" and
"Business -- Environmental Matters."
Litigation. The Company is currently, and is from time to time, subject to
claims and lawsuits arising in the ordinary course of its business, including
those relating to intellectual property, contractual obligations, competition
and employment matters. In certain such actions, plaintiffs request punitive or
other damages or nonmonetary relief, which may not be covered by insurance, and
in the case of nonmonetary relief, could if granted materially affect the
conduct of the Company's business. The Company accrues for the potential
liabilities involved in these matters as they become known and can be reasonably
estimated. In management's opinion (taking third party indemnities into
consideration), the various asserted claims and litigation in which the Company
is currently involved are not reasonably likely to have a material adverse
effect on the Company's business, results of operations or financial position.
However, no assurance can be given as to the ultimate outcome with respect to
such claims and litigation. The resolution of such claims and litigation could
be material to the Company's operating results for any particular period,
depending on the level of income for such period. See "Business -- Legal
Proceedings."
RECENT ACCOUNTING DEVELOPMENTS
The Company intends to adopt Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131), in fiscal 1998. Both standards will require
additional disclosure, but will not have a material effect on the Company's
financial position or results of operations. SFAS 130 establishes standards for
the reporting and display of comprehensive income and is expected to first be
reflected in the Company's first quarter of 1998 interim financial statements.
Components of comprehensive income include items such as net earnings, foreign
currency translation adjustments and changes in value of available-for-sale
securities. SFAS 131 changes the way companies report segment information and
requires segments to be determined and reported based on how management measures
performance and makes decisions about allocating resources. SFAS 131 will first
be reflected in the Company's 1998 Annual Report.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements, including statements
regarding, among other items, (i) the Company's business strategy; (ii)
anticipated trends in the Company's business; (iii) the Company's future
liquidity requirements and capital resources; (iv) anticipated synergies; (v)
future cost reductions; and (vi) the impact of the Acquisition on the Company's
future performance. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results could differ
materially from those anticipated by these forward-looking statements, as a
result of the factors described in "Risk Factors" or other factors, including
difficulties, delays or failures in effectively integrating worldwide operations
and/or completing the development phase of certain products, the amount and
timing of any synergies, the impact of currency and interest rates, delays in
receiving regulatory approvals for new products, changes in governmental medical
reimbursement policies or programs, or changes in economic and business
conditions. In light of these risks and uncertainties, there can be no assurance
that events anticipated by the forward-looking statements contained in this
Prospectus will in fact transpire as anticipated.
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BUSINESS
OVERVIEW
Beckman Coulter is a world leader in providing systems that simplify and
automate laboratory processes. The Company designs, manufactures and services a
broad range of laboratory systems consisting of instruments, reagents and
related products that customers use to conduct basic scientific research, drug
discovery research and diagnostic analysis of patient samples. Approximately 75%
of the Company's Pro Forma 1997 sales were for clinical diagnostics
applications, principally in hospital laboratories, while the remaining sales
were for life sciences and drug discovery applications in universities, medical
schools, and pharmaceutical and biotechnology companies. The Company's systems
address over 75% of the hospital laboratory test volume, including virtually all
routine laboratory tests. The Company believes that it is a worldwide market
leader in its primary markets, with well-recognized systems and a reputation for
high-quality, reliable service. After giving effect to the Acquisition, the
Company had sales and EBITDA of $1.8 billion and $278.2 million, respectively,
for Pro Forma 1997.
The Company's systems improve efficiency by integrating customer laboratory
operations. The design of these systems draws upon the Company's extensive
expertise in the chemical, biological, engineering and software sciences.
Products for the clinical diagnostics market consist of systems (analytical
instruments, reagents, accessories and software) that are used to detect,
quantify and classify various substances and cells of clinical interest in human
blood and other body fluids. Products for the life sciences market include
centrifuges, flow cytometers, high performance liquid chromatographs,
spectrophotometers, laboratory robotic workstations, capillary electrophoresis
systems, DNA sequencers and synthesizers, and the reagents and supplies for
their operation. Beckman Coulter has an installed base of approximately 75,000
systems in over 120 countries, which the Company believes will provide a
recurring stream of revenue and cash flows from After Sales. Approximately 67%
of the Company's Pro Forma 1997 sales were derived from After Sales, while the
remaining 33% were derived from the direct placement of systems.
THE ACQUISITION
On October 31, 1997, Beckman acquired all of the outstanding capital stock
of Coulter, which became a wholly owned subsidiary of Beckman. See "The
Acquisition." The acquisition of Coulter represents a significant milestone in
accomplishing the Company's strategy to solidify its position as a leading
provider of laboratory systems through Coulter's leading market position in
hematology and number two position in flow cytometry. Coulter is the world's
leading manufacturer of IVD systems for blood cell analysis (hematology), with a
market share in hematology approximately twice that of its next largest
competitor. Coulter's hematology systems are used to provide complete blood
counts and other blood-related diagnostic information to the same clinical IVD
and medical research laboratories that utilize Beckman's systems. Flow cytometry
is used by both researchers and clinicians to count and categorize various types
of cells, such as the measurement of T-4 cells in AIDS patients and the
diagnosis of leukemias and lymphomas.
Going forward, annual synergies from the Acquisition are expected to exceed
$60 million in 1999, with further gains anticipated in 2000. These synergies are
expected to be realized through both cost savings and increased revenues related
to cross selling. Cost-saving initiatives are designed to rationalize
manufacturing capacity, close duplicate field offices, align distribution
networks, combine administrative functions and size the Company to match market
conditions. The first of these changes has been announced and includes staff
reductions in Florida, California and Europe, along with the termination of
manufacturing at a Coulter facility in Luton, England. This first initiative
affects approximately 600 positions. See "Management's Discussion of Financial
Condition and Results of Operations -- Summary of Effects of the Acquisition."
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COMPETITIVE STRENGTHS
LEADING POSITION IN THE SIMPLIFICATION AND AUTOMATION OF LABORATORY
PROCESSES. The Acquisition significantly expanded Beckman's presence in the
clinical diagnostics and life sciences markets and combined Beckman and Coulter,
two of the most recognized global franchises and brand names in these markets.
In particular, Coulter's number one market position in hematology significantly
strengthens Beckman's global leadership in the clinical diagnostics market. This
will enhance the Company's ability to offer integrated testing capabilities and
automation options that can match a wider range of laboratory test volume,
capitalizing on the efforts of laboratories to improve productivity and reduce
costs.
RECURRING AFTER SALES FROM SUBSTANTIAL INSTALLED BASE. The Company
generates a recurring stream of revenues and cash flows from its large installed
base of approximately 75,000 systems, which require the ongoing consumption of
various reagents, consumables and services. After Sales revenue accounted for
approximately 67% of the Company's Pro Forma 1997 sales. In addition, the
Company's large installed base provides a strong foundation for new product
introductions and upgrades, since many customers tend to remain with an existing
supplier who can reliably provide quality products and services.
BROAD PRODUCT OFFERING. The Company manufactures and markets a more
comprehensive range of laboratory systems than any of its competitors. In
hospitals, the Company's broad product line addresses approximately 75% of all
testing volume, including virtually all routine laboratory tests. This
broad-based capability allows the Company to capitalize on the trend among
hospitals and laboratories toward preferred supplier arrangements and combined
product purchases. The Company offers more than 180 different clinical
diagnostics tests and a full range of hematology capabilities, giving customers
the ability to diagnose and monitor a wide variety of diseases and conditions.
The Company also provides a wide range of systems for life sciences applications
and is the industry leader in centrifugation, capillary electrophoresis and high
throughput screening for drug discovery. The Company believes that broadening
its product portfolio targeted to its existing laboratory customer base will
allow it to leverage its manufacturing and distribution capabilities, extensive
worldwide sales and service infrastructure and product development capabilities
as well as finance and administration activities.
WORLDWIDE SALES AND SERVICE NETWORK. Beckman Coulter maintains an extensive
worldwide sales, service and distribution network, generating approximately
one-half of the Company's Pro Forma 1997 sales outside the United States. This
sales and service network, furnishing service to customers in more than 120
countries, provides Beckman Coulter with recurring revenues and cash flows,
access to new product and application ideas, and sales opportunities from new
and existing customers.
BUSINESS STRATEGY
Beckman Coulter's goal is to profitably gain and retain customers by
providing quality products and services that simplify and automate biochemical
analyses across the technological continuum that extends from academic and
commercial research to clinical diagnostics laboratories. In pursuit of this
goal, the Company focuses on the following key initiatives:
IMPROVE LABORATORY PRODUCTIVITY. By integrating its systems into customer
processes, Beckman Coulter improves productivity and reduces costs in
laboratories worldwide. Laboratories are increasingly focused on automation as a
means of controlling labor costs, which typically account for over 50% of total
laboratory costs. Marketed as "The Power of Process," the Company's approach is
to link pre-analytical and analytical steps with robotics systems to automate
nearly the entire testing process. The Company will continue to focus on its
customers' needs to maximize laboratory operating efficiencies.
EXPAND MARKET SHARE THROUGH PRODUCT DEVELOPMENT. The Company's expertise in
simplifying and automating processes for biological laboratories forms a
technological continuum, which Beckman Coulter can broadly apply to develop a
range of products that are configured to meet specific customer needs in both
the clinical diagnostics and life sciences markets. The Company believes that
its close relationships with research laboratories allow the Company to identify
and commercialize new research techniques. Once brought to the marketplace, the
Company is in a position to translate technology into systems targeted for
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diagnostic needs. Both Beckman and Coulter historically have invested
considerable capital on research and development efforts, contributing to their
leadership in their respective markets and allowing them to consistently provide
new products. In Fiscal 1997, Beckman invested $123.6 million, or 10.3% of
sales, on research and development.
INCREASE INSTALLED BASE TO GENERATE AFTER SALES. One of the Company's
primary objectives is to maximize systems installations to generate future After
Sales revenue. Over the last six years, Beckman has ranked first in total
systems placements in automated clinical chemistry, its largest product
category. The Company believes that increasing its installed base of instruments
will generate increased reagent, consumables and service revenue, and expand
opportunities for new product sales and systems upgrades. In addition,
management believes that providing a fully integrated system that is reliable
and easy to use results in high switching costs and loyalty among customers who
value consistency and accuracy in test results.
PURSUE SELECTED ACQUISITION OPPORTUNITIES. The primary focus of Beckman's
acquisition strategy has been to broaden its product offerings. Beckman
significantly strengthened its diagnostic immunochemistry offerings, including
products for cancer diagnostics, through the acquisitions of Hybritech
Incorporated in January 1996 and the Access immunoassay product line of Sanofi
Diagnostics Pasteur in April 1997. Beckman also acquired high throughput
screening and robotics technology for drug discovery from Sagian, Inc. in
December 1996 and DNA sequencing technology through the acquisition of Genomyx
Inc. in October 1996. The acquisition of Coulter represents a significant
milestone in accomplishing the Company's strategy to solidify its position as a
leading provider of laboratory systems through Coulter's leading market position
in hematology and number two position in flow cytometry.
CONTINUE TO MAXIMIZE OPERATING EFFICIENCY. Beckman has a proven track
record of managing costs and improving operating efficiency through integrating
acquisitions, consolidating redundant functions and realizing potential
synergies in its business. For example, during 1993, Beckman strategically
repositioned itself in response to changes in the worldwide healthcare market by
consolidating redundant functions and improving overall efficiency. This
resulted in annualized savings of over $50 million in 1996. In connection with
the Acquisition, management believes annual synergies of at least $60 million
can be achieved by 1999 with further gains anticipated in 2000, stemming from a
combination of increased revenues related to cross-selling opportunities as well
as reduced operating costs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Summary of Effects of the
Acquisition." No assurances can be given as to whether and to what extent such
annual synergies may be actually realized in the future. See "Risk
Factors -- Ability to Successfully Integrate Coulter."
BACKGROUND
The Company is one of the world's leading manufacturers of analytical
instrument systems, test kits and IVD systems for blood and other cell analysis
and competes in the clinical diagnostics and life sciences markets. The
Company's sales for Fiscal 1997 were approximately $1.2 billion. In Fiscal 1997,
the Company generated approximately 67% of its sales through After Sales revenue
from an installed base of over 75,000 systems.
Founded by Dr. Arnold O. Beckman in 1934, Beckman entered the laboratory
market by introducing the world's first pH meter. The Company became a
publicly-traded corporation in 1952. In 1968 the Company expanded its laboratory
instrument focus to include healthcare applications in clinical diagnostics. The
Company was acquired by SmithKline Corporation to form SmithKline Beckman
Corporation in 1982, and the Company was operated as a subsidiary of SmithKline
Beckman until 1989 when it was divested. Since that time, the Company has
operated as a fully independent, publicly-owned company.
With the acquisition of Coulter, Beckman became the world's leading
manufacturer of IVD systems for blood and other cell analysis. Coulter was
founded in 1958 by Joseph Coulter, Jr. and Wallace Coulter, who discovered the
"Coulter Principle," a revolutionary technology, essentially creating the
automated hematology industry. Coulter's systems are used to provide diagnostic
information to many of the same IVD laboratories that utilize Beckman's clinical
systems.
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The Company's principal executive offices are located at 4300 North Harbor
Boulevard, Fullerton, California 92835, and its telephone number is (714)
871-4848.
CUSTOMERS AND MARKETS
The two primary markets which the Company serves are the clinical
diagnostics and life sciences markets. The Company's clinical diagnostics
customers include hospital clinical laboratories, physicians' offices and group
practices and commercial reference laboratories (large central laboratories to
which hospitals and physicians refer tests), and its life sciences customers
include universities conducting academic research, medical research
laboratories, pharmaceutical companies and biotechnology firms. Beckman
Coulter's customers are continually searching for processes and systems that can
perform tests faster, more efficiently and at lower costs. The Company believes
that its focus on automated and high throughput systems position it to
capitalize on this need.
Virtually all new analytical methods and tests originate in academic
research in universities and medical schools. If the utility of a new method or
test is demonstrated by fundamental research, it often will then be used by
pharmaceutical investigators, biotechnology companies, teaching hospitals or
specialized clinical laboratories in an investigatory mode. In some cases, these
new techniques eventually emerge in routine, high volume clinical testing at
hospitals and reference labs. Generally, instruments used at each stage from
research to routine clinical applications employ the same fundamental processes
but may differ in operating features such as number of tests performed per hour
and degree of automation. By serving several customer groups with differing
needs related through common science and technology, the Company has the
opportunity to broadly apply and leverage its expertise.
The clinical diagnostics and life sciences markets are both highly
competitive and the Company encounters significant competition in each market
from many manufacturers, both domestic and from outside the United States. These
markets continue to be unfavorably impacted by the economic weakness in Europe
and Asia and cost containment initiatives in several European governmental and
healthcare systems. The life sciences market also continues to be affected by
consolidation of pharmaceutical companies and governmental constraints on
research and development spending.
Attempts to lower costs and increase efficiencies have led to consolidation
among healthcare providers in the United States, resulting in more powerful
provider groups that leverage their purchasing power with suppliers to contain
costs. The consolidation trend among U.S. healthcare providers has put pressure
on diagnostic equipment manufacturers to broaden their product offerings to
encompass a wider range of testing capability, greater automation and higher
volume capacity.
The size and growth of the Company's markets are influenced by
technological innovation in bioanalytical practice; government funding for basic
and disease-related research (for example, heart disease, AIDS and cancer);
research and development spending by biotechnology and pharmaceutical companies;
and healthcare spending and physician practice. The Company expects worldwide
healthcare expenditures and diagnostic testing to increase over the long-term,
primarily as a result of the following three factors: (i) growing demand for
services generated by the aging of the world population, (ii) increasing
expenditures on diseases requiring costly treatment (for example, AIDS and
cancer) and (iii) expanding demand for improved healthcare services in
developing countries.
CLINICAL DIAGNOSTICS
The clinical diagnostics industry encompasses the study and analysis of
disease by means of laboratory evaluation and analysis of bodily fluids and
other substances from patients. Due to its important role in the diagnosis and
treatment of patients, IVD testing is an integral part of overall patient care.
Additionally, IVD testing is increasingly valued as an effective method of
reducing healthcare costs by providing accurate, early detection of health
disorders and also reducing the length of hospital stays.
The major diagnostic fields that comprise the IVD industry include clinical
chemistry, immunochemistry, microbiology, hematology and blood banking. The
worldwide IVD industry was estimated to be $19 billion in
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1996 and is estimated to grow at a 4% compound annual rate through the year
2001. The Company primarily serves the hospital and reference laboratory
segments of the IVD market, which tend to use more precise, higher volume and
more automated IVD systems. The hospital and reference laboratory segments
constituted approximately $15.5 billion of the worldwide IVD market in 1996.
IVD systems are composed of instruments, reagents, consumables, service and
data management systems. Instruments typically have a five- to ten-year life and
serve to automate repetitive manual tasks, improve test accuracy and speed the
reporting of results. Reagents are substances that react with the patient sample
to produce measurable, objective results. Consumables vary across application
segments but are generally items such as sample containers, adapters, pipette
tips, etc., used during test procedures. Reagents, accessories, consumables and
services generate significant ongoing revenues for suppliers. Sample handling
and preparation devices as well as data management systems are becoming
increasingly important components of IVD systems. These system additions further
improve safety and reduce costs through automation. The Company believes that
the most important criteria customers use to evaluate IVD systems are operating
costs, reliability, reagent quality and service, and that providing a fully
integrated system that is reliable and easy to use results in high switching
costs and loyalty among customers who value consistency and accuracy in test
results.
Attempts to lower costs and increase efficiencies have led to consolidation
among healthcare providers in the United States, resulting in more powerful
provider groups that leverage their purchasing power with suppliers to contain
costs. Preferred supplier arrangements and combined purchases are becoming more
commonplace. Consequently, it has become essential for manufacturers to provide
cost-effective diagnostic systems to remain competitive. In addition,
consolidation has put pressure on diagnostic equipment manufacturers to broaden
their product offerings to encompass a wider range of testing capability,
greater automation and higher volume capacity. Manufacturers that have the
ability to automate a wide variety of tests on integrated workstations have a
distinct competitive advantage. Broad testing menus that include immunoassays
and routine chemistry tests are highly attractive to laboratories seeking to
reduce the number of vendors they utilize. Finally, consolidation has made it
increasingly important for suppliers to deploy a highly focused salesforce that
is able to execute innovative marketing approaches and to maintain a reliable
after-sale service network.
LIFE SCIENCES RESEARCH AND DRUG DISCOVERY
Life sciences research is the study of the characteristics, behavior and
structure of living organisms and their component systems. Life sciences
researchers utilize a variety of instruments and related biochemicals and
supplies in the study of life processes, drug discovery and biotechnology. The
Company estimates that in 1996 annual sales to the global life sciences industry
for instrumentation and related service and biochemicals totaled approximately
$6.4 billion. The segments of this market on which the Company focuses are
centrifugation and other separation systems, biorobotics for drug screening,
electrophoresis for R&D and quality control uses, spectrophotometry, protein
purification, DNA synthesis and sequencing, and liquid scintillation, for which
the Company estimates 1996 worldwide sales totaled approximately $4.2 billion in
the aggregate. Trends in the life sciences industry include the growth in
funding for drug discovery by the pharmaceutical and biotechnology industries,
driven principally by the desire to accelerate drug discovery and development
and the demand for increased automation and efficiency at pharmaceutical and
biotechnology laboratories.
An important application of the Company's systems is for use as a part of
the drug discovery process. Pharmaceutical groups require the capability to
screen millions of potential drug leads against many new disease targets in
shorter time periods. Makers of bioanalytical instruments have addressed this
need and helped to make the new approach to drug discovery possible by combining
the detection capabilities of bioanalytical instruments with advances in high
throughput screening. "High throughput screening" is a general term that refers
to the automated systems and new instruments currently being used to accelerate
drug discovery.
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SYSTEMS -- INSTRUMENTS, SOFTWARE AND RELATED PRODUCTS
The Company offers a wide range of analytical and diagnostic systems that
consist of instruments, software and related products, including reagents,
consumables, and services. These systems can be grouped into categories by type
of laboratory process or application: (i) Life Sciences Research and Drug
Discovery Products, (ii) Clinical Chemistry Diagnostics Systems, (iii) Blood
Cell Systems, (iv) Immunochemistry Diagnostic Systems and (v) Rapid Test Kits.
LIFE SCIENCES RESEARCH AND DRUG DISCOVERY PRODUCTS
The Company's life sciences and drug discovery systems are used to advance
basic understanding of life processes and in the related activities of
therapeutic development. Product categories include centrifuges, flow
cytometers, life sciences laboratory automation, DNA synthesizers and
sequencers, high performance liquid chromatography ("HPLC"), capillary
electrophoresis, spectrophotometry and liquid scintillation.
Centrifuges separate liquid samples based on the density of the components.
Samples are spun at up to 120,000 revolutions per minute to create forces that
exceed 800,000 times the force of gravity. These forces result in a
nondestructive separation that allows proteins, DNA and other cellular
components to retain their biological activity. Centrifuges are offered in a
wide range of models priced from $2,000 to $150,000.
Flow cytometers rapidly count and categorize multiple types of cells in
suspension. Common research applications include blood, bone marrow and tumor
cells for the study of AIDS, leukemias and lymphomas. These systems are also
useful in clinical applications and sell in the $150,000 to $400,000 range.
Life sciences laboratory automation consists of integrated workstations and
robotics that automatically perform exacting and repetitive processes in
biotechnology and drug discovery laboratories. Operations include the
dispensing, measuring, dilution and mixing of samples and analysis of reactions.
A key application is for high throughput screening of candidate compounds in
drug discovery research. These systems become functional through sophisticated
scheduling and data handling software. Prices range from $50,000 to $500,000.
DNA synthesizers and sequencers allow researchers to assemble strands of
DNA molecules or to determine their component sequence through electrophoretic
separation. These techniques are central to biotechnology science and the
genetic understanding of life processes. Systems sell in the range of $12,000 to
$45,000.
HPLC uses high pressure (5,000 to 15,000 pounds per square inch) to force
liquid samples through dense columns of separating agents. This technique is
capable of separating very complex mixtures of both organic and inorganic
molecules. The Company focuses on biologically related applications, including
protein purification, with systems that range from $20,000 to $50,000. In
addition, the Company also provides specialized software that is capable of
recording, manipulating and archiving data from multiple HPLC systems. This type
of software is essential to the pharmaceutical development process and
installations can range from $20,000 to over $1,000,000.
Capillary electrophoresis uses the electrical charge found on biological
molecules to separate mixtures into their component parts. Its chief advantages
are its ability to process very small sample volumes, separation speed and high
resolution. The technique is considered a complement to HPLC. The Company has
systems for basic research and pharmaceutical methods development and quality
control that sell in the range of $30,000 to $60,000.
Spectrophotometry is the optical measurement of compounds in liquid
mixtures. Among its applications is the ability to measure changes during
biological reactions. The Company's spectrophotometers are characterized by
adaptive software that allows users to control the time, temperature and
wavelength of light used for measurement while computing and recording
experimental results. Spectrophotometers sell in the $5,000 to $30,000 range.
Liquid scintillation techniques allow researchers to insert radioactive
"labeled" atoms into compounds that then are introduced into biological systems.
The compounds can be traced to a specific tissue or waste
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product by measuring the amount of radioactive label that is present with a
liquid scintillation counter. Liquid scintillation systems sell in the $16,000
to $30,000 range.
CLINICAL CHEMISTRY DIAGNOSTICS SYSTEMS
Clinical chemistry systems use electrochemical detection or chemical
reactions with patient samples to detect and quantify substances of diagnostic
interest or "analytes" in blood, urine or other body fluids. Commonly performed
tests include protein, glucose, cholesterol, triglycerides and enzymes. The
Company offers a range of automated clinical chemistry systems to meet the
testing requirements of varying size laboratories, together with software that
allows these systems to communicate with central hospital computers. To save
time and reduce errors, systems identify patient samples through bar codes.
Automated clinical chemistry systems are designed to be available for testing on
short notice 24 hours a day. The Company has generally configured its systems
for the work flow in medium and large hospitals, but the systems also have
application in regional reference labs. Over 180 tests for individual analytes
are offered for use with the Company's clinical chemistry systems, which range
in price from $60,000 to over $300,000.
BLOOD CELL SYSTEMS
The Company's blood cell systems use the principles of physics, optics,
electronics and chemistry to separate cells of diagnostic interest and then
quantify and characterize them. These systems fall into two categories:
hematology and cytometry. Hematology systems allow clinicians to study formed
elements in blood such as red and white cells and platelets. The most common
diagnostic result is a "CBC" or complete blood count, which provides five to
eight blood cell parameters. Flow cytometers can extend analysis beyond blood to
include bone marrow, tumor and other cells. The rise of the AIDS epidemic and
the need to monitor subclasses of white cells moved cytometry from largely a
research technique into general clinical practice. These systems are automated,
use bar codes to identify samples and can communicate with central computers.
Prices range from $7,500 to $400,000.
IMMUNOCHEMISTRY DIAGNOSTIC SYSTEMS
Immunochemistry systems, like clinical chemistry systems, use chemical
reactions to detect and quantify chemical substances of diagnostic interest in
blood, urine or other body fluids. The key difference is that immunochemistry
systems use antibodies harvested from living organisms as the central component
in analytical reactions. These antibodies are created by the organism's immune
system and when incorporated in test kits, provide the ability to detect and
quantify very low analyte concentrations. Commonly performed tests assess
thyroid function, screen and monitor for cancer and calibrate cardiac risk.
Immunochemistry systems have been constructed to meet the special requirements
of these reactions and to simplify lab processes. They are able to automatically
identify individual patient sample tubes and communicate with central computers.
The Company offers over 60 immunochemistry-based test kits for individual
analytes and a range of systems priced from $60,000 to $90,000.
RAPID TEST KITS
The Company produces a line of single use, self contained, diagnostic test
kits for use in physician's offices, clinics, hospitals and other medical
settings. The kits rapidly provide clinicians with results for colorectal cancer
screening and detection of ulcer disease, pregnancy and Strep A. Because answers
are available while the patient is with the physician, the delay associated with
follow-up interpretation and diagnosis is reduced, treatment begins sooner and
overall healthcare expenditures are reduced. Individual test kits range in price
from approximately $2.00 to $6.00.
RESEARCH AND DEVELOPMENT
The Company's new products originate from four sources: internal research
and development programs; external collaborative efforts with individuals in
academic institutions and technology companies; devices or techniques that are
generated in customers' laboratories; and business and technology acquisitions.
Develop-
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ment programs focus on production of new generations of existing product lines
as well as new product categories not currently offered. Areas of pursuit
include innovative approaches to cell characterization, immunochemistry,
molecular biology, advanced electrophoresis technologies, automated sample
processing and information technologies. The Company's research and development
teams are skilled in optics, chemistry, electronics, software and mechanical and
other engineering disciplines, in addition to a broad range of biological and
chemical sciences.
Historically, the Company has invested considerable capital on research and
development efforts, contributing to their leadership in their respective
markets and a consistent flow of new products. The Company's research and
development expenditures for Fiscal 1997 were $123.6 million, or 10.3% of sales.
SALES AND SERVICE
Most of the Company's products are distributed directly by the Company's
sales groups. However, the Company employs independent distributors to serve
those markets that are more efficiently reached through such channels. Although
there is essentially no overlap in the product offerings of the respective
companies, the customer bases of Beckman and Coulter are substantially the same,
which the Company believes provides opportunities for cross-selling and reduced
operating costs.
The Company's sales representatives are technically educated and trained in
the operation and application of the Company's products. The sales force is
supported by a staff of scientists and technical specialists in each product
line and in each major scientific discipline served by the Company's products.
The Company's ability to provide immediate after sales service and
technical support are critical to customer satisfaction. This includes
capabilities to provide immediate technical support by phone and to deliver
parts or have a service engineer on site within hours. To have such capabilities
on a global basis requires a major investment in personnel, facilities, and
other resources. A large, existing installed base of instruments is a
prerequisite to make the required service and support infrastructure financially
viable. The Company considers its reputation for service responsiveness and
competence and its worldwide sales and service network to be important
competitive assets.
In addition to direct sales of its instruments, the Company leases certain
instruments to its customers, principally those used for clinical diagnostics
applications in hospitals. This method of instrument placement is a significant
competitive factor for the clinical diagnostics market.
COMPETITION
The markets for Beckman Coulter's products are highly competitive, with
many companies participating in one or more segments of the market. Competitors
in the clinical diagnostics market include Abbott Laboratories (Abbott
Diagnostics Division), Bayer Diagnostics, Dade Behring, Inc., Becton Dickinson
and Company, Johnson & Johnson (Ortho Diagnostics Division), Roche (Roche
Boehringer Manheim Diagnostics Division) and Sysmex Corporation of America (a
subsidiary of TOA Medical Electronics Co. Ltd.). Competitors focused more
directly in the life sciences market include Amersham Pharmacia Biotech plc,
Bio-Rad Laboratories Inc., Hewlett-Packard Company, Hitachi, Packard BioScience
Company, The Perkin-Elmer Corporation, Sorvall Products LP. and Waters
Corporation. Competitors include divisions or subsidiaries of corporations with
substantial resources. In addition, the Company competes with several companies
that offer reagents, consumables and service for laboratory instruments that are
manufactured by the Company and others.
Beckman Coulter competes primarily on the basis of improved laboratory
productivity, product quality, products combining to meet multiple instrument
needs, technology, product reliability, service and price. Management believes
that its extensive installed instrument base provides the Company with a
competitive advantage in obtaining both follow-on instrument sales and After
Sales business. See "Risk Factors -- Highly Competitive Industries."
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PATENTS AND TRADEMARKS
To complement and protect the innovations created by Beckman's research and
development efforts, the Company has an active patent protection program which
includes nearly 700 active U.S. patents and patent applications. The Company
also files important corresponding applications in principal foreign countries.
The Company has taken an aggressive posture in protecting its patent rights;
however, no one patent is considered essential to the success of the Company's
business. See "-- Legal Proceedings" and "Risk Factors -- Reliance on Patents
and Other Intellectual Property; Risk of Intellectual Property Litigation."
The Company's primary trademarks are "Beckman," with the trade name also
being Beckman or Beckman Coulter, Inc., and "Coulter." The Company vigorously
protects its primary trademarks, which are used on products and are recognized
throughout the worldwide scientific and diagnostics community. The Company owns
and uses secondary trademarks on various products, but none of these secondary
trademarks is considered of primary importance to the business.
EMPLOYEES
As of December 31, 1997, the Company had approximately 7,900 employees
located in the United States and approximately 3,200 in international
operations. The Company believes its relations with its employees are good.
LEGAL PROCEEDINGS
The Company is currently, and is from time to time, subject to claims and
suits arising in the ordinary course of its business, including those relating
to intellectual property, contractual obligations, competition and employment
matters. In certain such actions, plaintiffs request punitive or other damages
or nonmonetary relief, which may not be covered by insurance, and in the case of
nonmonetary relief, could, if granted, materially affect the conduct of the
Company's business. The Company accrues for potential liabilities involved in
these matters as they become known and can be reasonably estimated. In
management's opinion (taking third party indemnities into consideration), the
various asserted claims and litigation in which the Company is currently
involved are not reasonably likely to have a material adverse effect on the
Company's operations or financial position. However, no assurance can be given
as to the ultimate outcome with respect to such claims and litigation. The
resolution of such claims and litigation could be material to the Company's
operating results for any particular period, depending upon the level of income
for such period.
In January 1996, Coulter, then unrelated to Beckman, notified Hematronix, a
competitive reagent manufacturer, that Hematronix was selling reagents and
certain controls that infringed upon certain of Coulter's patents. In response,
Hematronix filed a complaint in April 1996, in the United States District Court
of the Eastern District of California against Coulter. The complaint seeks a
declaratory judgment to invalidate the patents. The complaint also includes
antitrust and related business tort claims directed at Coulter's business and
leasing activities, and seeks actual, treble and punitive damages in an
unspecified amount, as well as injunctive relief. Coulter answered the complaint
by denying violations of the antitrust laws and business tort claims and
counterclaimed that Hematronix has willfully infringed the patents at issue. In
March 1998, the matter was resolved and the lawsuit was dismissed without
material adverse effect on the Company's earnings or financial position.
Through its Hybritech acquisition the Company obtained a patent, referred
to as the Tandem Patent, that generates significant royalty income. The Tandem
Patent is involved in an interference action in the U.S. Patent and Trademark
Office with a patent application owned by La Jolla Cancer Research Foundation
(the "Foundation"). If the Foundation wins the interference, the Company would
lose the Tandem Patent and the royalty income, and a new patent would issue to
the Foundation covering those products. The Company believes it has the stronger
case and will prevail and does not expect this matter to have a material adverse
effect on its operations or financial position.
In 1991, Forest City Properties Corporation and F.C. Irvine, Inc.
(collectively, "Forest City"), former owners and developers of a portion of the
same real property in Irvine referred to under "-- Environmental
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Matters," filed suit against The Prudential Insurance Company of America
("Prudential") in the California Superior Court for the County of Los Angeles,
alleging breach of contract and damages caused by the pollution of the property.
Forest City originally sought damages of more than $20 million but subsequently
increased its demand to $40 million. Forest City also sought additional
remediation of the property. Although the Company is not a named defendant in
the Forest City action, it is obligated to contribute to the resolution of that
action pursuant to Beckman's 1990 settlement agreement with Prudential. The
trial of this matter was conducted in 1995, resulting in a jury verdict in favor
of Prudential. The Court subsequently granted Forest City's motion for a new
trial, which Prudential appealed. Prior to the Court's consideration of the
appeal, Prudential settled the lawsuit with Forest City and requested Beckman to
pay a portion of the settlement pursuant to the 1990 settlement agreement.
Beckman does not agree with Prudential's claims and recently negotiated a
settlement of them for an amount not material to the Company's operations or
financial position.
Since 1992, six toxic tort lawsuits have been filed in Maricopa County
Superior Court, Arizona by a number of residents of the Phoenix/Scottsdale area
against the Company (relating to a former manufacturing site) and a number of
other defendants, including Motorola, Inc., Siemens Corporation, the cities of
Phoenix and Scottsdale, and others. The Company is indemnified by SmithKline
Beecham p.l.c., the successor of its former controlling stockholder, for any
costs incurred in these matters in excess of applicable insurance, and thus the
outcome of these litigations, even if unfavorable to the Company, should have no
material effect on the Company's operations or financial position. These suits
are currently in the discovery phase, with the first of several anticipated
trials in the actions scheduled for June 1998.
The public prosecutor in Palermo (Sicily), Italy is investigating the
activities of officials at a local government hospital and laboratory as well as
representatives of the principal worldwide companies marketing diagnostic
equipment in Palermo, including the Company's Italian subsidiary (the
"Subsidiary"). The inquiry focuses on past leasing practices for placement of
diagnostic equipment which were common industry-wide practices throughout Italy,
but now are alleged to be improper. The Company believes the prosecutor's
evidence is weak and insufficient to support a criminal conviction against
certain identified employees (the Subsidiary is not a defendant). The Court has
appointed economic experts to evaluate and present a comprehensive economic
report on the leasing practices of the industry. Although it is very difficult
to evaluate the political climate in Italy and the activities of the Italian
public prosecutors, the Company does not expect this matter to have a material
adverse effect on its operations or financial position.
In addition, the Company is involved in a number of lawsuits which the
Company considers ordinary and routine in view of its size and the nature of its
business. The Company does not believe that any ultimate liability resulting
from any such lawsuits will have a material adverse effect on the operations or
financial position of the Company.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign environmental
laws and regulations. Although the Company continues to make expenditures for
environmental protection, it does not anticipate any significant expenditures in
order to comply with such laws and regulations that would have a material impact
on the Company's operations or financial position. The Company believes that its
operations comply in all material respects with all applicable federal, state
and local environmental laws and regulations. To address contingent
environmental costs, the Company establishes reserves when such costs are
probable and can be reasonably estimated. The Company believes that, based on
current information and regulatory requirements (and taking third party
indemnities into consideration), the reserves established by the Company for
environmental expenditures are adequate. Based on current knowledge, to the
extent that additional costs may be incurred that exceed the reserves, such
amounts are not expected to have a material impact on the Company's operations
or financial condition although no assurance can be given in this regard.
In 1983 the Company discovered organic chemicals in the groundwater near a
waste storage pond at its manufacturing facility in Porterville, California.
SmithKline Beckman, the Company's former controlling stockholder, agreed to
indemnify the Company with respect to this matter for any costs incurred in
excess of applicable insurance, eliminating any impact on the Company's earnings
or financial position. SmithKline
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Beecham p.l.c., the surviving entity of the 1989 merger between SmithKline
Beckman and Beecham, assumed the obligations of SmithKline Beckman in this
respect.
In 1987 soil and groundwater contamination was discovered on property in
Irvine, California (the "Property") formerly owned by the Company. In 1988,
Prudential, which purchased the Property from the Company, filed suit against
the Company in U.S. District Court in California for recovery of costs and other
alleged damages with respect to the soil and groundwater contamination. In 1990
the Company entered into an agreement with Prudential for settlement of the
lawsuit and for sharing current and future costs of investigation, remediation
and other claims. Soil and groundwater remediation of the Property have been in
process since 1988. During 1994, the County agency overseeing the site
remediation formally acknowledged completion of remediation of a major portion
of the soil, although there remain other areas of soil contamination that may
require further remediation. In July 1997 the California Regional Water Quality
Control Board, the agency overseeing the site groundwater remediation, issued a
closure letter for the upper water bearing unit. The Company and Prudential
continued to operate a groundwater treatment system throughout 1997 and expect
to continue its operation in 1998. Investigations on the Property are continuing
and there can be no assurance that further investigation will not reveal
additional contamination or result in additional costs. The Company believes
that additional remediation costs, if any, beyond those already provided for the
contamination discovered by the current investigations will not have a material
adverse effect on the Company's operations or financial position.
PROPERTIES
The Company's primary instrument assembly and manufacturing facilities are
located in Fullerton, Brea, and Palo Alto, California; Chaska, Minnesota; and
Hialeah, Opa Locka and Miami Lakes, Florida. The Company recently announced the
termination effective June 1998 of manufacturing operations at a Coulter
facility located in Luton, England. Component manufacturing support facilities
for parts and electronic subassemblies are located in Fullerton and Porterville,
California. An additional manufacturing facility is located in Galway, Ireland.
Reagents are manufactured in Carlsbad, San Diego and Palo Alto, California;
Chaska, Minnesota; Naguabo, Puerto Rico; Florence, Kentucky; Galway, Ireland;
Germany; France; Japan; Brazil; Australia; Argentina and Hong Kong. The
Company's computer software products business is located in Allendale, New
Jersey and its facility for the production of Hemoccult(R) test kits and related
products is located in Sharon Hill, Pennsylvania. A portion of the Company's
laboratory robotics operations (Sagian) are conducted in leased facilities in
Indianapolis, Indiana and some of its DNA sequencing activities are performed in
leased facilities in Foster City, California.
All of the Company's U.S. manufacturing facilities, including land and
buildings, are owned with the exception of Allendale, Foster City, Indianapolis,
San Diego, Sharon Hill, Opa Locka, Miami Lakes, eight of the facilities in
Hialeah and Florence which are leased facilities, and Palo Alto, where the
Company has built and owns its buildings on a long-term land lease expiring in
2054. All manufacturing facilities outside the U.S. are leased with the
exception of Germany, France, Japan, Brazil and Australia. The component
production facilities for the Company also include plastics molding and machine
shop capabilities in Fullerton. This facility, in conjunction with electronic
subassembly work done in Porterville, supplies the primary parts and
subassemblies to the various instrument assembly locations in California. The
Company's principal distribution locations are in Brea and Fullerton,
California; Chaska, Minnesota; Somerset, New Jersey; Frankfurt, Germany; and
Paris, France. In 1994 the Company established a European Administration Center
at a facility in Nyon, Switzerland.
The Company intends to consummate sale-leaseback transactions with respect
to some of its real estate assets which the Company expects will generate
proceeds of approximately $150.0 million in 1998 and approximately $40.0 million
in 1999. The Company believes that its production facilities meet applicable
government environmental, health and safety regulations and industry standards
for maintenance, and that its facilities in general are adequate for its current
business.
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GOVERNMENT REGULATION
Certain of the Company's products are subject to regulations of the FDA
which require such products to be manufactured in accordance with "good
manufacturing practices." Such laws and regulations also require that such
products be safe and effective and that the labeling of those products conform
with specific requirements. Testing is conducted to demonstrate performance
claims and to provide other necessary assurances. Clinical systems and reagents
must be reviewed by the FDA before sale and, in some instances, are subject to
product standards, other special controls or a formal FDA premarket approval
process. New federal regulations under the Clinical Laboratory Improvement
Amendments of 1988 will, when fully implemented, require regulatory review and
approval of quality assurance protocols for the Company's clinical reagent
products. While adding to the overall regulatory review process, this is not
expected to materially affect the sale of the Company's products. Certain of the
Company's products are subject to comparable regulations in other countries as
well.
In 1993 the member states of the European Union ("EU") began implementation
of their plan for a new unified EU market with reduced trade barriers and
harmonized regulations. The EU adopted a significant international quality
standard, the International Organization for Standardization Series 9000 Quality
Standards ("ISO 9000"). The Company's manufacturing operations in its Brea,
Carlsbad, Fullerton, Palo Alto, Porterville and San Diego, California; Chaska,
Minnesota; Allendale, New Jersey; Sharon Hill, Pennsylvania; Miami and Hialeah,
Florida; Florence, Kentucky; Naguabo, Puerto Rico; Galway, Ireland; Australia,
France, Germany, Hong Kong, Ireland, South Africa and the United Kingdom
facilities have been certified as complying with the requirements of ISO 9000.
Many of the Company's international sales and service subsidiaries have also
been certified, including those located in Australia, Austria, Canada, China,
France, Germany, Italy, The Netherlands, Poland, Singapore, South Africa, Spain,
Sweden, Switzerland and the United Kingdom.
The design of the Company's products and the potential market for their use
may be directly or indirectly affected by U.S. and foreign regulations
concerning reimbursement for clinical testing services. The configuration of new
products, such as the SYNCHRON(R) series of clinical analyzers, reflects the
Company's response to the changes in hospital capital spending patterns such as
those engendered by the Medicare Diagnostic Related Groups ("DRGs"). Under the
DRG system, a hospital is reimbursed a fixed sum for the services rendered in
treating a patient, regardless of the actual cost of the services provided.
Japan, France, Germany and Italy are among the other countries that are in the
process of adopting reimbursement policies designed to lower the cost of
healthcare.
Medicare reimbursement of inpatient capital costs incurred by a hospital
(to the extent of Medicare utilization) is in a 10-year transition period begun
in 1991 from the "capital cost passthrough" payment methodology to a
"prospective capital" payment methodology based on Medicare DRGs. To date, the
Company has not experienced, and does not expect to experience in the future,
any material financial impact from the change in Medicare's payment for
inpatient capital costs.
The current healthcare reform efforts in the United States and in some
foreign countries are expected to further alter the methods and financial
aspects of doing business in the healthcare field. The Company is closely
following these developments so that it may position itself to take advantage of
them. However, the Company cannot predict the effect on its business of these
reforms should they occur nor of any other future government regulation.
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MANAGEMENT
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as to the executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Louis T. Rosso 64 Chairman of the Board and Chief Executive Officer
John P. Wareham 56 President and Chief Operating Officer
Dennis K. Wilson 62 Vice President, Finance and Chief Financial Officer
James T. Glover 48 Vice President and Controller
Fidencio M. Mares 51 Vice President, Human Resources
William H. May 55 Vice President, General Counsel and Secretary
Bruce A. Tatarian 49 Vice President, Beckman Distribution Markets Operation
Albert R. Ziegler 59 Vice President, Clinical Chemistry Division
Paul Glyer 41 Treasurer
</TABLE>
LOUIS T. ROSSO. Mr. Rosso has been Chief Executive Officer of the Company
since 1988 and Chairman of the Board since 1989. He served as the Company's
President from 1982 until 1993. He also served as a Vice President of SmithKline
Beckman from 1982 to 1989. Mr. Rosso first joined the Company in 1959 and was
named Corporate Vice President in 1974. He is a director of Allergan, Inc. and
American Health Properties, Inc. He is a member of the Board of Trustees of St.
Jude Heritage Foundation in Fullerton, California and of Harvey Mudd College.
Mr. Rosso has been a director of the Company since 1988.
JOHN P. WAREHAM. Mr. Wareham has been President and Chief Operating
Officer of the Company since 1993. He served as the Company's Vice President,
Diagnostic Systems Group from 1984 to 1993. Prior thereto, he had been President
of Norden Laboratories, Inc., a wholly owned subsidiary of SmithKline Beckman
engaged in developing, manufacturing and marketing veterinary pharmaceuticals
and vaccines. Mr. Wareham first joined SmithKline Corporation, a predecessor of
SmithKline Beckman, in 1968. He is a director of the Little Rapids Corporation
and the Health Industry Manufacturers Association. Mr. Wareham has been a
director of the Company since 1993.
DENNIS K. WILSON. Mr. Wilson has been Vice President, Finance and Chief
Financial Officer of the Company since 1993. He served as Vice President,
Treasurer of the Company from 1989 until his current appointment. Prior thereto
he had been Vice President, Corporate Accounting and Assistant Controller of
SmithKline Beckman since 1984. Mr. Wilson first joined the Company in 1969.
JAMES T. GLOVER. Mr. Glover has been Vice President and Controller of the
Company since 1993. From 1989 until assuming his current position, he was Vice
President, Controller - Diagnostic Systems Group. Mr. Glover joined the Company
in 1983, serving in several management positions, including a two-year term at
Allergan, Inc., then a Company affiliate. Prior to 1983, he held management
positions with KPMG Peat Marwick LLP and another Fortune 500 Company.
FIDENCIO M. MARES. Mr. Mares was named Vice President, Human Resources of
the Company in 1995. Prior thereto he had been President of The Gas Company of
Hawaii. Before that he was Senior Vice President of Administration and Human
Resources for Pacific Resources, Inc., Corporate Wage and Salary Manager and
Corporate Human Resources Services Manager for Getty Oil Company/Texaco, Inc.,
and held various human resources managerial positions at Southern California
Edison.
WILLIAM H. MAY. Mr. May has been General Counsel and Secretary of the
Company since 1984 and has been Vice President, General Counsel and Secretary of
the Company since 1985. Mr. May first joined the Company in 1976.
BRUCE A. TATARIAN. Mr. Tatarian was named Vice President, Beckman
Distribution Markets Operation of the Company in October 1997. He had been Vice
President, Field Operations - Emerging Markets since 1995 and Vice President,
Bioresearch Commercial Operations International since 1994. Prior thereto, he
had
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been Vice President, Marketing Operations for the Bioanalytical Systems Group
since 1991. Mr. Tatarian originally joined the Company in 1973.
ALBERT R. ZIEGLER. Mr. Ziegler was named Vice President, Chemical
Chemistry Division of the Company in October 1997. He had been Vice President,
Diagnostics Development Center of the Company since 1994. He joined the Company
in 1986 as Vice President, North America Operations for the Diagnostic Systems
Group. Prior thereto he had been President of Branson Ultrasonics Corporation, a
manufacturer of industrial ultrasound instruments and a subsidiary of SmithKline
Beckman until the divestiture of SmithKline Beckman's industrial instruments
businesses in 1984. Mr. Ziegler first joined SmithKline Beckman in 1971.
PAUL GLYER. Mr. Glyer has been Treasurer of the Company since 1993. In
1995 he additionally assumed the position of Director, Corporate Business
Development and Licensing. He served as Assistant Treasurer since 1989, when he
first joined the Company.
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DESCRIPTION OF CREDIT FACILITY
In connection with the Acquisition, the Company entered into the Credit
Facility with a syndicate of financial institutions for which Citicorp USA, Inc.
acted as agent (the "Agent"), Citicorp Securities, Inc. acted as arranger (the
"Arranger") and Merrill Lynch & Co. acted as syndication agent (the "Syndication
Agent"). The following is a summary of the material terms and conditions of the
Credit Facility and is subject to the detailed provisions of the credit
agreement (the "Credit Agreement") entered into on October 31, 1997 by and among
the Company, the lenders party thereto (the "Lenders"), the Agent, the Arranger
and the Syndication Agent, and various related documents entered into in
connection therewith. Capitalized terms used but not defined herein have the
respective meanings assigned to them in the Credit Agreement. To the extent such
summary contains descriptions of the Credit Facility and other loan documents,
such descriptions do not purport to be complete and are qualified in their
entirety by reference to such documents, which are available upon request from
the Company.
GENERAL
The Credit Facility provides up to a maximum aggregate amount of $1,300.0
million financing through a (i) $500.0 million Term Loan and (ii) $800.0 million
Revolving Credit Facility for working capital and general corporate purposes and
under which standby and trade letters of credit may be issued in a maximum
aggregate amount up to $25 million. As of April 1, 1998, there were no amounts
outstanding under the Term Loan and $670.0 million was outstanding under the
Revolving Credit Facility.
Proceeds of the Credit Facility are restricted to funding the Acquisition,
refinancing certain existing indebtedness of Beckman and Coulter, paying
transaction costs, providing working capital for the Company and its domestic
subsidiaries and for general corporate purposes, subject to certain limitations.
INTEREST RATES; FEES
Interest is computed on the outstanding daily balance of the loans under
the Credit Facility at the Company's option, at the Applicable Margin above the
Agent's Base Rate or the Eurodollar Rate as determined by a pricing grid or, in
the case of Competitive Bid Advances, at a fixed rate of interest or the LIBO
Rate. Interest is calculated on the basis of a 360-day year for actual days
elapsed or 365 or 366 days for Base Rate loans, and will be payable in arrears,
monthly, in the case of Base Rate interest, and at least quarterly, in the case
of Eurodollar Rate interest. During the continuance of an event of default, the
applicable interest rate will increase by 2% per annum.
Under the pricing grid, the Applicable Margin generally varies depending on
the Company's (i) senior unsecured debt rating from at least two of Standard &
Poor's Ratings Services, Duff & Phelps Credit Rating Co. and Moody's Investors
Service, Inc. or (ii) leverage ratio from time to time. As of the Issue Date,
such Applicable Margin was zero for Base Rate loans and 0.50% for Eurodollar
Rate Advances under the Revolving Credit Facility, and 0.25% for Base Rate loans
and 0.75% for Eurodollar Rate Advances under the Term Loan.
The Company is charged a per annum facility fee (at the rate determined by
the pricing grid) on the Revolving Credit Facility, whether used or unused,
payable quarterly in arrears and varying from 0.125% to 0.375%. Such fee is
expected to be 0.250% as of the Issue Date. The Company also pays the Agent
certain fees as agreed upon between the Agent and the Company. Fees for letters
of credit issued as part of the Revolving Credit Facility will be equal to the
Applicable Margin for Eurodollar Rate Advances under the Revolving Credit
Facility plus customary issuance fees and costs of the Issuing Bank.
AMORTIZATION; PREPAYMENTS
The Revolving Credit Facility matures in October 2002. The Company is
required to make prepayments on loans under the Revolving Credit Facility in an
amount equal to the net cash proceeds received by the Company and/or its
subsidiaries from the disposition of certain assets, all net cash proceeds of
Extraordinary Receipts, all cash proceeds from the issuance of additional debt
or equity permitted under the loan documentation (with limited exceptions), and
50% of the Company's Excess Cash Flow (commencing for the
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1998 fiscal year). Such required prepayments will be applied to reduce the
commitments under the Revolving Credit Facility on a pro rata basis. However, no
reductions in the Revolving Credit Facility commitments will be required from
Excess Cash Flow after the Company's Debt to Earnings Ratio is less than or
equal to 3.25 to 1.0 at the end of a fiscal year.
CONDITIONS AND COVENANTS
The obligations of the Lenders under the Credit Agreement are subject to
the satisfaction of certain conditions precedent customary in credit facilities
of this type or otherwise appropriate under the circumstances. The Company and
each of its subsidiaries are subject to certain affirmative and negative
covenants contained in the Credit Agreement, including without limitation
covenants that restrict, subject to specified exceptions, (i) the incurrence of
indebtedness, guaranties and other obligations, (ii) the granting of liens,
(iii) mergers, acquisitions, investments and dispositions of assets, (iv)
capital expenditures, (v) loans, advances, dividends, distributions and stock
repurchases and redemptions, (vi) engaging in certain transactions with
affiliates and subsidiaries, (vii) prepayments, redemption or defeasance of
debt, (viii) the use of proceeds and (ix) changes of lines of business. The
Credit Agreement covenants also include covenants relating to compliance with
ERISA and environmental and other laws, payment of taxes, maintenance of
corporate existence and rights, maintenance of insurance, and financial and
other reporting. Certain of the Credit Agreement covenants are significantly
more restrictive than those set forth in the Indenture. In addition, the Credit
Agreement requires the Company to maintain compliance with certain specified
financial ratios and tests, including minimum net worth, maximum capital
expenditures, a maximum debt to earnings ratio, a minimum interest coverage
ratio and a maximum amount of debt incurrence.
GUARANTEES
Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated and
SmithKline Diagnostics, Inc. unconditionally guarantee the obligations of the
Company under the Credit Facility. Such subsidiaries also guarantee payment on
the Notes as provided in the Indenture and guarantee payment of the Old
Debentures as provided in the indenture governing the Old Debentures. See
"Description of Notes -- Note Guarantees."
EVENTS OF DEFAULT
The Credit Facility includes events of default that are customary in credit
facilities of this type or otherwise appropriate under the circumstances,
including, without limitation, with respect to change in ownership or control.
The occurrence of any of such events of default could result in acceleration of
the Company's obligations under the Credit Facility, which could have a material
adverse effect on holders of the Notes.
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DESCRIPTION OF NOTES
GENERAL
The Initial Notes were issued under the Indenture, dated as of March 4,
1998 (the "Indenture"), among the Company, as issuer, the Note Guarantors and
The First National Bank of Chicago, as Trustee (the "Trustee"). Upon the
issuance of the Exchange Notes, the Indenture will be subject to and governed by
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
form and terms of the Exchange Notes are the same as the form and terms of the
Initial Notes except that (i) the Exchange Notes will have been registered under
the Securities Act, pursuant to the Registration Statement and therefore, the
Exchange Notes will not bear legends restricting the transfer thereof and (ii)
holders of the Exchange Notes will not be entitled to certain rights of holders
of the Initial Notes under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Initial Notes (which they replace) and will be
entitled to the benefits of the Indenture.
The following summary of the material provisions of the Indenture does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act. A copy of the Indenture is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. For
definitions of certain capitalized terms used in the following summary, see "--
Certain Definitions." Reference is made to the Indenture for the full definition
of all such terms, as well as any other capitalized terms used herein for which
no definition is provided. As used in the following summary, the "Notes" means
the Initial Notes and the Exchange Notes, and references to (i) the "2003 Notes"
include the Initial 2003 Notes and the Exchange 2003 Notes and (ii) the "2008
Notes" include the Initial 2008 Notes and the Exchange 2008 Notes. As used in
the following summary, the "Company" means Beckman Coulter, Inc. (formerly known
as Beckman Instruments, Inc.), but not any of its subsidiaries (unless the
context otherwise requires), and the term "Credit Facility" refers to the Credit
Facility, as each such term is more particularly defined in "-- Certain
Definitions."
MATURITY AND INTEREST
The 2003 Notes are unsecured obligations of the Company in an aggregate
principal amount of $160.0 million and mature on March 4, 2003. The 2003 Notes
bear interest at a rate of 7.10% from March 4, 1998, payable semiannually in
arrears on each March 4 and September 4, commencing September 4, 1998, to
Persons in whose names the 2003 Notes are registered on the preceding February
19 and August 19, respectively.
The 2008 Notes are unsecured obligations of the Company in an aggregate
principal amount of $240.0 million and mature on March 4, 2008. The 2008 Notes
bear interest at a rate of 7.45% from March 4, 1998, payable semiannually in
arrears on each March 4 and September 4, commencing September 4, 1998, to
Persons in whose names the 2008 Notes are registered on the preceding February
19 and August 19, respectively.
Under certain circumstances, additional interest may be payable in respect
of the Initial Notes in the event that the Company does not timely file a
registration statement with respect to the Exchange Notes, cause such a
registration statement to become effective or consummate the Exchange Offer, in
each case within certain time periods. See "The Exchange Offer."
Principal of and any premium and interest on the Notes will be payable, and
the Notes may be presented for exchange or for registration of transfer, at the
office or agency of the Company maintained for such purposes (which initially
will be the corporate trust office of the Trustee in The City of New York),
except that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
appears in the Note Register. The Notes are issued only in fully registered
form, without coupons, only in denominations of $1,000 and integral multiples
thereof. No service charge will be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
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RANKING
The Notes are unsecured senior obligations of the Company, and the
Indebtedness evidenced by the Notes ranks pari passu in right of payment with
all other existing and future senior obligations of the Company, including
borrowings under the Credit Facility, and senior in right of payment to all
future obligations of the Company subordinated in right of payment to the Notes.
The Notes, however, are effectively subordinated to secured senior obligations
of the Company with respect to the assets of the Company securing such
obligations, and to all obligations of the Company's subsidiaries (other than
Note Guarantors) with respect to their assets. The Notes are fully and
unconditionally Guaranteed on an unsecured, senior basis by certain Note
Guarantors that guarantee Bank Indebtedness of the Company, consisting of
Coulter and certain other existing and future subsidiaries of the Company. Each
such Note Guarantor's Note Guarantee is an unsecured, senior obligation of such
Note Guarantor, and ranks pari passu in right of payment with all other existing
and future senior obligations of such Note Guarantor, including any Guarantee of
borrowings under the Credit Facility, and senior in right of payment to all
future obligations of such Note Guarantor subordinated in right of payment to
its Note Guarantee. Each such Note Guarantee will be subject to release and
discharge as provided in the Indenture. See "-- Note Guarantees."
As of December 31, 1997, the outstanding Indebtedness of the Company and
the Note Guarantors was $1,127.4 million (excluding capital lease obligations),
none of which was secured Indebtedness, and the outstanding Indebtedness of the
Company's subsidiaries (other than the Note Guarantors) was approximately $98.2
million (excluding capital lease obligations). Subject to certain limitations,
the Company and its Subsidiaries may incur additional Indebtedness in the
future. See "-- Restrictive Covenants -- Limitation on Incurrence of
Indebtedness."
OPTIONAL REDEMPTION
The Notes are redeemable, in whole or in part, at the option of the Company
at any time at a redemption price equal to the greater of (i) 100% of the
principal amount of such Notes or (ii) as determined by an Independent
Investment Banker, the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the redemption date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to
the date of redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
The Notes are not entitled to the benefit of a sinking fund.
NOTE GUARANTEES
The Indenture provides that the Company is required to cause any of its
Restricted Subsidiaries that Guarantee Bank Indebtedness of the Company to, as
primary obligors and not merely as sureties, fully, irrevocably and
unconditionally Guarantee pursuant to a Note Guarantee, on an unsecured, senior
basis, the performance and punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all obligations of the Company under
the Indenture and the Notes, whether for payment of principal of or premium, if
any, or interest on the Notes, expenses, indemnification or otherwise. Such Note
Guarantors agree to pay, in addition to the amount stated above, any and all
expenses (including reasonable counsel fees and expenses) incurred by the
Trustee or the holders in enforcing any rights under any such Note Guarantee.
Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated and
SmithKline Diagnostics, Inc. have guaranteed the Indebtedness of the Company
under the Credit Facility, the Notes and the Old Debentures. In addition, the
Company will cause Restricted Subsidiaries that guarantee any Bank Indebtedness
of the Company to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee payment of the
Notes.
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Each Note Guarantee is limited to an amount not to exceed the maximum
amount that can be Guaranteed by the applicable Note Guarantor without rendering
such Note Guarantee, as it relates to such Note Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Each Note Guarantee is a continuing Guarantee and (a) will remain in full
force and effect until payment in full of all the obligations of the Company
under the Notes and the Indenture, except to the extent such Note Guarantee is
released in accordance with the Indenture, (b) is binding upon each Note
Guarantor and (c) inures to the benefit of and be enforceable by the Trustee,
the Noteholders and their successors, transferees and assigns.
Any such Note Guarantee provides by its terms that it will be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer to any Person not an Affiliate of the Company of all of the Capital
Stock held by the Company and its Subsidiaries in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release and discharge of all
Guarantees by such Restricted Subsidiary of any Bank Indebtedness of the
Company, other than by reason of payment under such Guarantee. The Company
expects that in the future it may renegotiate the terms under the Credit
Facility relating to guarantees, such that any Guarantee by its Restricted
Subsidiaries of its Indebtedness under the Credit Facility will terminate.
Accordingly, it is expected that all Note Guarantees will terminate at that
time.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, each holder of
the Notes shall have the right to require that the Company repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's Notes at
a repurchase price in cash equal to 100% of the aggregate principal amount
thereof plus accrued interest, if any, to the date of such repurchase.
Within 30 days following any such Change of Control Triggering Event, the
Company will be required to mail a notice to each holder of a Note (with a copy
to the Trustee) stating (1) that a Change of Control Triggering Event has
occurred and that such holder has the right to require the Company to repurchase
such holder's Notes at a repurchase price in cash equal to 100% of the aggregate
principal amount thereof plus accrued interest, if any, to the date of
repurchase (the "Change of Control Offer"); (2) the repurchase date, which shall
be a Business Day and be not earlier than 20 Business Days or later than 60
Business Days from the date such notice is mailed (the "Repurchase Date"); (3)
that interest on any Note tendered will continue to accrue; (4) that interest on
any Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue after the repurchase of any Note on the Repurchase Date; (5)
that holders electing to have a Note purchased pursuant to the Change of Control
Offer will be required to surrender such Note, with the form entitled "Option to
Elect Purchase" on the reverse of the Note completed, to the Trustee at the
address specified in the notice prior to the close of business on the Business
Day prior to the Repurchase Date; (6) that holders of Notes will be entitled to
withdraw their election on the terms and conditions set forth in such notice;
and (7) that holders of Notes that elect to have their Notes purchased only in
part will be issued new Notes in a principal amount equal to the then
unpurchased portion of the Notes surrendered.
For so long as the Notes are in global form, upon any such Change of
Control Triggering Event, the Company will be required to deliver to The
Depository Trust Company ("DTC"), within the time periods specified above, for
re-transmittal to its participants, a notice substantially to the effect
specified in clauses (1) through (4) and (6) of the previous paragraph. Such
notice shall also specify the required procedures (furnished by DTC) for holders
of interests in the Global Security to tender and receive payment of the
purchase price for interests in accordance with DTC's rules, regulations and
practices (including DTC's "Repayment Option Procedures" to the extent
applicable).
On the Repurchase Date, the Company shall (i) accept for payment such
surrendered Notes or portions thereof tendered pursuant to the Change of Control
Offer; (ii) deposit with the Trustee money sufficient to pay the purchase price
of all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee Notes so accepted with an officers' certificate
identifying the Notes or portions thereof so
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tendered. The Company will publicly announce the result of the Change of Control
Offer as soon as practicable after the Repurchase Date.
The Company has agreed to comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act in connection
with a Change of Control Offer.
The phrase "all or substantially all" as used in the definition of "Change
of Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event that the holders of the 2003 Notes or 2008 Notes, as
the case may be, elected to exercise their rights under the Indenture and the
Company elected to contest such election, there could be no assurance as to how
a court interpreting New York law would interpret such phrase.
The Change of Control provisions may not be waived by the Trustee or the
Board of Directors of the Company. The Change of Control provisions may in
certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
provisions, however, are not the result of management's knowledge of any
specific effort to accumulate shares of capital stock of the Company or to
obtain control of the Company by a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions. In addition, the Change of Control provisions will not necessarily
afford protection to holders of Notes including protection against an adverse
effect on the value of the Notes, in the event that the Company or its
subsidiaries and affiliates incur additional Indebtedness, whether through
recapitalizations or otherwise.
If a Change of Control Triggering Event were to occur, there can be no
assurance that the Company would have sufficient funds to pay the Change of
Control purchase price for all Notes tendered by the holders thereof. In
addition, the Company's ability to make such payment may be limited by the terms
of its then-existing borrowing and other agreements. The Credit Facility is
expected to have, and certain agreements relating to other indebtedness of the
Company may have, similar change of control provisions and restrictions on the
prepayment of Indebtedness that may have the effect of further limiting the
Company's ability to pay the Change of Control purchase price for the Notes
tendered by the holders thereof. The failure of the Company to make such payment
to holders of Notes, if continued for 60 days after receipt of written notice of
Default from the Trustee or the holders of at least 25% of the aggregate
principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may
be, specifying such Default and requiring that it be remedied, would constitute
an Event of Default under the terms of the Indenture.
The Credit Facility may limit the Company's ability to repurchase or redeem
any Notes, whether on a Change of Control or otherwise. Failure to make any such
repayment or redemption may result in a default under the Indenture and the
Credit Facility.
RESTRICTIVE COVENANTS
The Indenture provides for certain restrictive covenants of the Company,
including the following:
LIMITATION ON LIENS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, create, incur, issue, assume or guarantee any
indebtedness of the Company or any Subsidiary secured by a Lien upon any
Principal Property, or upon shares of capital stock or evidences of indebtedness
issued by any Restricted Subsidiary and owned by the Company or any Restricted
Subsidiary, now owned or hereafter owned by the Company, without making
effective provision to secure all of the Notes then outstanding by such Lien,
equally and ratably with any and all other indebtedness thereby secured, so long
as such indebtedness shall be so secured.
The foregoing restrictions shall not apply, however, to (1) Liens on any
property existing at the time of the acquisition thereof; (2) Liens on property
of a corporation existing at the time such corporation is merged into or
consolidated with the Company or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of such corporation (or a
division thereof) as an entirety or substantially as an entirety to the Company
or a Restricted Subsidiary, provided that such Lien as a result of such merger,
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consolidation, sale, lease or other disposition is not extended to property
owned by the Company or such Restricted Subsidiary immediately prior thereto;
(3) Liens on property of a corporation existing at the time such corporation
becomes a Restricted Subsidiary; (4) Liens securing indebtedness of a Restricted
Subsidiary to the Company or to another Restricted Subsidiary; (5) Liens to
secure all or part of the cost of acquisition, construction, development or
improvement of the underlying property, or to secure indebtedness incurred to
provide funds for any such purpose, provided that the commitment of the creditor
to extend the credit secured by any such Lien shall have been obtained not later
than twenty-four months after the later of (a) the completion of the
acquisition, construction, development or improvement of such property or (b)
the placing in operation of such property or of such property as so constructed,
developed or improved; (6) Liens on any property created, assumed or otherwise
brought into existence in contemplation of the sale or other disposition of the
underlying property, whether directly or indirectly, by way of share disposition
or otherwise; provided that the Company must have disposed of such property
within 180 days from the creation of such Liens and any indebtedness secured by
such Liens shall be without recourse to the Company or any Subsidiary; (7) Liens
in favor of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision thereof, to
secure partial, progress, advance or other payments; (8) Liens to secure
indebtedness of joint ventures in which the Company or a Restricted Subsidiary
has an interest, to the extent such Liens are on property or assets of, or
equity interests in, such joint ventures; (9) Liens on Equipment Held for
Resale; and (10) any indebtedness secured by Liens existing on the date of the
Indenture or any extension, renewal or replacement or refunding of any Lien
existing on the date of the Indenture or referred to in clauses (1) to (3) or
(5); provided, however, that the aggregate principal amount of indebtedness
secured thereby and not otherwise authorized by clauses (1) to (3) or (5), shall
not exceed the aggregate principal amount of indebtedness, plus any premium or
fee payable in connection with any such extension, renewal, replacement, or
refunding, so secured at the time of such extension, renewal, replacement or
refunding.
Notwithstanding the restrictions described above, the Company and its
Restricted Subsidiaries may incur, issue, assume or guarantee debt secured by
Liens without equally and ratably securing the Notes then outstanding, provided,
that at the time of such incurrence, issuance, assumption or guarantee, after
giving effect thereto and to the retirement of any indebtedness which is
concurrently being retired, the aggregate amount of all outstanding indebtedness
secured by Liens so incurred, other than any indebtedness secured by Liens
permitted as described in clauses (1) through (10) above, and together with all
outstanding Attributable Value of all sale and leaseback transactions permitted
as described in "-- Limitation on Sale and Leaseback Transactions," does not
exceed 15% of the Consolidated Net Tangible Assets of the Company.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Sale and leaseback transactions by the Company or any Restricted Subsidiary
involving any Principal Property are prohibited unless either (1) the Company or
its Restricted Subsidiaries would be entitled pursuant to the provisions
described in clauses (1) through (10) above under "Limitation on Liens" to
issue, assume or guarantee indebtedness secured by a Lien on such Principal
Property without equally and ratably securing the Notes then outstanding or (2)
the Company or such Restricted Subsidiary shall apply, or cause to be applied,
to the retirement of its secured debt within 120 days after the effective date
of the sale and leaseback transaction, an amount not less than the greater of
(i) the net proceeds (net of all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such sale) of the sale of the
Principal Property leased pursuant to such arrangement or (ii) the fair market
value of the Principal Property so leased. This restriction does not apply to a
sale and leaseback transaction between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries or involving the taking back of a lease for a
period of less than three years.
Notwithstanding the restrictions described above, the Company or any
Restricted Subsidiary may enter into a sale and leaseback transaction provided,
that at the time of such transaction, after giving effect thereto, the
Attributable Value thereof, together with all indebtedness secured by Liens
permitted pursuant to the Indenture as described above under "Limitation on
Liens" other than all indebtedness secured by Liens
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permitted as described in clauses (1) through (10) above under "Limitation on
Liens" and other than the Attributable Value of such sale and leaseback
transactions permitted by the preceding paragraph, does not exceed 15% of
Consolidated Net Tangible Assets of the Company.
COVENANTS IN EFFECT PRIOR TO AN INVESTMENT GRADE RATING DATE
The following two covenants will cease to be effective upon the Investment
Grade Rating Date.
LIMITATION ON INCURRENCE OF INDEBTEDNESS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or directly or indirectly enter
into any Guarantee of, or in any other manner become directly or indirectly
liable for ("incur"), any Indebtedness (including Acquired Debt), except that
the Company may incur Indebtedness if, at the time of, and immediately after
giving pro forma effect to, such incurrence of Indebtedness, the Consolidated
Coverage Ratio of the Company for the most recently ended four fiscal quarters
for which financial statements are available would be at least 2.0 to 1. The
foregoing limitations will not apply to the incurrence by the Company or any
Restricted Subsidiary, as the case may be, of any Permitted Indebtedness of such
Person.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, make any Restricted Payment,
unless at the time of and immediately after giving effect to the proposed
Restricted Payment (with the value of any such Restricted Payment, if other than
cash, to be as determined in good faith by the Board of Directors of the
Company, which determination shall be conclusive), (i) no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof, (ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first sentence of the covenant described under "-- Limitation on
Incurrence of Indebtedness" and (iii) the aggregate amount of all Restricted
Payments made after the Issue Date shall not exceed the Restricted Payment
Amount.
The foregoing provisions do not prohibit the following actions
(collectively, "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under the Indenture and such payment shall be deemed to have
been paid on such date of declaration for purposes of clause (iii) of the
preceding paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or any Indebtedness of the Company that is subordinated
in right of payment to the Notes in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Restricted
Subsidiary) of Capital Stock of the Company (other than any Disqualified
Stock);
(iii) the defeasance, redemption, repurchase, retirement or other
acquisition of any Indebtedness of the Company that is subordinated in
right of payment to the Notes in exchange for, or out of the proceeds of,
the substantially concurrent sale of Refinancing Indebtedness that is (x)
at least as subordinated in right of payment to the Notes as the
Indebtedness being refinanced and (y) permitted to be incurred pursuant to
the covenant described in "-- Limitation on Incurrence of Indebtedness";
(iv) the redemption, repurchase, retirement or other acquisition of
any Indebtedness of the Company that is subordinated in right of payment to
the Notes upon a Change of Control to the extent required by the agreement
governing such Indebtedness but only if the Company shall have complied
with the covenant described in "-- Change of Control" and purchased all
Notes tendered pursuant to the offer to repurchase all of the Notes
required thereby, prior to purchasing or repaying such Indebtedness;
(v) payments by the Company to purchase or otherwise acquire Capital
Stock of the Company (including options, warrants or other rights to
acquire such Capital Stock) from departing or deceased
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directors, officers or employees of the Company or its Subsidiaries,
whether pursuant to the terms of an employee benefit plan or employment
agreement or otherwise; provided that the aggregate amount of all such
repurchases shall not exceed $2 million in any fiscal year; and
(vi) the payment by the Company of dividends on the common stock of
the Company in an amount not to exceed $25 million in any fiscal year;
provided that, in the case of clauses (v) and (vi), no Default or Event of
Default shall have occurred or be continuing at the time of such Permitted
Payment after giving effect thereto.
For purposes of clause (iii) of the first paragraph of this covenant,
Permitted Payments made pursuant to clauses (i), (v) and (vi) of the immediately
preceding paragraph shall be included (with respect to clause (i), as of the
date of declaration) as Restricted Payments made since the Issue Date.
ADDITIONAL COVENANTS
The Indenture also contains covenants with respect to the following
matters: (i) payment of principal, premium and interest; (ii) maintenance of an
office or agency in The City of New York; (iii) maintenance of corporate
existence; (iv) payment of taxes and other claims; and (v) maintenance of
properties.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company may not consolidate with or merge
into, or convey, transfer or lease its properties and assets substantially as an
entirety to, any Person (a "successor Person"), and may not permit any Person to
merge into, or convey, transfer or lease its properties and assets substantially
as an entirety to, the Company, unless (i) the successor Person (if any) is a
corporation, partnership, trust or other entity organized and validly existing
under the laws of any U.S. domestic jurisdiction and expressly assumes the
Company's obligations on the Notes and under the Indenture, (ii) immediately
after giving effect to the transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing under the Indenture, (iii) if, as a result of
the transaction, property of the Company would become subject to a Lien that
would not be permitted under the covenant described in "-- Restrictive
Covenants -- Limitation on Liens," the Company takes such steps as shall be
necessary to secure the Notes equally and ratably with (or prior to) the
indebtedness secured by such Lien, (iv) if such transaction occurs prior to an
Investment Grade Rating Date, the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first sentence of the covenant described
under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness," on
a pro forma basis after giving effect to such transaction, and (v) certain other
conditions are met.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture
with respect to the 2003 Notes or 2008 Notes, as the case may be: (a) failure to
pay principal of or any premium on any Note of that series when due; (b) failure
to pay any interest on any Note of that series when due, continued for 30 days;
(c) failure to offer to repurchase or to repurchase the Notes in the event of a
Change of Control in accordance in all material respects with the provisions
described in "-- Change of Control" or to perform or comply with any provision
described in "-- Consolidation, Merger and Sale of Assets"; (d) failure to
perform any other covenant of the Company in the Indenture, continued for 60
days after written notice has been given as provided in the Indenture; (e)
failure to pay when due (subject to any applicable grace period) the principal
of, or acceleration of, any indebtedness for money borrowed by the Company or
any Restricted Subsidiary (including a default with respect to any Note of the
other such series) having an aggregate principal amount outstanding of at least
$20 million, if in the case of any such failure, such indebtedness has not been
discharged or, in the case of any such acceleration, such acceleration has not
been rescinded or annulled, in each case within 10 days after written notice has
been given by the Trustee, or the Holders of at least 25% in aggregate principal
amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, as
provided in the Indenture; (f) certain events in respect of bankruptcy,
insolvency or reorganization involving the Company or any Restricted Subsidiary;
and (g) any Note Guarantee ceases to be in full force and effect or any Note
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Guarantor denies in writing that it has any liability under its Note Guarantee
(other than by reason of the termination of the Indenture or the release of any
such Note Guarantee in accordance with the Indenture).
If an Event of Default (other than an Event of Default described in clause
(f) above) with respect to the 2003 Notes or 2008 Notes, as the case may be,
shall occur and be continuing, either the Trustee or the holders of at least 25%
in aggregate principal amount of such 2003 Notes or 2008 Notes, as the case may
be, then outstanding by notice as provided in the Indenture may declare the
aggregate principal amount of such Notes to be due and payable immediately. If
an Event of Default described in clause (f) above shall occur, the aggregate
principal amount of all Notes will automatically, and without any action by the
Trustee or any holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree for payment of money has been
obtained by the Trustee, the holders of a majority in aggregate principal amount
of the outstanding 2003 Notes or 2008 Notes, as the case may be, may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal (or other specified
amount), have been cured or waived as provided in the Indenture. For information
as to waiver of defaults, see "-- Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Indenture
provides that the Trustee is under no obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any of the holders,
unless such holders shall have offered to the Trustee reasonable indemnity.
Subject to such provisions for the indemnification of the Trustee, the Indenture
provides that holders of at least a majority in aggregate principal amount of
the outstanding 2003 Notes or 2008 Notes, as the case may be, 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 with respect to such Notes.
No holder of any 2003 Note or 2008 Note has any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the 2003 Notes or 2008 Notes, as the case may be, (ii) the
holders of at least 25% in aggregate principal amount of the outstanding 2003
Notes or 2008 Notes, as the case may be, have made written request, and such
holder or holders have offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee and (iii) the Trustee has failed to institute such
proceeding, and has not received from the holders of a majority in aggregate
principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may
be, a direction inconsistent with such request, within 60 days after such
notice, request and offer. However, such limitations do not apply to a suit
instituted by a holder of a Note for the enforcement of payment of the principal
of or any premium or interest on such Note on or after the applicable due date
specified in such Note.
The Company is required to furnish to the Trustee annually a statement by
certain of its officers as to whether or not the Company, to their knowledge, is
in default in the performance or observance of any of the terms, provisions and
conditions of the Indenture and, if so, specifying all such known defaults.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company,
the Note Guarantors and the Trustee with the consent of the holders of at least
a majority in aggregate principal amount of the outstanding Notes of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding 2003 Note or 2008 Note, as the case may be, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any 2003 Note or 2008 Note, as the case may be, (b) reduce the principal amount
of, or any premium or interest on, any 2003 Note or 2008 Note, as the case may
be, (c) reduce the amount of principal of any 2003 Note or 2008 Note, as the
case may be, payable upon acceleration of the Maturity thereof, (d) change the
place or currency of payment of principal of, or any premium or interest on, any
2003 Note or 2008 Note, as the case may be, (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any 2003 Note or
2008 Note, as the case may be, (f) reduce the percentage in principal
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amount of outstanding 2003 Notes or 2008 Notes, as the case may be, the consent
of whose Holders is required for modification or amendment of the Indenture, (g)
reduce the percentage in principal amount of outstanding 2003 Notes or 2008
Notes, as the case may be, necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults or (h) modify such
provisions with respect to modification and waiver.
The holders of at least a majority in aggregate principal amount of the
outstanding Notes of each series affected may waive compliance by the Company
and the Note Guarantors with certain restrictive provisions of the Indenture.
The holders of at least a majority in aggregate principal amount of the
outstanding 2003 Notes or 2008 Notes, as the case may be, may waive any past
default under the Indenture with respect to such 2003 Notes or 2008 Notes, as
the case may be, except a default in the payment of principal, premium or
interest and certain covenants and provisions of the Indenture which cannot be
amended without the consent of the holder of each outstanding 2003 Note or 2008
Note, as the case may be.
Until an amendment, modification or waiver becomes effective, a consent to
it by a holder is a continuing consent by such holder and by every subsequent
holder of such prior holder's Note or any portion of such Note that evidences
the same debt. Any such holder or subsequent holder may revoke the consent as to
such Note or portion thereof by written notice to the Trustee or the Company
received by the Trustee or the Company, as the case may be, before the date on
which the Trustee receives an Officers' Certificate from the Company certifying
that the holders of the requisite principal amount of Notes have consented (and
not theretofore revoked such consent) to the amendment, modification or waiver.
Except in certain limited circumstances, the Company is entitled to set any
day as a record date for the purpose of determining the holders of outstanding
2003 Notes or 2008 Notes, as the case may be, entitled to give or take any
direction, notice, consent, waiver or other action under the Indenture, in the
manner and subject to the limitations provided in the Indenture. If a record
date is set for any action to be taken by holders of a particular series, such
action may be taken only by persons who are holders of outstanding 2003 Notes or
2008 Notes, as the case may be, on the record date. To be effective, such action
must be taken by holders of the requisite principal amount of such Notes within
a specified period following the record date. For any particular record date,
this period will be 180 days or such other period as may be specified by the
Company, and may be shortened or lengthened from time to time.
DEFEASANCE AND COVENANT DEFEASANCE
Defeasance and Discharge. The Indenture provides that, upon the Company's
exercise of its defeasance and discharge option with respect to the 2003 Notes
or 2008 Notes, as the case may be, the Company and each Note Guarantor will be
discharged from all its respective obligations with respect to such Notes,
except for certain obligations to exchange or register the transfer of Notes, to
replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold
moneys for payment in trust, upon the deposit in trust for the benefit of the
holders of such Notes of money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Notes on the respective Stated
Maturities in accordance with the terms of the Indenture and such Notes. Such
defeasance or discharge may occur only if, among other things, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the Company
has received from, or there has been published by, the United States Internal
Revenue Service a ruling, or there has been a change in tax law, in either case
to the effect that holders of such Notes will not recognize gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge were not to occur.
Defeasance of Certain Covenants. The Indenture provides that, upon the
Company's exercise of its covenant defeasance option with respect to the 2003
Notes or 2008 Notes, as the case may be, the Company may omit to comply with
certain restrictive covenants, including those described in "-- Restrictive
Covenants" and in clause (iii) under "-- Consolidation, Merger and Sale of
Assets," and the occurrence of certain
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Events of Default, which are described above in clause (d) (with respect to such
restrictive covenants) and clause (e) under "-- Events of Default," will be
deemed not to be or result in an Event of Default, in each case with respect to
such Notes. The Company, in order to exercise such option, is required to
deposit, in trust for the benefit of the Holders of such Notes, money or U.S.
Government Obligations, or both, which, through the payment of principal and
interest in respect thereof in accordance with their terms, will provide money
in an amount sufficient to pay the principal of and any premium, if any, and
interest on such Notes on the respective Stated Maturities in accordance with
the terms of the Indenture and such Notes. The Company is also required, among
other things, to deliver to the Trustee an Opinion of Counsel satisfying the
requirements of the Indenture, to the effect that holders of such Notes will not
recognize gain or loss for federal income tax purposes as a result of such
deposit and defeasance of certain obligations and will be subject to federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit and defeasance were not to occur. In the
event the Company exercised this option with respect to any Notes and such Notes
were declared due and payable because of the occurrence of any Event of Default,
the amount of money and U.S. Government Obligations so deposited in trust would
be sufficient to pay amounts due on such Notes at the time of their respective
Stated Maturities but may not be sufficient to pay amounts due on such Notes at
the time of any acceleration resulting from such Event of Default. In such case,
the Company would remain liable for such payments.
REPORTING REQUIREMENTS
The Indenture provides that, whether or not the Company is then subject to
Section 13(a) or 15(d) of the Exchange Act, the Company will file (unless such
filing is not permitted under the Exchange Act) with the Commission, so long as
Notes are outstanding, the annual reports, quarterly reports and other periodic
reports that the Company would have been required to file with the Commission
pursuant to such Section 13(a) or 15(d) if the Company were so subject, and such
documents shall be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company will also in
any event (i) within 15 days of each Required Filing Date, (a) transmit by mail
to all holders of Notes, as their names and addresses appear in the Note
Register, without cost to such holders and (b) file with the Trustee copies of
the annual reports, quarterly reports and other periodic reports which the
Company would have been required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act if the Company were subject to such Sections
and (ii) if filing such documents by the Company with the Commission is
prohibited under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective holder at the Company's cost.
NOTICES
Notices to holders of Notes will be given by mail to the addresses of such
holders as they may appear in the Note Register.
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Note is registered as the absolute owner
thereof (whether or not such Note may be overdue) for the purpose of making
payment and for all other purposes.
GOVERNING LAW
The Indenture and the Notes are governed by, and construed in accordance
with, the law of the State of New York.
THE TRUSTEE
The Company maintains banking relationships in the ordinary course of
business with the Trustee. The First National Bank of Chicago also acts as the
trustee under the indenture governing the Old Debentures.
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The occurrence of a default under the Indenture with respect to the 2003
Notes or 2008 Notes, as the case may be, could create a conflicting interest for
the Trustee under the Trust Indenture Act. If the default has not been cured or
waived within 90 days after the Trustee has or acquires a conflicting interest,
the Trustee generally is required by the Trust Indenture Act to eliminate such
conflicting interest or resign as Trustee with respect to the affected Notes. In
the event of the Trustee's resignation, the Company shall promptly appoint a
successor trustee with respect to the affected Notes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other terms used in the
Indenture.
"Acquired Debt" means (x) Indebtedness of any Person (the "Acquired
Person") existing at the time the Acquired Person merges or consolidates with or
into, or becomes a Restricted Subsidiary of, the Company or any Restricted
Subsidiary, or (y) Indebtedness of any Person assumed by the Company or any
Restricted Subsidiary in connection with its acquisition of assets from such
Person, in each case excluding Indebtedness incurred in connection with, or in
contemplation of, the Acquired Person merging or consolidating with or into, or
becoming a Restricted Subsidiary of, the Company or any Restricted Subsidiary,
or such acquisition of assets.
"Acquisition" means the acquisition by the Company of all of the capital
stock of Coulter on October 31, 1997.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25% in the case of the 2003
Notes, and 0.375%, in the case of the 2008 Notes.
"Asset Sale" means (i) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary of any assets (including by way of a
sale-and-leaseback) other than (a) in the ordinary course of business, (b) the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company, which shall not be an "Asset Sale" but instead shall be
governed by the provisions of the Indenture described under "-- Consolidation,
Merger and Sale of Assets", and (c) any "fee in lieu of" or other disposition of
assets to any governmental authority or agency that continue in use by the
Company or any Restricted Subsidiary, so long as the Company or any Restricted
Subsidiary may obtain title to such assets at any time upon reasonable notice by
paying a nominal fee, or (ii) the issuance or sale of Capital Stock of any
Restricted Subsidiary, in the case of each of clauses (i) and (ii), whether in a
single transaction or a series of related transactions, to any Person (other
than the Company or a Restricted Subsidiary) for Net Proceeds in excess of $1.0
million.
"Attributable Value," when used with respect to any sale and leaseback
transaction means, as of the time of determination, the total obligation
(discounted to present value at the interest rate assumed in making calculations
in accordance with FAS 13) of the lessee for rental payments (other than amounts
required to be paid on account of property taxes as well as maintenance,
repairs, insurance, water rates and other items which do not constitute payments
for property rights) during the remaining portion of the base term of the lease
included in such sale and leaseback transaction.
"Bank Indebtedness" means any and all Indebtedness or other amounts,
whether outstanding on the Issue Date or thereafter incurred, payable under or
in respect of the Credit Facility or any refinancing in respect thereof, and any
Refinancing Indebtedness in respect thereof, including in each case (without
limitation) principal, premium (if any), interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Company or any Restricted Subsidiary whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, Guarantees, other monetary obligations of any nature
and all other amounts payable under or in respect of any of the foregoing (and,
without limitation, whether incurred in accordance with any clause of the
definition of
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"Permitted Indebtedness" or the first sentence of the covenant described under
"-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness" or
otherwise).
"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 Lease Obligation" of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
"Capital Stock" of any Person means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association, limited liability company
or business entity, any and all Equity Interests, (iii) in the case of a
partnership, partnership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person, including any Preferred Stock.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
instrumentality or agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality or agency thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Ratings Services or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Rating Group or at least
P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit, time
deposits or bankers' acceptances (or, with respect to foreign banks, similar
instruments) maturing within one year from the date of acquisition thereof
issued by (x) any lender under the Credit Agreement or (y) a commercial banking
institution that is a member of the Federal Reserve System or a commercial
banking institution organized and located in a country recognized by the United
States of America, in each case, having combined capital and surplus and
undivided profits in excess of $500,000,000 (or the foreign currency equivalent
thereof); (v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above; (vi)
investments in money market funds which invest substantially all their assets in
securities of the types described in clauses (i) through (v) above; and (vii)
other short-term investments utilized by Foreign Subsidiaries in accordance with
normal investment practices for cash management not exceeding $20 million in
aggregate principal amount outstanding at any time.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, or (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the voting stock of the Company.
"Change of Control Downgrade" means, with respect to any Change of Control,
a downgrade in the rating assigned to any Notes arising out of or otherwise
attributable to such Change of Control (whether or not such Change of Control
has occurred at the time of such downgrade), which downgrade (i) if prior to an
Investment Grade Rating Date, is by any Rating Agency and (ii) if on or after an
Investment Grade Rating Date, is by any two Rating Agencies unless, after giving
effect to such downgrade, the rating assigned to such Notes by either of such
two Rating Agencies is Investment Grade. For purposes of the foregoing, and
without limiting the generality thereof, a Change of Control Downgrade with
respect to any Change of Control shall be
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deemed to have occurred if such Change of Control Downgrade occurs during any
90-day period beginning prior to and ending after the occurrence of such Change
of Control.
"Change of Control Triggering Event" means the later to occur of (i) any
Change of Control and (ii) a Change of Control Downgrade with respect to such
Change of Control. Both a Change of Control and a Change of Control Downgrade
shall be required for a Change of Control Triggering Event to occur.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Company" means Beckman Coulter, Inc. (formerly known as Beckman
Instruments, Inc.), a Delaware corporation, until a successor Person shall have
become such pursuant to the applicable provisions of the Indenture, and
thereafter "Company" shall mean such successor Person.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Treasury Reference
Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.
"Consolidated Cash Flow" means, with respect to any period, the
Consolidated Net Income for such period, plus without duplication (i)
Consolidated Interest Expense for such period, plus (ii) provision for taxes
based on income, profits or capital, to the extent such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) depreciation,
amortization (including, without limitation, amortization of goodwill and other
intangibles) and all other non-cash charges (excluding any non-cash charge which
requires an accrual or reserve for cash charges for any future period), to the
extent such depreciation, amortization and other non-cash charges were deducted
in computing such Consolidated Net Income.
"Consolidated Coverage Ratio" means, with respect to any date of
determination, the ratio of (i) the aggregate amount of Consolidated Cash Flow
for the period of the most recent four consecutive fiscal quarters ended prior
to such date for which consolidated financial statements of the Company are
available, to (ii) Consolidated Interest Expense for such four fiscal quarters,
provided that:
(1) if since the beginning of such period the Company or any
Restricted Subsidiary has incurred any Indebtedness that remains
outstanding on such date of determination, or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio involves an
incurrence of Indebtedness (including without limitation any Acquired
Debt), Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness and the application of the proceeds thereof (and, in the case
of any Acquired Debt, the related
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acquisition) as if such Indebtedness had been incurred (and any such
acquisition had occurred) on the first day of such period;
(2) if since the beginning of such period the Company or any
Restricted Subsidiary has repaid, repurchased, defeased, retired or
otherwise discharged (a "Discharge") any Indebtedness that is no longer
outstanding on such date of determination, or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio involves a
Discharge of Indebtedness, Consolidated Cash Flow and Consolidated Interest
Expense for such period shall be calculated after giving effect to such
Discharge of such Indebtedness, including the proceeds of any such new
Indebtedness, as if such Discharge had occurred on the first day of such
period;
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have disposed of any company, any business, any
group of assets constituting an operating unit, or any other assets out of
the ordinary course of business (a "Sale"), (x) Consolidated Cash Flow for
such period shall be reduced by an amount equal to the Consolidated Cash
Flow (if positive) directly attributable to the assets that are the subject
of such Sale for such period or increased by an amount equal to the
Consolidated Cash Flow (if negative) directly attributable thereto for such
period and (y) Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Sale for such period (and,
if the Capital Stock of any Restricted Subsidiary is sold, transferred or
otherwise disposed of, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale, transfer or
disposition);
(4) if since the beginning of such period the Company or any
Restricted Subsidiary shall have acquired (by merger or otherwise, and
whether accounted for as a purchase, a pooling of interests or otherwise)
any company, any business, any group of assets constituting an operating
unit, or any other assets out of the ordinary course of business (a
"Purchase"), Consolidated Cash Flow and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto
(including the incurrence of any related Indebtedness) as if such Purchase
had occurred on the first day of such period; and
(5) if since the beginning of such period any Person became a
Restricted Subsidiary or was merged or consolidated with or into the
Company or any Restricted Subsidiary, in each case in a Purchase, and since
the beginning of such period such Person shall have Discharged any
Indebtedness or made any Sale or Purchase that would have required an
adjustment pursuant to clause (2), (3) or (4) above if made by the Company
or a Restricted Subsidiary during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Discharge, Sale or Purchase
occurred on the first day of such period.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at the
option of the Company, either a fixed or floating rate. If any Indebtedness that
is being given pro forma effect was incurred under a revolving credit facility,
the interest expense on such Indebtedness shall be computed based upon the
average daily balance of such Indebtedness during the applicable period (being
the relevant four-quarter period or, if shorter, the portion thereof beginning
on the date such facility was first drawn upon). In making any calculation of
the Consolidated Coverage Ratio for any period prior to the date of the closing
of the Acquisition, the Acquisition shall be deemed to have taken place on the
first day of such period.
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"Consolidated Interest Expense" means, with respect to any period, the sum
(without duplication) of (i) the interest expense of the Company and its
Restricted Subsidiaries for such period, plus (ii) all cash dividends paid
during such period by the Company and its Restricted Subsidiaries with respect
to any Disqualified Stock (other than to the Company or a Restricted
Subsidiary), and minus (iii) to the extent otherwise included in Consolidated
Interest Expense, amortization or write-off of financing costs, in each case
under clauses (i) through (iii) as determined on a consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any period, the net income
(or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP consistently applied,
adjusted by excluding, to the extent included in calculating such net income (or
loss), without duplication, (i) any extraordinary gain or loss as recorded on
the statement of operations in accordance with GAAP, (ii) the portion of net
income (or loss) of the Company and its Restricted Subsidiaries allocable to the
Company's equity in the net income (or loss) of any unconsolidated Person or
Unrestricted Subsidiary, except (in the case of such net income) to the extent
of the amount of dividends or distributions actually paid or made to the Company
or any of its Restricted Subsidiaries by such other Person during such period,
(iii) net income (or loss) of any Person combined with the Company or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) any gain or loss realized upon any
Asset Sale (other than sales of leases of customer-leased equipment) and any
gain or loss realized upon the sale or other disposition of any Capital Stock of
any Person, (v) the net income of any Restricted Subsidiary if the declaration
of dividends or similar distributions by that Restricted Subsidiary of that net
income to the Company is at the time restricted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation (other than pursuant to
any statute, rule or governmental regulation that permits such dividends or
similar distributions payments after the passage of time, not to exceed 120
days, or after the filing or providing of notice with respect to such dividends
or similar distributions) applicable to that Restricted Subsidiary or its
stockholders (other than pursuant to the Notes or the Indenture), except to the
extent that any dividend or distribution was or could have been made by the
Restricted Subsidiary to the Company or another Restricted Subsidiary during
such period in compliance with such restrictions, (vi) non-cash, nonrecurring
charges (excluding any non-cash charge which requires an accrual or reserve for
cash charges for any future period), (vii) any nonrecurring charges related to
the Acquisition or any acquisition by the Company or any Restricted Subsidiary
after the Issue Date and (viii) all deferred financing costs written off and
premium paid in connection to any early extinguishment of Indebtedness.
"Consolidated Net Tangible Assets" of the Company means the aggregate
amount of assets (less applicable reserves and other properly deductible items)
after deducting therefrom (a) all current liabilities (excluding any
indebtedness for money borrowed having a maturity of less than 12 months from
the date of the most recent consolidated balance sheet of the Company but which
by its terms is renewable or extendable beyond 12 months from such date at the
option of the borrower) and (b) all goodwill, trade names, patents, unamortized
debt discount and expense and any other like intangibles, all as set forth on
the most recent consolidated balance sheet of the Company and computed in
accordance with GAAP.
"Coulter" means Coulter Corporation, a Delaware corporation.
"Credit Agreement" means the credit agreement dated as of October 31, 1997,
among the Company, the banks and other financial institutions party thereto from
time to time, Citicorp USA, Inc., as agent, Citicorp Securities, Inc., as
arranger, and Merrill Lynch & Co., as syndication agent, as such agreement may
be amended, supplemented, waived or otherwise modified from time to time, or
refunded, refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether with the
original agents and lenders or other agents and lenders or otherwise, and
whether provided under the original Credit Agreement or otherwise).
"Credit Facility" means the collective reference to the Credit Agreement,
any notes and letters of credit issued pursuant thereto and any guarantees,
security agreements, pledges, mortgages, letter of credit applications and other
collateral documents, and other instruments and documents, executed and
delivered
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pursuant to or in connection with any of the foregoing, in each case as the same
may be amended, supplemented, waived or otherwise modified from time to time, or
refunded, refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether with the
original agents and lenders or other agents and lenders or otherwise, and
whether provided under the original Credit Agreement or otherwise).
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Default" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Disqualified Stock" means (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (other than upon a change of control of the Company in
circumstances where the holders of the Notes would have similar rights), in
whole or in part on or prior to the stated maturity of any Notes.
"Dollars" and "$" means lawful money of the United States of America.
"Equipment Held for Resale" means instrument systems and related
accessories and components manufactured or assembled by the Company that are
owned and held for placement in facilities of the Company's customers.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including limited liability company interests, in such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is
(i) not organized under the laws of the United States of America or any state
thereof or the District of Columbia and (ii) conducts its principal operations
outside the United States.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date, including those 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 statement by such
other entity as approved by a significant segment of the United States
accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person, and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Indebtedness" means, with respect to any Person, without duplication, and
whether or not contingent, (i) all indebtedness of such Person for borrowed
money or which is evidenced by a note, bond, debenture or
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similar instrument, (ii) all obligations of such Person to pay the deferred or
unpaid purchase price of property or services, which purchase price is due more
than one year after the date of placing such property in service or taking
delivery and title thereto or the completion of such service, (iii) all Capital
Lease Obligations of such Person, (iv) all obligations of such Person in respect
of letters of credit or bankers' acceptances issued or created for the account
of such Person, (v) to the extent not otherwise included in this definition, all
net obligations of such Person under all Interest Rate Agreement Obligations,
Currency Agreement Obligations or Commodity Price Protection Agreements of such
Person, (vi) all liabilities of others of the kind described in the preceding
clause (i), (ii) or (iii) secured by any Lien on any property owned by such
Person even if such Person has not assumed or otherwise become liable for the
payment thereof, to the extent of the value of the property subject to such
Lien, (vii) all Disqualified Stock issued by such Person, and (viii) to the
extent not otherwise included, any Guarantee by such Person of any other
Person's indebtedness or other obligations described in clauses (i) through
(vii) above. "Indebtedness" of the Company and its Restricted Subsidiaries shall
not include (i) current trade payables incurred in the ordinary course of
business and payable in accordance with customary practices and (ii)
non-interest bearing installment obligations and accrued liabilities incurred in
the ordinary course of business which are not more than 90 days past due.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement, but excluding advances, loans and other extension of credit
to customers, directors, officers and employees in the ordinary course of
business) to, capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, bonds,
notes, securities or other similar instruments issued by, such Person and shall
include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and the
covenant described under "-- Restrictive Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of the
assets (net of liabilities) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude
the Fair Market Value of the assets (net of liabilities) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of
such transfer, in each case as determined by the Board of Directors in good
faith.
"Investment Grade" means a rating in one of the four highest categories
(without regard to subcategories within such rating categories) by a Rating
Agency.
"Investment Grade Rating Date" means the first date on which the Notes are
rated Investment Grade by two Rating Agencies.
"Issue Date" means March 4, 1998.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, security interest, lien,
encumbrance, or other security arrangement of any kind or nature whatsoever on
or with respect to such property or assets (including any conditional sale or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Proceeds" from an Asset Sale means cash payments received (including
any cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to the properties
or assets that are the subject of such Asset Sale or received in any other
noncash form) therefrom, in each case net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all federal,
state, provincial,
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foreign and local taxes required to be paid or accrued as a liability under
GAAP, as a consequence of such Asset Sale, (ii) all payments made on any
Indebtedness that is secured by any assets subject to such Asset Sale, in
accordance with the terms of any Lien upon such assets, (iii) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Sale, or to any other
Person (other than the Company or a Restricted Subsidiary) owning a beneficial
interest in the assets disposed of in such Asset Sale and (iv) appropriate
amounts to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Sale and
retained by the Company or any Restricted Subsidiary after such Asset Sale.
"Note Guarantee" means each Guarantee of the Notes by Coulter, Beckman
Instruments (Naguabo), Inc., Hybritech Incorporated and SmithKline Diagnostics,
Inc., and any Guarantee of the Notes that may from time to time be executed and
delivered pursuant to the terms of the Indenture. Each such Note Guarantee shall
be in the form prescribed by the Indenture.
"Note Guarantor" means any Restricted Subsidiary that has issued a Note
Guarantee.
"Permitted Indebtedness" means:
(i) Indebtedness incurred by the Company pursuant to the Credit
Facility in an aggregate principal amount not to exceed $1,100.0 million
outstanding at any time, minus the aggregate amount of all scheduled
repayments of principal, and all mandatory prepayments of principal with
Net Proceeds from Asset Sales, and plus (in the case of any refinancing
thereof) the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing;
provided that, so long as no term loan Indebtedness remains outstanding
under the Credit Facility, the Company shall be permitted to incur
revolving credit Indebtedness thereunder in an aggregate principal amount
not to exceed $800 million outstanding at any time;
(ii) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount outstanding at any time not exceeding, as to all such Foreign
Subsidiaries, the greater of (a) $75 million and (b) an amount equal to the
sum of (x) 80% of the combined book value of the net account receivables
owned by Foreign Subsidiaries that are shown on the consolidated balance
sheet of the Company as of the end of the most recently ended fiscal
quarter for which financial statements of the Company are available plus
(y) 50% of the combined book value of the inventory owned by Foreign
Subsidiaries that is shown on such balance sheet, all as calculated on a
combined basis and in accordance with GAAP;
(iii) Indebtedness represented by the Notes or the Exchange Notes, any
Guarantees in respect thereof, and any Indebtedness arising by reason of
any Lien granted to secure any of the foregoing Indebtedness;
(iv) Indebtedness owed by any Restricted Subsidiary to the Company or
to another Restricted Subsidiary, or owed by the Company to any Restricted
Subsidiary; provided, however, that any such Indebtedness shall be at all
times held by a Person that is either the Company or a Restricted
Subsidiary of the Company; provided, further however, that upon either (a)
the transfer or other disposition of any such Indebtedness to a Person
other than the Company or another Restricted Subsidiary or (b) the sale,
lease, transfer or other disposition of shares of Capital Stock (including
by consolidation or merger) of any such Restricted Subsidiary to a Person
other than the Company or another Restricted Subsidiary, the incurrence of
such Indebtedness shall be deemed to be an incurrence that is not permitted
by this clause (iv);
(v) Indebtedness of the Company or any Restricted Subsidiary in the
form of Purchase Money Obligations or Capital Lease Obligations, in an
aggregate amount not in excess of $30 million outstanding at any time;
(vi) Indebtedness of the Company or any Restricted Subsidiary arising
in the ordinary course of business (a) pursuant to Interest Rate Agreements
designed to protect the Company or any Subsidiary against fluctuations in
interest rates in respect of Indebtedness of the Company or any Subsidiary
as long as such obligations do not exceed the aggregate principal amount of
such Indebtedness then outstanding,
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(b) under any Currency Hedging Arrangements, which if related to
Indebtedness do not increase the amount of such Indebtedness other than as
a result of foreign exchange fluctuations, or (c) under any Commodity Price
Protection Agreements, which if related to Indebtedness do not increase the
amount of such Indebtedness other than as a result of foreign exchange
fluctuations;
(vii) Indebtedness of the Company or any Restricted Subsidiary arising
from the honoring of a check, draft or similar instrument of such Person
drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence;
(viii) Indebtedness of the Company or any Restricted Subsidiary
consisting of Guarantees, indemnities, or obligations in respect of
purchase price adjustments, in connection with the acquisition or
disposition of assets;
(ix) Indebtedness of the Company or any Restricted Subsidiary in
respect of (a) judgment, performance, surety and other bonds provided by
such Person with respect to obligations of such Person in the ordinary
course of business, (b) letters of credit securing obligations incurred in
the ordinary course of business or (c) other letters of credit in an amount
not to exceed $5 million in the aggregate outstanding at any time;
(x) Indebtedness of the Company or any Restricted Subsidiary
consisting of Guarantees in respect of loans or advances made to officers
or employees of the Company or any Restricted Subsidiary, or Guarantees
otherwise made on their behalf, (a) in respect of travel, entertainment and
moving related expenses incurred in the ordinary course of business, or (b)
in the ordinary course of business not exceeding $500,000 in the aggregate
outstanding at any time;
(xi) Any Refinancing Indebtedness incurred in respect of any
Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii)
of this definition of "Permitted Indebtedness," any Capital Lease
Obligations described in clause (v) of this definition of "Permitted
Indebtedness" or any Indebtedness permitted to be incurred pursuant to the
first sentence of the covenant described in "-- Restrictive
Covenants -- Limitation on Incurrence of Indebtedness;"
(xii) Indebtedness of the Company or any Restricted Subsidiary that is
outstanding on the Issue Date;
(xiii) Acquired Debt of any Restricted Subsidiary, provided that at
the time of the incurrence thereof and after giving effect thereto on a pro
forma basis, (x) no Default or Event of Default will have occurred and be
continuing or would result therefrom and (y) the Company could incur at
least $1.00 of additional Indebtedness pursuant to the first sentence of
the covenant described in "-- Restrictive Covenants -- Limitation on
Incurrence of Indebtedness;"
(xiv) Indebtedness of any Restricted Subsidiary in an aggregate
principal amount not exceeding $10 million outstanding at any time, as to
all such Restricted Subsidiaries that incur Indebtedness pursuant to this
clause (xiv);
(xv) Guarantees by the Company of any Indebtedness of any Restricted
Subsidiary incurred by such Subsidiary in compliance with the covenant
described under "-- Restrictive Covenants -- Limitation on Incurrence of
Indebtedness," provided that if such Indebtedness is subordinated in right
of payment to any other Indebtedness, such Guarantee shall be subordinated
in right of payment to the Notes at least to the same extent as such
Indebtedness is so subordinated to such other Indebtedness;
(xvi) any Guarantee by any Note Guarantor of Bank Indebtedness of the
Company incurred pursuant to clause (i), (xi) or (xvii) of this definition
of "Permitted Indebtedness" or the first sentence of the covenant described
under "-- Restrictive Covenants -- Limitation on Incurrence of
Indebtedness," provided that (a) if such Indebtedness is subordinated in
right of payment to any other Indebtedness, such Guarantee shall be
subordinated in right of payment to the Notes at least to the same extent
as such Indebtedness is so subordinated to such other Indebtedness, and (b)
upon such Person no longer being a Note Guarantor, there shall be deemed to
have occurred a new incurrence of such Guarantee not permitted by this
clause (xvi); and
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(xvii) Indebtedness of the Company in addition to that described in
clauses (i), (iii) through (xii) and (xv) above, and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all such
Indebtedness incurred pursuant to this clause (xvii) does not exceed $50
million outstanding at any time.
For purposes of determining compliance with any such Dollar-denominated
restriction on the incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was incurred, in the case of term
debt, or first committed, in the case of revolving credit debt, provided that
(x) the Dollar-equivalent principal amount of any such Indebtedness outstanding
on the Issue Date shall be calculated based on the relevant currency exchange
rate in effect on the Issue Date, (y) if such Indebtedness is incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced, and (z) the Dollar-equivalent principal amount of Indebtedness
denominated in a foreign currency and incurred pursuant to the Credit Facility
shall be calculated based on the relevant currency exchange rate in effect on,
at the Company's option, (i) the Issue Date, (ii) any date on which any of the
respective commitments under the Credit Facility shall be reallocated between or
among facilities or subfacilities thereunder, or on which such rate is otherwise
calculated for any purpose thereunder, or (iii) the date of such incurrence. The
principal amount of any Indebtedness incurred to refinance other Indebtedness,
if incurred in a different currency from the Indebtedness being refinanced,
shall be calculated based on the currency exchange rate applicable to the
currencies in which such respective Indebtedness is denominated that is in
effect on the date of such refinancing.
For purposes of determining compliance with, and the outstanding principal
amount of any particular Indebtedness incurred pursuant to and in compliance
with, the covenant described under "-- Restrictive Covenants -- Limitation on
Incurrence of Indebtedness," (i) any other obligation of the obligor on such
Indebtedness (or of any other Person that could have incurred such Indebtedness
as the obligor thereon in compliance with such covenant) arising under any
Guarantee, Lien or letter of credit supporting such Indebtedness shall be
disregarded to the extent that such Guarantee, Lien or letter of credit secures
the principal amount of such Indebtedness; (ii) in the event that Indebtedness
is entitled to be incurred pursuant to the first paragraph of such covenant or
meets the criteria of more than one of the types of Indebtedness described in
the definition of "Permitted Indebtedness," the Company, in its sole discretion,
shall classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of such clauses; and (iii) the
amount of Indebtedness issued at a price that is less than the principal amount
thereof shall be equal to the amount of the liability in respect thereof
determined in accordance with GAAP.
Indebtedness of any Person that is not a Restricted Subsidiary, which
Indebtedness is outstanding at the time such Person becomes a Restricted
Subsidiary or is merged with or into or consolidated with the Company or a
Restricted Subsidiary, shall be deemed to have been incurred at the time such
Person becomes a Restricted Subsidiary or is merged with or into or consolidated
with the Company or a Restricted Subsidiary, and Indebtedness which is assumed
at the time of the acquisition of any asset shall be deemed to have been
incurred at the time of such acquisition. Accrual of interest, the accretion of
accreted value of principal, and the payment of interest in the form of
additional Indebtedness having the same terms as the original Indebtedness on
which such payment is made (which payment is made pursuant to the terms of such
original Indebtedness as initially issued), will not be deemed an incurrence of
Indebtedness for purposes of the covenant described under "-- Restrictive
Covenants -- Limitation on Incurrence of Indebtedness."
"Permitted Investments" means (i) any Investment in the Company or any
Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any
Investment in a Person if, as a result of such Investment, (a) such Person
becomes a Restricted Subsidiary, or (b) such Person either (1) is merged,
consolidated or amalgamated with or into the Company or one of its Restricted
Subsidiaries and the Company or such Restricted Subsidiary is the surviving
Person, or (2) transfers or conveys substantially all of its assets to, or is
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liquidated into, the Company or one of its Restricted Subsidiaries; (iv)
Investments in accounts and notes receivable acquired in the ordinary course of
business; (v) any securities or other Investments received in connection with
any sale or other disposition of property or assets (including Equity
Interests); (vi) obligations under any Interest Rate Agreement, Currency Hedging
Arrangement or Commodity Price Protection Agreement permitted pursuant to the
covenant described in "-- Restrictive Covenants -- Limitation on Incurrence of
Indebtedness"; (vii) securities or other Investments received in settlement of
debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement
of any Lien, or in satisfaction of judgments, including in connection with any
bankruptcy proceeding or other reorganization of another Person; (viii)
Investments in existence or made pursuant to legally binding written commitments
in existence on the Issue Date; (ix) pledges or deposits with respect to leases
or utilities, provided to third parties in the ordinary course of business; (x)
bonds secured by assets leased to and operated by the Company or any Restricted
Subsidiary that were issued in connection with the financing of such assets so
long as the Company or any Restricted Subsidiary may obtain title to such assets
at any time by paying a nominal fee, canceling such bonds and terminating the
transaction; (xi) Investments in a joint venture or similar entity that is not a
Restricted Subsidiary, made in the ordinary course of business; (xii)
Investments in customers or suppliers, not to exceed $10 million in the
aggregate outstanding at any time; and (xiii) Investments in an amount not
exceeding $50 million in the aggregate outstanding at any time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"Principal Property" means any real property of the Company or any of its
Subsidiaries, and any equipment located at or comprising a part of any such
property, having a net book value, as of the date of determination, in excess of
the greater of $50 million and 10% of Consolidated Net Tangible Assets of the
Company; provided, however, that Principal Property shall not include Equipment
Held for Resale.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Company or any Restricted Subsidiary at any time after the Issue Date;
provided that (i) any security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Security Agreement") shall be entered into within 180 days
after the purchase or substantial completion of the construction of such assets
and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii) (a) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Security Agreement is entered into exceed 100% of the purchase price
to the Company or any Restricted Subsidiary of the assets subject thereto or (b)
the Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"Rating Agency" means each of Standard & Poor's Ratings Services, Duff &
Phelps Credit Rating Co. and Moody's Investors Service, Inc. (or, in any case,
if such Person ceases to rate the Notes for reasons outside the control of the
Company, any other "nationally recognized statistical rating organization"
(within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act) selected
by the Company as a replacement Rating Agency).
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"Reference Treasury Dealer" means each of Merrill Lynch & Co., Salomon
Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston Corporation,
Morgan Stanley & Co. Incorporated, BancAmerica Robertson Stephens, First Chicago
Capital Markets, Inc. and Goldman, Sachs & Co. and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer.
"Refinancing Indebtedness" means any Indebtedness incurred in connection
with or given in exchange for the renewal, extension, substitution, refunding,
defeasance, refinancing, repayment or replacement (a "refinancing") of any
Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii) of the
definition of "Permitted Indebtedness," any Capital Lease Obligations described
in clause (v) of the definition of "Permitted Indebtedness" or any Indebtedness
permitted to be incurred pursuant to the first sentence of the covenant
described in "-- Restrictive Covenants -- Limitation on Incurrence of
Indebtedness"; provided, however, that (a) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount (or accrued
amount, if less) of the Indebtedness so renewed, extended, substituted,
refunded, defeased, refinanced or replaced ("refinanced"), plus the reasonable
fees, underwriting discounts, premiums and other costs and expenses incurred in
connection therewith, (b) such Refinancing Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being refinanced; (c) if the Indebtedness being
refinanced is subordinated in right of payment to any Notes, such Refinancing
Indebtedness shall be at least as subordinated in right of payment to the Notes
as the Indebtedness being refinanced; and (d) the obligor on such Refinancing
Indebtedness shall be the obligor on the Indebtedness being refinanced, the
Company, or (in the case of Indebtedness of a Foreign Subsidiary that is being
refinanced) any Foreign Subsidiary; it being understood that any Indebtedness
incurred pursuant to clauses (i), (ii) or (v) of the definition of "Permitted
Indebtedness" that is so refinanced shall be deemed to remain outstanding for
the purpose of determining compliance with any limitations or restrictions set
forth in such clauses.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means (i) any dividend or other distribution declared
or paid on any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in Capital
Stock (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or dividends or distributions payable to the Company or any
Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or
distributions has any stockholder other than the Company or another Restricted
Subsidiary, to such stockholder on no more than a pro rata basis, measured by
value)); (ii) any payment to purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any Restricted Subsidiary (other than
any Capital Stock owned by the Company or any Restricted Subsidiary, or from all
holders of such Capital Stock of a Restricted Subsidiary on a pro rata basis);
(iii) any payment to purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is subordinated in right of payment to any Notes
(other than a purchase, redemption, defeasance or other acquisition or
retirement for value in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of such acquisition or retirement); or (iv) any Restricted Investment.
"Restricted Payment Amount" means the sum of:
(a) an amount equal to 50% of the Company's aggregate cumulative
Consolidated Net Income accrued on a cumulative basis from the Issue Date
(or, if such aggregate cumulative Consolidated Net Income for such period
shall be a deficit, minus 100% of such deficit), plus
(b) the aggregate amount of all net cash proceeds received since the
Issue Date by the Company (1) as capital contributions in the form of
common equity to the Company after the Issue Date, (2) from the issuance
and sale (other than to a Restricted Subsidiary) of its Capital Stock
(other than Disqualified Stock), (3) from the issuance to a Person who is
not a Subsidiary of the Company of any options, warrants or other rights to
acquire Capital Stock of the Company (in each case, exclusive of any
Disqualified Stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of any Notes) and (4) from the issuance and
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sale by the Company or any Restricted Subsidiary after the Issue Date of
Disqualified Stock or debt securities that have been converted into or
exchanged for Capital Stock of the Company (other than Disqualified Stock),
plus the amount of cash received by the Company or any Restricted
Subsidiary upon such conversion or exchange, in each case to the extent
that such proceeds are not used to redeem, repurchase, retire or otherwise
acquire Capital Stock or any Indebtedness of the Company or any Restricted
Subsidiary, pursuant to clause (ii) or (iii) of the second paragraph of the
covenant described under "-- Limitation on Restricted Payments," plus
(c) the amount of the net reduction in Investments by the Company in
Unrestricted Subsidiaries resulting from (x) the payment of cash dividends
or the repayment in cash of the principal of loans or the cash return on
any Investment, in each case to the extent received by the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or
extinguishment of any Guarantee of Indebtedness of any Unrestricted
Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries of the Company (valued as provided in the
definition of "Investment"), such aggregate amount of the net reduction in
Investments not to exceed in the case of any Unrestricted Subsidiaries the
amount of Restricted Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted Payments, plus
(d) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for cash,
the amount of cash proceeds received with respect to such Restricted
Investment, net of taxes and the cost of disposition, not to exceed the
amount of Restricted Investments made after the Issue Date.
"Restricted Subsidiary" means any Subsidiary of the Company which owns or
leases a Principal Property; provided that, prior to an Investment Grade Rating
Date, "Restricted Subsidiary" means any Subsidiary of the Company (other than an
Unrestricted Subsidiary) for all purposes other than as used in the covenants
described in "-- Restrictive Covenants -- Limitation on Liens and
"-- Restrictive Covenants -- Limitation on Sale and Leaseback Transactions."
"Stated Maturity" means, when used with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the purchase of
such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" of a Person means a Person more than 50% of the outstanding
voting stock or other Equity Interests of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting" stock or other Equity Interests means stock or other Equity Interests
which ordinarily has voting power for the election of directors, trustees or
similar managers, whether at all times or only so long as no senior class of
stock or other Equity Interests has such voting power by reason of any
contingency.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors as provided below) and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate (a "Designation")
any Subsidiary of the Company (other than a Subsidiary that owns any Capital
Stock of, or owns, or holds any Lien on, any property of the Company or any
other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be
so designated) to be an Unrestricted Subsidiary if: (a) no Default shall have
occurred and be continuing at the time of or after giving effect to such
Designation; (b) the Company could make an Investment (other than a Permitted
Investment) at the time of such Designation (assuming the effectiveness thereof)
in an amount (the "Designation Amount") equal to the Fair Market Value of the
Capital Stock of such Subsidiary on such date; and (c) the Company could incur
$1.00 of additional Indebtedness under the first sentence of the covenant
described in "-- Restrictive Covenants -- Limitation on Indebtedness" at the
time of such Designation (assuming the effectiveness thereof). The Board of
Directors may revoke (a "Revocation") any Designation of a Subsidiary as an
Unrestricted Subsidiary if: (a) no Default shall have
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occurred and be continuing at the time of and after giving effect to such
Revocation; (b) the Company could incur $1.00 of additional Indebtedness under
the first sentence of the covenant described in "-- Restrictive
Covenants -- Limitation on Indebtedness" at the time of such Revocation
(assuming the effectiveness thereof); and (c) all Liens and Indebtedness of such
Unrestricted Subsidiary outstanding immediately following such Revocation would,
if incurred at such time, have been permitted to be incurred under the
Indenture. Any Designation or Revocation must be evidenced by a Board Resolution
certifying compliance with the foregoing provisions.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described in "-- Restrictive Covenants -- Limitation on Restricted Payments" for
all purposes of the Indenture in the Designation Amount. The Company shall not,
and shall not permit any Restricted Subsidiary to, at any time (i) provide a
Guarantee of any Indebtedness of any Unrestricted Subsidiary, (ii) be directly
or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or
(iii) be directly or indirectly liable for any Indebtedness which provides that
the holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except to the extent
permitted under the covenant described in "-- Restrictive
Covenants -- Limitation on Restricted Payments."
"Voting Stock" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Notes are initially issued in the form of a
global note (the "Global Note"). The Global Note is deposited with, or on behalf
of, DTC and registered in its name or in the name of Cede & Co., as its nominee.
Notwithstanding the foregoing, Notes (i) originally issued to or
transferred to institutional "accredited investors," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, who are not qualified
institutional buyers or to any other persons who are not qualified institutional
buyers or (ii) held by qualified institutional buyers who elect to take physical
delivery of their certificates instead of holding their interest through the
Global Note (and which are thus ineligible to trade through DTC) (collectively
referred to herein as "Non-Global Purchasers") will be issued, in registered
form, without interest coupons as "Certificated Notes." Upon the transfer to a
qualified institutional buyer of such Certificated Notes initially issued to a
Non-Global Purchaser, such Certificated Notes will, unless the transferee
requests otherwise or the Global Note has previously been exchanged in whole for
Certificated Securities, be exchanged for an interest in the Global Note
representing the principal amount of Notes being transferred.
DTC has advised the Company that it is (i) a limited-purpose trust company
organized under the laws of the State of New York, (ii) is a member of the
Federal Reserve System, (iii) a "clearing operation" within the meaning of the
Uniform Commercial Code, as amended, and (iv) a "Clearing Agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its participating organizations (collectively, the "Participants" or the
"DTC's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in
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accounts of its Participants, thereby eliminating the need for physical movement
of certificates. DTC's Participants include securities brokers and dealers
(including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "DTC's Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. Qualified institutional buyers may elect to hold
Notes purchased by them through DTC. Qualified institutional buyers who are not
Participants may beneficially own securities held by or on behalf of DTC only
through Participants or Indirect Participants. Persons that are not qualified
institutional buyers may not hold Notes through DTC.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC will credit the accounts of Participants
designated by the Initial Purchasers with an interest in the Global Note and
(ii) ownership of the Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the interests of DTC's Participants), DTC's Participants and DTC's Indirect
Participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own and that security
interests in negotiable instruments can only be perfected by delivery of
certificates representing the instruments. Consequently, the ability to transfer
Notes or to pledge the Notes as collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee will be considered the sole owner or holder of
the Notes represented by the Global Note for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in the Global Note will
not be entitled to have Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
Certificated Notes, and will not be considered the owners or holders thereof
under the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. As a result,
the ability of a person having a beneficial interest in Notes represented by the
Global Note to pledge such interest to persons or entities that do not
participate in DTC's system, or to otherwise take actions with respect to such
interest, may be affected by the lack of a physical certificate evidencing such
interest.
Accordingly, each qualified institutional buyer owing a beneficial interest
in the Global Note must rely on the procedures of DTC and, if such qualified
institutional buyer is not a Participant or an Indirect Participant, on the
procedures of the Participant through which such qualified institutional buyer
owns its interest, to exercise any rights of a holder under the Indenture or the
Global Note. The Company understands that under existing industry practice, in
the event the Company requests any action of holders of Notes or a qualified
institutional buyer that is 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 the qualified institutional buyers owning
through such Participants to take such action or would otherwise act upon the
instructions of such qualified institutional buyers. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
of DTC or for maintaining, supervising or reviewing any records of DTC relating
to the Notes.
Payments with respect to the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes represented by the Global Note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the Trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the Global Note representing such Notes
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names the Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments and for any and all purposes whatsoever. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of DTC to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the Global
Note as shown on the records of DTC. Payments by DTC's Participants and DTC's
Indirect Participants to the beneficial owners of Exchange Notes will be
governed by standing instructions and customary practice and will be the
responsibility of DTC's Participants or DTC's Indirect Participants.
88
<PAGE> 94
Neither the Company nor the Trustee will be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts of the Notes to be issued).
The Indenture requires that payments in respect of the Notes having a
principal amount in excess of $1.0 million (including principal, premium, if
any, interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
represented by the Global Note are expected to be eligible to trade in the
PORTAL market and to trade in DTC's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such Exchange Notes will,
therefore, be required by DTC to be settled in immediately available funds.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Certificated Notes. Upon any such issuance, the Trustee is required
to register such Certificated Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). All such
Certificated Notes evidencing Notes will be subject to the legend requirements
applicable to the Notes. In addition, if (i) the Company notifies the Trustee in
writing that DTC is no longer willing or able to act as a depository and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in definitive form under the Indenture, then, upon
surrender by DTC of the Global Note, Certificated Notes will be issued to each
person that DTC identifies as being the beneficial owner of the Notes
represented by the Global Note.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources the Company believes to be reliable. The Company
will have no responsibility for the performance by DTC or its Participants of
their respective obligations as described hereunder or under the rules and
procedures governing their respective operations.
89
<PAGE> 95
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
In the opinion of Latham & Watkins, counsel to the Company, the following
are the material federal income tax consequences expected to result to holders
whose Initial Notes are exchanged for Exchange Notes in the Exchange Offer. This
discussion is based upon current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary view,
and no ruling from the Service has been or will be sought with respect to the
Exchange Offer. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below. EACH HOLDER OF INITIAL NOTES SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING INITIAL NOTES FOR EXCHANGE
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
LAWS.
The exchange of Initial Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Initial Notes. As
a result, no material federal income tax consequences will result to holders
exchanging Initial Notes for Exchange Notes.
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 such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resale of Exchange Notes received in
exchange for Initial Notes where such Initial Notes were acquired as a result of
market-making activities or other trading activities.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
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 such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
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 such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such 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.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Initial Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act.
90
<PAGE> 96
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (of which this Prospectus is a part) (together with all amendments thereto,
the "Registration Statement") under the Securities Act, with respect to the
Exchange Notes offered hereby. This Prospectus does not and any Prospectus
Supplement will not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. Statements contained in this Prospectus and
in any Prospectus Supplement as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Notes, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto which may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. The Registration Statement, the exhibits and
schedules forming a part thereof and the reports, proxy statements and other
information filed by the Company with the Commission in accordance with the
Exchange Act can be inspected and copied at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Company's common stock is listed on the New York Stock
Exchange and similar information concerning the Company can be inspected and
copied at the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are incorporated by reference herein: (i) Annual Report on Form 10-K for the
year ended December 31, 1997; (ii) Proxy Statement dated February 26, 1998
(except for the statements made under the headings "Performance Graph" and
"Comparison of Five Year Cumulative Return" which are not incorporated herein by
reference); and (iii) Current Reports on Form 8-K dated February 18, 1998 and
February 26, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus or any Prospectus Supplement to the
extent that a statement contained herein, or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Beckman Coulter, Inc., 4300 North Harbor Boulevard, Fullerton, California 92835,
Attention: Office of Investor Relations, telephone (714) 773-7620.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Offer will be passed
upon for the Company by Latham & Watkins, Los Angeles, California.
91
<PAGE> 97
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of Beckman as of December 31, 1997
and 1996 and for the years ended December 31, 1997, 1996 and 1995 included in
this Prospectus have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, to the extent and for the periods indicated in
their report thereon. Such financial statements have been included in reliance
upon the report of KPMG Peat Marwick LLP.
The consolidated statements of operations, stockholders' equity and cash
flows of Coulter for the seven months ended October 31, 1997 included in this
Prospectus have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, to the extent and for the periods indicated in their report
thereon. Such financial statements have been included in reliance upon the
report of KPMG Peat Marwick LLP.
The consolidated financial statements of Coulter as of March 31, 1997 and
1996 and for the years ended March 31, 1997, 1996 and 1995 included in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report with respect thereto, and are included in
reliance upon the report of Arthur Andersen LLP.
92
<PAGE> 98
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BECKMAN COULTER, INC. AND SUBSIDIARIES:
Independent Auditors' Report (KPMG Peat Marwick LLP)........ F-2
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1996 and 1995.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Quarterly Information (Unaudited)........................... F-35
COULTER CORPORATION AND SUBSIDIARIES:
Independent Auditors' Report (KPMG Peat Marwick LLP)........ F-36
Report of Independent Certified Public Accountants (Arthur
Andersen LLP)............................................. F-37
Consolidated Balance Sheets as of March 31, 1997 and 1996... F-38
Consolidated Statements of Operations for the seven months
ended October 31, 1997 and the years ended March 31, 1997,
1996 and 1995............................................. F-39
Consolidated Statements of Stockholders' Equity for the
seven months ended October 31, 1997 and the years ended
March 31, 1997, 1996 and 1995............................. F-40
Consolidated Statements of Cash Flows for the seven months
ended October 31, 1997 and the years ended March 31, 1997,
1996 and 1995............................................. F-41
Notes to Consolidated Financial Statements.................. F-42
Unaudited Condensed Consolidated Statements of Operations
for the six months ended September 30, 1997 and 1996...... F-67
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended September 30, 1997 and 1996...... F-68
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-69
</TABLE>
F-1
<PAGE> 99
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Beckman Coulter, Inc.:
We have audited the accompanying consolidated balance sheets of Beckman
Coulter, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Beckman
Coulter, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Orange County, California
January 23, 1998, except as to note 16,
which is as of March 4, 1998
F-2
<PAGE> 100
BECKMAN COULTER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- ------
<S> <C> <C>
Current assets
Cash and equivalents...................................... $ 33.1 $ 34.6
Short-term investments.................................... 0.4 8.1
Trade receivables and other............................... 524.6 309.5
Inventories............................................... 332.3 190.4
Deferred income taxes..................................... 53.0 21.4
Other current assets...................................... 33.3 15.4
-------- ------
Total current assets................................... 976.7 579.4
Property, plant and equipment, net.......................... 410.9 263.5
Intangibles, less accumulated amortization of $10.6 in 1997
and $4.2 in 1996.......................................... 444.9 34.1
Goodwill, less accumulated amortization of $6.0 in 1997 and
$3.1 in 1996.............................................. 402.8 13.7
Deferred income taxes....................................... -- 50.8
Other assets................................................ 95.7 18.6
-------- ------
Total assets........................................... $2,331.0 $960.1
======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable............................................. $ 49.0 $ 15.1
Current maturities of long-term debt...................... 19.9 4.3
Accounts payable.......................................... 96.3 45.6
Accrued compensation...................................... 84.6 47.4
Other accrued expenses.................................... 575.5 115.2
Income taxes.............................................. 69.6 51.7
-------- ------
Total current liabilities.............................. 894.9 279.3
Long-term debt, less current maturities..................... 1,181.3 176.6
Deferred income taxes....................................... 40.3 --
Other liabilities........................................... 132.7 105.3
-------- ------
Total liabilities...................................... 2,249.2 561.2
Commitments and contingencies (Note 12)
Stockholders' equity
Preferred stock, $0.10 par value; authorized 10.0 shares;
none issued............................................ -- --
Common stock, $0.10 par value; authorized 75.0 shares;
shares issued 29.1 at 1997 and 1996; shares outstanding
27.6 at 1997 and 28.0 at 1996.......................... 2.9 2.9
Additional paid-in capital................................ 126.6 128.9
Foreign currency translation adjustment................... (13.8) 3.9
Retained earnings......................................... 19.0 300.0
Treasury stock, at cost................................... (52.9) (36.8)
-------- ------
Total stockholders' equity............................. 81.8 398.9
-------- ------
Total liabilities and stockholders' equity............. $2,331.0 $960.1
======== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 101
BECKMAN COULTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Sales...................................................... $ 1,198.0 $ 1,028.0 $ 930.1
Operating costs and expenses
Cost of sales............................................ 609.7 477.8 427.2
Marketing, general and administrative.................... 360.3 319.3 300.4
Research and development................................. 123.6 108.4 91.7
In-process research and development...................... 282.0 -- --
Restructuring charge..................................... 59.4 -- 27.7
--------- --------- -------
1,435.0 905.5 847.0
--------- --------- -------
Operating (loss) income.................................... (237.0) 122.5 83.1
Nonoperating expense:
Interest income.......................................... (6.1) (5.8) (5.3)
Interest expense......................................... 29.4 18.1 13.4
Other, net............................................... (8.4) (1.3) 2.6
--------- --------- -------
14.9 11.0 10.7
--------- --------- -------
(Loss) earnings before income taxes........................ (251.9) 111.5 72.4
Income taxes............................................... 12.5 36.8 23.5
--------- --------- -------
Net (loss) earnings........................................ $ (264.4) $ 74.7 $ 48.9
========= ========= =======
Basic (loss) earnings per share............................ $ (9.58) $ 2.66 $ 1.74
========= ========= =======
Weighted average number of shares outstanding.............. 27.6 28.0 28.1
========= ========= =======
Diluted (loss) earnings per share.......................... $ (9.58) $ 2.58 $ 1.70
========= ========= =======
Weighted average number of shares outstanding.............. 27.6 28.9 28.8
========= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 102
BECKMAN COULTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY MINIMUM
COMMON PAID-IN TRANSLATION RETAINED PENSION TREASURY
STOCK CAPITAL ADJUSTMENT EARNINGS LIABILITY STOCK TOTAL
------ ---------- ----------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994......... $2.9 $130.0 $ 8.6 $203.4 -- $(27.9) $ 317.0
Net earnings........................ 48.9 48.9
Foreign currency translation
adjustments....................... (0.2) (0.2)
Dividends to stockholders, $0.44 per
share............................. (12.3) (12.3)
Purchases of treasury stock......... (13.3) (13.3)
Vesting of restricted stock......... 0.1 0.1
Employee stock purchases............ (1.1) 18.7 17.6
Minimum pension liability........... (9.9) (9.9)
---- ------ ------ ------ ----- ------ -------
Balances, December 31, 1995......... $2.9 $129.0 $ 8.4 $240.0 $(9.9) $(22.5) $ 347.9
Net earnings........................ 74.7 74.7
Foreign currency translation
adjustments....................... (4.5) (4.5)
Dividends to stockholders, $0.52 per
share............................. (14.7) (14.7)
Purchases of treasury stock......... (35.9) (35.9)
Employee stock purchases............ (0.1) 21.6 21.5
Minimum pension liability........... 9.9 9.9
---- ------ ------ ------ ----- ------ -------
Balances, December 31, 1996......... $2.9 $128.9 $ 3.9 $300.0 $ -- $(36.8) $ 398.9
Net (loss).......................... (264.4) (264.4)
Foreign currency translation
adjustments....................... (17.7) (17.7)
Dividends to stockholders, $0.60 per
share............................. (16.6) (16.6)
Purchases of treasury stock......... (43.7) (43.7)
Employee stock purchases............ (2.3) 27.6 25.3
---- ------ ------ ------ ----- ------ -------
Balances, December 31, 1997......... $2.9 $126.6 $(13.8) $ 19.0 $ -- $(52.9) $ 81.8
==== ====== ====== ====== ===== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 103
BECKMAN COULTER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net (loss) earnings......................................... $ (264.4) $ 74.7 $ 48.9
Adjustments to reconcile net (loss) earnings to net cash
provided by operating activities
Depreciation and amortization............................. 109.1 87.8 79.1
Net deferred income taxes................................. (5.1) 11.3 10.2
Write-off of acquired in-process research and
development............................................ 282.0 -- --
Proceeds from sale of sales-type lease receivables........ 35.7 -- --
Changes in assets and liabilities, net of acquisitions
Trade receivables and other............................... (53.1) (26.1) (23.7)
Inventories............................................... 18.2 (26.4) (15.7)
Accounts payable and accrued expenses..................... (3.4) 30.7 0.7
Accrued restructuring costs............................... 44.4 (10.6) (12.9)
Accrued income taxes...................................... 1.0 7.0 (8.8)
Other..................................................... (26.6) (9.3) (17.6)
-------- ------- -------
Net cash provided by operating activities.............. 137.8 139.1 60.2
-------- ------- -------
Cash Flows from Investing Activities
Additions to property, plant and equipment................ (100.9) (110.5) (103.2)
Net disposals of property, plant and equipment............ 18.4 18.7 13.2
Sales (purchases) of short-term investments............... 7.7 0.2 (7.5)
Proceeds from sale-leaseback transaction.................. 39.6 -- --
Investments and acquisitions.............................. (893.9) (23.0) (15.5)
-------- ------- -------
Net cash used by investing activities.................. (929.1) (114.6) (113.0)
-------- ------- -------
Cash Flows from Financing Activities
Dividends to stockholders................................. (16.6) (14.7) (12.3)
Proceeds from issuance of stock........................... 23.1 21.5 17.6
Purchases of treasury stock............................... (43.7) (35.9) (13.3)
Notes payable borrowings (reductions)..................... 11.7 (2.4) 2.9
Long-term debt borrowings................................. 1,164.2 128.3 43.4
Long-term debt reductions................................. (348.1) (113.0) (3.5)
-------- ------- -------
Net cash provided (used) by financing activities....... 790.6 (16.2) 34.8
-------- ------- -------
Effect of exchange rates on cash and equivalents............ (0.8) 0.1 --
-------- ------- -------
(Decrease) increase in cash and equivalents................. (1.5) 8.4 (18.0)
Cash and equivalents -- beginning of year................... 34.6 26.2 44.2
-------- ------- -------
Cash and equivalents -- end of year......................... $ 33.1 $ 34.6 $ 26.2
======== ======= =======
Supplemental Disclosures of Cash Flow Information
Cash payments for income taxes............................ $ 12.9 $ 19.2 $ 22.0
Cash payments for interest................................ 18.7 18.3 12.0
Noncash Investing and Financing Activities
Conversion of notes receivable............................ -- 8.1 --
Minimum pension liability................................. -- (9.9) 9.9
Purchase of equipment under capital lease obligation...... 9.8 6.9 6.8
Issuance of restricted stock as employee compensation..... 2.2 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 104
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Beckman
Coulter, Inc., formerly known as Beckman Instruments, Inc. ("Beckman"), and its
wholly owned subsidiaries. The consolidated entity is referred to as the Company
in the accompanying consolidated financial statements. All significant
transactions among the consolidated entities have been eliminated from the
consolidated financial statements. The accounts of many of the Company's
non-U.S. subsidiaries are included on the basis of their fiscal years ended
November 30.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments approximate
their fair value at December 31, 1997 and 1996. Market value of cash and cash
equivalents, trade and other receivables, other current assets, investments,
notes payable, accounts payable, and amounts included in other accrued expenses
meeting the definition of a financial instrument are based upon management
estimates. Market values of the Company's debt and derivative instruments are
determined by quotes from financial institutions.
FOREIGN CURRENCY TRANSLATION
Non-U.S. assets and liabilities are translated into U.S. dollars using
year-end exchange rates. Operating results are translated at exchange rates
prevailing during the year. The resulting translation adjustments are
accumulated as a separate component of stockholders' equity. Gains and losses
resulting from foreign currency hedging transactions and translation adjustments
relating to foreign entities deemed to be operating in U.S. dollar functional
currency or in highly inflationary economies are included in the Consolidated
Statements of Operations.
DERIVATIVES
The Company utilizes derivative financial instruments to hedge foreign
currency and interest rate market exposures of underlying assets, liabilities
and other obligations and not for speculative or trading purposes. Gains and
losses on currency forward contracts, options and swaps that are designated as
hedges of existing transactions are recognized in income in the same period as
losses and gains on the underlying transactions are recognized and generally
offset. Gains and losses on currency forward contracts and options that are
designated as hedges of anticipated transactions for which a firm commitment has
been attained are deferred and recognized in income in the same period that the
underlying transactions are settled. Gains and losses on any instruments not
meeting the above criteria would be recognized in income in the current period.
Income or expense on interest rate swaps is accrued as an adjustment to the
yield of the related debt that they hedge.
STOCK-BASED COMPENSATION
The Company implemented Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123) in 1996. As permitted
by SFAS 123, the Company continues to
F-7
<PAGE> 105
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
follow the guidance of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." Consequently, compensation related to stock
options is the difference between the grant price and the fair market value of
the underlying common shares at the grant date. Generally, the Company issues
options to employees with a grant price equal to the fair value of the Company's
common stock. Accordingly, no compensation expense has been recognized on the
Company's stock option or stock purchase plans. The Company discloses in Note 10
"Employee Benefits" the effect on earnings if compensation costs were recorded
at the estimated fair value of the stock options granted, as prescribed by SFAS
123.
CASH AND EQUIVALENTS
Cash and equivalents include cash in banks, time deposits and investments
having maturities of three months or less from the date of acquisition.
SHORT-TERM INVESTMENTS
Short-term investments are principally comprised of investments with final
maturities in excess of three months but less than one year from the date of
acquisition.
INVESTMENTS
The Company periodically makes investments in unaffiliated companies
through debt and equity securities. The Company's investments are considered
available-for-sale and carried at current fair value with unrealized gains or
losses reported as a separate component of stockholders' equity, if necessary.
INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Land, buildings and machinery and equipment are carried at cost. The cost
of additions and improvements are capitalized, while maintenance and repairs are
expensed as incurred. Depreciation is computed generally on the straight-line
basis over the estimated useful lives of the related assets. Buildings are
depreciated over 20 to 40 years, machinery and equipment over 3 to 10 years and
instruments subject to lease over the lease terms but not in excess of 7 years.
Leasehold improvements are amortized over the lesser of the life of the asset or
the term of the lease but not in excess of 20 years.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of the purchase price of acquired companies
over the estimated fair value of the tangible and intangible net assets
acquired. Goodwill is amortized on a straight line basis over 40 years. Other
intangibles consist primarily of patents, trademarks and customer base arising
from business combinations. Intangibles are amortized on a straight line basis
over periods ranging from 15 to 30 years.
ACCOUNTING FOR LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (SFAS 121) in 1996. SFAS 121 establishes accounting standards
for the impairment of long-lived assets to be reviewed whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. In addition, SFAS 121 requires that certain long-lived assets be
reported at the lower of carrying value or the fair
F-8
<PAGE> 106
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
value less costs to sell. Adopting SFAS 121 had no material impact on the
Company's results of operations and financial position for 1997 and 1996.
ENVIRONMENTAL EXPENDITURES
The Company accrues for environmental expenses resulting from existing
conditions that relate to operations when the costs are probable and reasonable
to estimate.
REVENUE RECOGNITION
In general, revenue is recognized when a product is shipped. When a
customer enters into an operating-type lease agreement, revenue is recognized
over the life of the lease. Under a sales-type lease agreement, revenue is
recognized at the time of shipment with interest income recognized over the life
of the lease. Service revenues are recognized ratably over the life of the
service agreement or as service is performed, if not under contract.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
In-process research and development is charged to operations in the period
acquired.
OTHER NONOPERATING INCOME AND EXPENSES
Other nonoperating income and expenses for the Company are generally
comprised of five primary items: (i) interest expense, (ii) interest income,
(iii) foreign exchange gains or losses, (iv) investments that are non-core or
are accounted for as a minority interest and (v) other nonoperating gains or
losses. Interest income typically includes income form sales-type leases and
interest on cash equivalents and other investments. Foreign exchange gains or
losses are primarily the result of the Company's hedging activities (net of
revaluation) and are recorded net of premiums paid. Other nonoperating gains and
losses are most frequently the result of one-time items such as asset sales or
other items.
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.
EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128) in 1997. SFAS 128 simplifies the computation of
earnings per share ("EPS") previously required in Accounting Principles Board
(APB) Opinion No. 15, "Earnings Per Share," by replacing primary and fully
diluted EPS with basic and diluted EPS. Under SFAS 128, basic EPS is calculated
by dividing net earnings (loss) by the weighted-average common shares
outstanding during the period. Diluted EPS reflects the potential dilution to
basic EPS that could occur upon conversion or exercise of securities, options,
or other such items, to common shares using the treasury stock method based upon
the weighted-average fair value of the Company's common shares during the
period. SFAS 128 was required to be adopted by the Company in its year-end 1997
Annual Report, and earnings per share for prior periods have been restated in
accordance with SFAS 128. See Note 13 "Earnings Per Share" for computation of
EPS.
F-9
<PAGE> 107
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
RECENT ACCOUNTING DEVELOPMENTS
The Company intends to adopt Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information"(SFAS 131), in 1998. Both standards will require additional
disclosure, but will not have a material effect on the Company's financial
position or results of operations. SFAS 130 establishes standards for the
reporting and display of comprehensive income and is expected to first be
reflected in the Company's first quarter of 1998 interim financial statements.
Components of comprehensive income include items such as net earnings, foreign
currency translation adjustments and changes in value of available-for-sale
securities. SFAS 131 changes the way companies report segment information and
requires segments to be determined and reported based on how management measures
performance and makes decisions about allocating resources. SFAS 131 will first
be reflected in the Company's 1998 Annual Report.
F-10
<PAGE> 108
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform
with the current year presentation.
2. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Trade receivables and other
Trade receivables........................................ $488.5 $295.3
Other receivables........................................ 30.0 20.7
Current portion of lease receivables..................... 23.5 3.1
Less allowance for doubtful receivables.................. (17.4) (9.6)
------ ------
$524.6 $309.5
====== ======
Inventories
Finished products........................................ $206.5 $123.8
Raw materials, parts and assemblies...................... 99.1 53.0
Work in process.......................................... 26.7 13.6
------ ------
$332.3 $190.4
====== ======
Property, plant and equipment, net
Land..................................................... $ 74.1 $ 9.1
Buildings................................................ 240.2 144.1
Machinery and equipment.................................. 382.9 239.1
Instruments subject to lease(a).......................... 205.6 281.6
------ ------
902.8 673.9
Less accumulated depreciation
Building, machinery and equipment........................ (365.4) (236.4)
Instruments subject to lease(a).......................... (126.5) (174.0)
------ ------
$410.9 $263.5
====== ======
Other accrued expenses
Accrued restructuring costs.............................. $ 47.2 $ 2.6
Unrealized service income................................ 63.8 36.9
Insurance................................................ 27.2 23.1
Accrued warranty and installation costs.................. 18.6 4.5
Severance and related costs.............................. 109.6 --
Closure of offices and manufacturing facilities.......... 23.0 --
Change in control payments............................... 36.0 --
Contractual obligations of Coulter to its employees...... 103.0 --
Other.................................................... 147.1 48.1
------ ------
$575.5 $115.2
====== ======
</TABLE>
- ---------------
(a) Includes instruments leased to customers under three to five year cancelable
operating leases.
F-11
<PAGE> 109
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
3. ACQUISITIONS
During 1997, 1996 and 1995, the Company made the following acquisitions,
all of which were accounted for using the purchase method of accounting. The
operating results of these acquired businesses have been included in the
Consolidated Statements of Operations from the dates of acquisition.
On October 31, 1997, the Company acquired all of the outstanding capital
stock of Coulter Corporation for $850.2, net of Coulter's cash on hand of $24.8
at the date of acquisition. Coulter is the leading manufacturer of in-vitro
diagnostics systems for blood cell analysis. The purchase of Coulter was
financed with the net proceeds from a new $1,300.0 credit facility (see Note 6
"Debt").
As a result of the acquisition, $374.4 in goodwill was recorded by the
Company. 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 $282.0 was charged to expense in the
fourth quarter in accordance with generally accepted accounting principles.
Purchase liabilities recorded included approximately $110.0 for severance and
related costs and $23.0 for costs associated with the closure of certain offices
and manufacturing facilities. The Company expects to complete its termination of
certain employees and closure of certain facilities in fiscal 1998. Assumed
liabilities recorded included approximately $103.0 of contractual obligations of
Coulter to its employees, $36.0 of change in control payments and $31.0 of other
assumed liabilities. The Company expects to pay for the above obligations
throughout fiscal 1998. At December 31, 1997 substantially all of the purchase
liabilities and $150.4 of the assumed liabilities remained on the balance sheet.
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.
The Company estimates, based upon current exchange rates, that its cash
funding requirements for the previously mentioned costs associated with the
Coulter acquisition will amount to approximately $180.0 from the consummation of
the Coulter acquisition through the end of 1998, and approximately $50.0 to
$65.0 in each of the following two years. This includes up to $103.0 of sharing
bonus plan payments which will be made to Coulter's employees.
As the Company's 1997 financial statements only include two months of
operations of Coulter, the following selected unaudited pro forma information is
being provided to present a summary of the combined results of Beckman and
Coulter as if the acquisition had occurred as of January 1, 1997 and 1996,
giving effect to purchase accounting adjustments. The pro forma data is for
informational purposes only and may not necessarily reflect the results of
operations of Beckman had Coulter operated as part of the Company for the years
ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
PRO FORMA YEARS ENDED
----------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
Sales...................................................... $1,790.1 $1,722.6
Net earnings............................................... $ 9.0 $ 28.9
Basic earnings per share................................... $ 0.33 $ 1.03
Diluted earnings per share................................. $ 0.31 $ 1.00
</TABLE>
The pro forma amounts reflect the results of operations for Beckman,
Coulter and the following purchase accounting adjustments for the periods
presented:
- Amortization of intangible assets and goodwill based on the purchase
price allocation for each period presented.
- Amortization of debt financing fees and expenses over the term of the new
credit facility.
F-12
<PAGE> 110
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
- The addition of interest expense on debt incurred to finance the
acquisition offset by a reduction of historical interest expense as a
result of the elimination of Coulter's debt.
- Additional cost of sales expense as a result of a step-up in the basis of
inventory.
- Estimated income tax effect on the pro forma adjustments.
The pro forma statements do not include the $282.0 write-off of in-process
research and development and the $59.4 accrued restructuring costs, as they are
non-recurring charges. These charges are included in the Consolidated Statements
of Operations of the Company for 1997. The pro forma diluted net earnings per
share is based on the weighted average number of common shares and dilutive
common share equivalents of Beckman during 1997 and 1996.
In April 1997 the Company acquired the Access immunoassay product line and
related manufacturing facility from Sanofi Diagnostics Pasteur, Inc. ("Sanofi").
The acquisition also established an ongoing alliance in immunochemistry between
the Company and Sanofi. The Access product line, together with the earlier
acquisition of Hybritech Incorporated ("Hybritech") and the Company's own
immunochemistry/protein products, create a major presence for the Company in the
field of immunochemistry.
In December 1996 the Company acquired the assets and assumed the
liabilities of the laboratory robotics division of Sagian Inc. of Indianapolis,
Indiana. By combining Sagian's scheduling software and robotics with its own
biorobotics systems, the Company enhanced its ability to serve the
pharmaceutical industry's need for high-throughput screening (HTS) of candidate
compounds for new drugs.
In January 1996, the Company acquired the assets and assumed the
liabilities of Hybritech, a San Diego-based life sciences and diagnostic
company. The acquisition expanded the Company's ability to develop and
manufacture high sensitivity immunoassays, including cancer tests.
In May 1995, the Company agreed to acquire Genomyx Corporation of Foster
City, California. Genomyx is a developer and manufacturer of advanced DNA
sequencing products and complements the Company's biotechnology business. The
acquisition was completed on October 21, 1996.
With the exception of Coulter, the purchase prices of the acquisitions and
the effects on consolidated results of operations were not material to the
Company individually or in the aggregate.
4. PROVISION FOR RESTRUCTURING OPERATIONS
1997 RESTRUCTURING:
The Company recorded a restructuring charge of $59.4, $36.4 after taxes or
$1.32 per share, in the fourth quarter of 1997. The work force reductions
anticipated under this plan, some of which occurred prior to year-end total
approximately 500 employees in Europe, Asia and North America in sales, general,
administrative and technical functions and approximately 100 employees in
production related areas. The charge included $37.3 for severance related costs.
The $22.1 provided for facility consolidation and asset related write-offs
included $2.5 for lease termination payments, $12.2 for the write-off of
machinery, equipment and tooling associated with those functions to be
consolidated, and $7.4 for exiting non-core investment activities. These changes
are scheduled to be substantially completed by December 1998. At December 31,
1997, the Company's remaining obligation related to the restructuring charges
was $46.6, which is included in "Other Accrued Expenses."
F-13
<PAGE> 111
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
The following table details the major components of the 1997 restructuring
provision:
<TABLE>
<CAPTION>
FACILITY
CONSOLIDATION
AND ASSET
RELATED
PERSONNEL WRITE-OFFS TOTAL
--------- ------------- -----
<S> <C> <C> <C>
PROVISION
Consolidation of sales, general, administrative and
technical functions....................................... $34.3 $18.2 $52.5
Changes in manufacturing operations......................... 3.0 3.9 6.9
----- ----- -----
Total provision............................................. 37.3 22.1 59.4
----- ----- -----
FISCAL 1997 ACTIVITY
Consolidation of sales, general, administrative and
technical functions....................................... 7.8 5.0 12.8
Changes in manufacturing operations......................... -- -- --
----- ----- -----
Total 1997 activity......................................... 7.8 5.0 12.8
----- ----- -----
BALANCE AT DECEMBER 31, 1997
Consolidation of sales, general, administrative and
technical functions....................................... 26.5 13.2 39.7
Changes in manufacturing operations......................... 3.0 3.9 6.9
----- ----- -----
Balance at December 31, 1997................................ $29.5 $17.1 $46.6
===== ===== =====
</TABLE>
PRIOR YEARS RESTRUCTURING:
The Company also recorded a restructuring charge of approximately $27.7 in
1995. This restructuring charge included costs for facility moves and transition
costs which were anticipated and directly associated with the 1993 restructuring
plan but could not be recognized in establishment of the original restructuring
reserve under generally accepted accounting principles. At December 31, 1997 and
1996, the Company's remaining obligation relating to this restructuring charge
was $0.4 and $2.6, respectively, and is included in "Other Accrued Expenses".
5. SALE OF ASSETS
In December 1997, the Company sold $34.2 of Coulter's sales-type lease
receivables, net of $2.6 of allowances, for cash proceeds of $35.7. Under the
provisions of Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities" (SFAS 125), the transaction was accounted for as a sale and as a
result the related receivables have been excluded from the accompanying
Consolidated Balance Sheet. The sale is subject to certain recourse provisions
and as such the Company established a $1.5 reserve for potential losses.
Also in December 1997, the Company entered into an agreement for the sale
and leaseback of certain instruments which are subject to various three to five
year cancelable operating-type leases to customers. These instruments had a net
book value of $37.0 and were sold for cash proceeds of $39.6. The gain is being
deferred and credited to income, as a rent expense adjustment over the lease
term. Obligations under the operating lease agreement are included in the lease
commitments disclosure in Note 12 "Commitments and Contingencies".
Proceeds from the above transactions were used to reduce outstanding
borrowings under the new $1,300 credit facility (see Note 6 "Debt").
F-14
<PAGE> 112
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
6. DEBT
Notes payable consist primarily of short-term bank borrowings by the
Company's subsidiaries outside the U.S. under local lines of credit. The bank
borrowings are at rates which approximate current market rates; therefore, the
carrying value of the notes approximates the market value. At December 31, 1997
approximately $139.9 of unused short-term lines of credit were available to the
Company's subsidiaries outside the U.S. at various interest rates. Within the
U.S., the Company had available $18.0 in unused committed short-term lines of
credit at market rates. Compensating balances and commitment fees on these lines
of credit are not material and there are no withdrawal restrictions.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
AVERAGE
RATE OF
INTEREST 1997 1996
-------- -------- ------
<S> <C> <C> <C>
Credit Agreement -- Term loan facility.......... 6.75% $ 400.0 $ --
Credit Agreement -- Revolving credit facility... 6.47 600.0 --
Debentures...................................... 7.05 100.0 100.0
Senior notes, unsecured......................... -- -- 50.0
Other long-term debt............................ 6.39 101.2 30.9
-------- ------
1,201.2 180.9
Less current maturities......................... 19.9 4.3
-------- ------
Long-term debt, less current maturities......... $1,181.3 $176.6
======== ======
</TABLE>
In October 1997, in conjunction with the acquisition of Coulter, the
Company cancelled its $150.0 credit agreement and entered into a new credit
agreement (the "Credit Agreement") with a group of financial institutions. The
Credit Agreement provides up to a maximum aggregate amount of $1,300.0 through a
$500.0 senior unsecured term loan facility (the "Term Loan") and an $800.0
senior unsecured revolving credit facility (the "Credit Facility"). Borrowings
under the Credit Agreement generally bear interest at current market rates plus
a margin based upon the Company's senior unsecured debt rating or debt to
earnings ratio, whichever is more favorable to the Company, except in the case
of competitive bid advances (as defined in the Credit Agreement) which may bear
interest at a fixed rate. The Company is accordingly subject to fluctuations in
such interest rates, which could cause its interest expense to increase or
decrease in the future. As a result of the substantial indebtedness incurred in
connection with the Coulter acquisition, the Company's interest expense will be
higher and will have a much greater proportionate impact on net earnings in
comparison to preacquisition periods. The Company must also pay a quarterly
facility fee on the average Credit Facility commitment. In addition,
approximately $6.8 of fees paid to enter the Credit Agreement are being
amortized to interest expense over the term of the Credit Agreement. The Credit
Agreement provides for mandatory prepayment of the Term Loan and Credit Facility
borrowings (and, to the extent provided, reductions in commitments) thereunder
from excess cash flow (as defined in the Credit Agreement), and from proceeds of
certain equity or debt offerings, asset sales and extraordinary receipts. The
Credit Facility is not subject to any scheduled principal amortization.
Beginning in March 2000, the Company will be required to make scheduled
quarterly principal payments of $25.0 on the Term Loan borrowings with a final
maturity in October 2002. The Credit Facility matures on the same date as the
Term Loan. As of the date of this report, the Company's remaining borrowing
availability under the Credit Facility is $200.0. Undrawn amounts under the
Credit Facility will be available to meet future working capital and other
business needs of the Company.
In June 1996, the Company issued $100.0 of debentures bearing an interest
rate of 7.05% per annum due June 1, 2026. Interest is payable semi-annually in
June and December. The debentures were recorded net of discount and issuance
costs of approximately $1.5 which are being amortized to interest expense over
the term
F-15
<PAGE> 113
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
of the debentures. The debentures may be repaid on June 1, 2006 at the option of
the holders of the debentures, at 100% of their principal amount, together with
accrued interest to June 1, 2006, in accordance with the terms of the debenture
agreement. The debentures may be redeemed, in whole or in part, at the option of
the Company at any time after June 1, 2006 at a redemption price equal to the
greater of the principal amount of the debentures or the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the redemption date on a semiannual basis at a comparable treasury
issue rate plus a margin.
The Company had $50.0 senior notes, comprised of Series A $20.0 and Series
B $30.0 notes, that were repaid with borrowings under the Credit Agreement in
October 1997. In addition, the Company paid a premium of approximately $2.0 to
redeem the notes.
Other long-term debt at December 31, 1997 consists principally of $76.6 of
notes used to fund the operations of the Company's international subsidiaries
and notes given as partial consideration for an acquisition. Some of the notes
issued by the Company's international subsidiaries are secured by their assets.
Notes used to fund the Company's international subsidiaries amounted to $22.1 in
1996. Capitalized leases of $24.6 in 1997 and $8.8 in 1996 are also included in
other long-term debt.
Certain of the Company's borrowing agreements contain covenants that the
Company must comply with, for example: minimum net worth, maximum capital
expenditures, a debt to earnings ratio, a minimum interest coverage ratio and a
maximum amount of debt incurrence. At December 31, 1997, the Company was in
compliance with all such covenants.
The aggregate maturities of long-term debt for the five years subsequent to
December 31, 1997 are $19.9 in 1998, $24.6 in 1999, $110.7 in 2000, $107.4 in
2001, $814.6 in 2002 and $124.0 thereafter.
7. DERIVATIVES
The Company manufactures its products principally in the United States, but
generates approximately half of its revenues from sales made outside the U.S. by
its international subsidiaries. Sales generated by the international
subsidiaries generally utilize the subsidiary's local currency, thereby exposing
the Company to the risk of foreign currency fluctuations. Also, as the Company
is a net borrower, it is exposed to the risk of fluctuating interest rates. The
Company utilizes derivative instruments in an effort to mitigate these risks.
The Company's policy is not to speculate in derivative instruments to profit on
the foreign currency exchange or interest rate price fluctuation, nor to enter
trades for which there are no underlying exposures, nor enter into trades to
intentionally increase the underlying exposure. Instruments used as hedges must
be effective at reducing the risk associated with the exposure being hedged and
are designated as a hedge at the inception of the contract. Accordingly, changes
in market values of hedge instruments are highly correlated with changes in
market values of underlying hedged items both at the inception of the hedge and
over the life of the hedge contract.
Various foreign currency contracts are used to hedge firm commitments
denominated in foreign currencies and to mitigate the impact of changes in
foreign currency exchange rates on the Company's operations. The Company uses
forward contracts, purchased option contracts, and complex option contracts,
consisting of purchased and sold options, to hedge transactions with its foreign
customers. The hedge instruments mature at various dates with premiums and
resulting gains or losses recognized at the maturity
F-16
<PAGE> 114
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
date, which approximates to the transaction date. The notional values of
contracts afforded hedge accounting treatment are summarized as follows at
December 31:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Forward Contracts........................................... $66.9 $63.6
Purchased Option Contracts.................................. 45.0 28.5
Complex Option Contracts.................................... 28.5 --
</TABLE>
When the Company uses foreign currency contracts and the dollar strengthens
against foreign currencies, the decline in the value of future foreign currency
cash flows is partially offset by the recognition of gains in the value of the
foreign currency contracts designated as hedges of the transactions. Conversely,
when the dollar weakens, the increase in the value of future foreign currency
cash flows is reduced by (i) the recognition of the net premium paid to acquire
option contracts; (ii) the recognition of any loss in the value of the forward
contracts designated as hedges of the transactions; and (iii) the recognition of
any loss on sold options. Market value gains and losses and premiums on these
contracts are recognized in "Other, net nonoperating expense" when the hedged
transaction is recognized. The net premiums paid for purchased and complex
options are reported in current assets.
The Company held purchased foreign currency call option contracts totaling
$20.4 and $45.9 at December 31, 1997 and 1996, respectively, which did not
qualify for hedge accounting treatment. The call options were purchased to
create synthetic puts when combined with forward and complex option contracts,
thereby cost effectively reducing the Company's risk. The purchased call options
mature at various dates throughout 1998 with resulting gains recognized at
maturity. Premiums paid for these contracts are recognized immediately in
"Other, net nonoperating expense".
The Company also uses foreign currency swap contracts to hedge loans
between subsidiaries. At December 31, 1997, the Company had foreign currency
swap contracts totaling $103.7 expiring at various dates through February 1998.
At December 31, 1996, the Company had foreign currency swap contracts totaling
$89.8. As monetary assets and liabilities are marked to market and recorded in
earnings, foreign currency swap contracts designated as hedges of the monetary
assets and liabilities are also marked to market with the resulting gains and
losses similarly recognized in earnings. Gains and losses on foreign currency
swap contracts are included in "Other, net nonoperating expense" and offset
losses and gains on the hedged monetary assets and liabilities. The carrying
value of foreign currency swap contracts is reported in current assets and
current liabilities.
The Company occasionally uses purchased foreign currency option contracts
to hedge the market risk of a subsidiary's net asset position. At December 31,
1997, the Company had no purchased foreign currency option contracts related to
net asset positions. At December 31, 1996 the Company had $3.5 of purchased
foreign currency option contracts related to net asset positions. Purchased
foreign currency option contracts resulted in favorable foreign currency
translation adjustments of $1.5 and $1.2 at December 31, 1997 and 1996,
respectively. Purchased foreign currency option contracts to hedge the market
risk of a subsidiary's net asset position are recognized in "Foreign currency
translation adjustments" when the hedged transaction is recognized. The foreign
currency translation adjustments are only recognized in "Other, net nonoperating
expense" upon liquidation of the subsidiary.
The Company uses interest rate contracts on certain borrowing transactions
to hedge fluctuating interest rates. Interest rate contracts are intended to be
an integral part of borrowing transactions and, therefore, are not recognized at
fair value. Interest differentials paid or received under these contracts are
recognized as adjustments to the effective yield of the underlying financial
instruments hedged. Interest rate contracts would only be recognized at fair
value if the hedged relationship is terminated. Gains or losses accumulated
prior to termination of the hedged relationship would be amortized as a yield
adjustment over the shorter of the
F-17
<PAGE> 115
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
remaining life of the contract or the remaining period to maturity of the
underlying instrument hedged. If the contract remained outstanding after
termination of the hedged relationship, subsequent changes in market value of
the contract would be recognized in "Interest expense".
In October 1997, the Company entered into interest rate contracts
associated with its $1,100.0 in borrowing arising from the acquisition of
Coulter. Specifically, the Company entered into $500.0 in interest rate swap
agreements in which the Company receives an average floating interest rate equal
to the three-month LIBOR (5.8% at December 31, 1997) and pays an average fixed
interest rate of 6.2%. The Company also entered into $400.0 in treasury rate
lock agreements to hedge the U.S. Treasury Note rate underlying an expected
refinancing. The interest rate swaps and the U.S. Treasury rate locks are
accounted for as hedges.
The Company is exposed to credit risk in the event of non-performance of
the counterparties to its foreign currency and interest rate contracts, which
the Company believes is remote. Nevertheless, the Company monitors its
counterparty credit risk and utilizes netting agreements and internal policies
to mitigate its risk. The disclosed derivatives are indicative of the volume and
types of instruments used throughout the year after giving consideration to the
increase in volume arising from the acquisition of Coulter. The market value of
all derivative instruments amounted to an unrecognized loss of $8.0 at December
31, 1997.
8. INCOME TAXES
The components of (loss) earnings before income taxes were:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ -----
<S> <C> <C> <C>
U.S.............................................. $(304.5) $ 42.5 $21.2
Non-U.S.......................................... 52.6 69.0 51.2
------- ------ -----
$(251.9) $111.5 $72.4
======= ====== =====
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ -----
<S> <C> <C> <C>
Current
U.S. federal................................... $ 5.2 $ 9.6 $ 5.1
Non-U.S........................................ 5.3 12.4 7.7
U.S. state and Puerto Rico..................... 3.5 4.0 (0.6)
------- ------ -----
Total current.................................... 14.0 26.0 12.2
Deferred
U.S. federal................................... 0.7 9.0 4.3
Non-U.S........................................ (2.2) 1.8 7.0
------- ------ -----
Total deferred, net......................... (1.5) 10.8 11.3
------- ------ -----
Total............................................ $ 12.5 $ 36.8 $23.5
======= ====== =====
</TABLE>
F-18
<PAGE> 116
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
The reconciliation of the U.S. federal statutory tax rate to the
consolidated effective tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ -----
<S> <C> <C> <C>
Statutory tax rate............................... (35.0)% 35.0% 35.0%
In-process research and development.............. 39.2 -- --
State taxes, net of U.S. tax benefit............. 0.1 0.4 0.8
Ireland and Puerto Rico income................... (2.0) (6.8) (13.6)
Non-U.S. taxes................................... 0.9 5.0 10.9
Foreign income taxed in the U.S., net of
credits........................................ 1.4 (2.8) 0.4
Other............................................ 0.4 2.2 (1.0)
------- ------ -----
Effective tax rate............................... 5.0% 33.0% 32.5%
======= ====== =====
</TABLE>
Certain income of subsidiaries operating in Puerto Rico and Ireland is
taxed at substantially lower income tax rates than the U.S. federal statutory
tax rate. The lower rates reduced expected income taxes by approximately $5.1 in
1997, $7.6 in 1996, and $9.8 in 1995. Since April 1990, earnings from
manufacturing operations in Ireland are subject to a 10% tax. The lower Puerto
Rico income tax rate expires in July 2003.
The components of the (benefit) provision for deferred income taxes are:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Restructuring costs................................ $(15.7) $ 3.0 $13.2
Compensation....................................... 18.7 -- --
Inventory.......................................... (4.0) -- --
Net operating loss................................. (2.6) -- --
International transactions......................... 2.2 1.3 (4.7)
Accelerated depreciation........................... (0.4) (0.5) 0.4
Accrued expenses................................... (4.2) 3.3 (0.6)
Pension costs...................................... 8.9 6.9 1.7
Postretirement medical costs....................... (1.7) (1.7) (0.5)
Other.............................................. (2.7) (1.5) 1.8
------ ----- -----
Total......................................... $ (1.5) $10.8 $11.3
====== ===== =====
</TABLE>
F-19
<PAGE> 117
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
The tax effect of temporary differences which give rise to significant
portions of deferred tax assets and liabilities consists of the following at
December 31:
<TABLE>
<CAPTION>
1997 1996
------ -----
<S> <C> <C>
Deferred tax assets
Inventories............................................... $ 9.8 $ 2.9
Capitalized expenses...................................... 0.7 1.0
International............................................. 22.7 --
Tax credits............................................... 23.8 --
Purchase and assumed liabilities (see Note 3)............. 87.4 --
Pension costs............................................. -- 2.4
Accrued expenses.......................................... 43.9 19.9
Restructuring costs....................................... 16.3 0.6
Environmental costs....................................... 4.8 5.0
Postretirement benefits................................... 38.6 26.5
Other..................................................... 28.3 32.0
------ -----
276.3 90.3
Less: Valuation allowance................................... (42.4) (14.5)
------ -----
Total deferred tax assets................................... 233.9 75.8
Deferred tax liabilities
Depreciation.............................................. 1.8 2.3
Pension costs............................................. 9.9 --
Intangible assets......................................... 140.4 --
Fixed assets.............................................. 17.5 --
Leases.................................................... 9.9 --
Deferred service contracts................................ 3.2 --
International transactions................................ 6.4 --
Other..................................................... 32.1 1.3
------ -----
Total deferred tax liabilities.............................. 221.2 3.6
------ -----
Net deferred tax asset...................................... $ 12.7 $72.2
====== =====
</TABLE>
Based upon the Company's historical pretax earnings, adjusted for
significant items such as non-recurring charges, management believes it is more
likely than not that the Company will realize the benefit of the existing net
deferred tax asset at December 31, 1997. Management believes the existing net
deductible temporary differences will reverse during periods in which the
Company generates net taxable income. Certain tax planning or other strategies
will be implemented, if necessary, to supplement income from operations to fully
realize recorded tax benefits.
At December 31, 1997 and 1996 the Company recorded a valuation allowance of
$42.4 and $14.5 respectively, for certain deductible temporary differences for
which it is more likely than not that the Company will not receive future
benefits. The change in the valuation allowance was $27.9 and $0 for 1997 and
1996, respectively. The change in the valuation allowance was primarily due to
the acquisition of Coulter.
Non-U.S. withholding taxes and U.S. taxes have not been provided on
approximately $111.4 of unremitted earnings of certain non-U.S. subsidiaries
because such earnings are or will be reinvested in operations or will be offset
by credits for foreign income taxes paid.
F-20
<PAGE> 118
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
All income tax liability issues between the Company and its former parent
SmithKline Beckman have been resolved in accordance with a tax agreement between
the two companies. Such resolution did not have a material effect on the
Company's consolidated financial position or operating results.
9. STOCKHOLDERS' EQUITY
The Company had been authorized, through 1998, to acquire its common stock
to meet the needs of its existing stock-related employee benefit plans. Under
this program, the Company repurchased 1.0 shares of its common stock during 1997
and 1.0 shares during 1996. The Company elected to discontinue this stock
repurchase program in connection with the Coulter acquisition. The Credit
Facility generaly prohibits market repurchase of the Company's stock. Treasury
shares have been, and are expected to continue to be, reissued to satisfy the
Company's obligations under existing stock-related employee benefit plans.
In January 1993 the Company created the Benefit Equity Fund ("BEF"), a
trust for prefunding future stock-related obligations of employee benefit plans.
The BEF does not change these plans or the amounts of stock expected to be
issued for these plans. The BEF is funded by existing shares in treasury as well
as from additional shares the Company purchases on the open market over time.
While shares in the BEF are not considered outstanding for the calculation of
earnings per share, the shares within the BEF are voted by the participants of
the Employee Stock Purchase Plan. At December 31, 1997, 1.4 shares remain in
treasury of which 0.7 are held by the BEF.
10. EMPLOYEE BENEFITS
INCENTIVE COMPENSATION PLANS
In 1988, the Company adopted an Incentive Compensation Plan for its
officers and key employees, which provided for stock-based incentive awards
based upon several factors including Company performance. This plan expired on
December 31, 1990, but options outstanding on that date were not affected by
such termination. Pursuant to this plan, the Company granted options to purchase
approximately 0.8 shares, with an expiration date of ten years from the date of
grant.
The Company has also adopted the Incentive Compensation Plan of 1990. This
1990 plan reserves shares of the Company's common stock for grants of options
and restricted stock. Granted options typically vest over three years and expire
ten years from the date of grant. Subsequent to stockholder approval in 1992,
amendments were adopted to extend the expiration of the plan to 2001 and to
increase each year, commencing January 1, 1993, the number of shares available
under the plan by 1.5% of the number of shares of common stock issued and
outstanding as of the prior December 31. As of January 1, 1998, 0.6 shares
remain available for grant under this plan.
The following is a summary of the Company's option activity, including
weighted average option information (in thousands, except per option
information):
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
EXERCISE EXERCISE EXERCISE
PRICE PER PRICE PER PRICE PER
OPTIONS OPTION OPTIONS OPTION OPTIONS OPTION
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year............................ 2,672 $26.03 2,634 $22.83 2,689 $21.39
Granted........................... 536 $40.49 447 $40.72 418 $29.33
Exercised......................... (302) $26.77 (372) $19.97 (424) $19.57
Canceled.......................... (11) $33.38 (37) $37.12 (49) $27.20
----- ------ ----- ------ ----- ------
Outstanding at end of year........ 2,895 $28.60 2,672 $26.03 2,634 $22.83
===== ===== =====
</TABLE>
F-21
<PAGE> 119
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
OUTSTANDING EXERCISE REMAINING EXERCISABLE EXERCISE
RANGE OF EXERCISE AT DECEMBER 31, PRICE PER CONTRACTUAL LIFE AT DECEMBER 31, PRICE PER
PRICES 1997 OPTION (YEARS) 1997(A) OPTION
----------------- ----------------- --------- ---------------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
$16.50 to $22.50......... 1,049 $19.72 3.5 1,049 $19.72
$26.38 to $28.88......... 585 $26.43 6.2 585 $26.43
$29.25 to $35.13......... 369 $29.34 7.3 249 $29.34
$39.56 to $41.19......... 892 $40.16 8.7 151 $40.88
----- ------ --- ----- ------
$16.50 to $41.19......... 2,895 $28.60 6.1 2,034 $24.40
===== =====
</TABLE>
- ---------------
(a) Options exercisable at December 31, 1996 and 1995 (in thousands) were 1,911
and 1,705, respectively.
The following represents pro forma information as if the Company recorded
compensation cost using the fair value of the issued compensation instrument
(the results may not be indicative of the actual effect on net income in future
years):
<TABLE>
<CAPTION>
1997 1996
------- -----
<S> <C> <C>
Net (loss) earnings as reported.......................... $(264.4) $74.7
Assumed stock compensation cost.......................... 5.7 2.6
------- -----
Pro forma net (loss) earnings............................ $(270.1) $72.1
======= =====
Diluted (loss) earnings per share as reported............ $ (9.58) $2.58
Pro forma diluted (loss) earnings per share.............. $ (9.79) $2.49
</TABLE>
The Company uses the Black-Scholes valuation model for estimating the fair
value of its compensation instruments. The following represents the estimated
fair value of options granted and the assumptions used for calculation:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Weighted average estimated fair value per option
granted................................................ $15.73 $14.56
Average exercise price per option granted................ $40.49 $40.72
Stock volatility......................................... 22.0% 18.0%
Risk-free interest rate.................................. 5.9% 6.7%
Option term -- years..................................... 10.0 10.0
Stock dividend yield..................................... 1.4% 1.5%
</TABLE>
STOCK PURCHASE PLAN
The Company's stock purchase plan allows all U.S. employees and employees
of certain subsidiaries outside of the U.S. to purchase the Company's common
stock at favorable prices and upon favorable terms. Employee purchases are
settled at six month intervals as of June 30 and December 31. The difference
between the purchase price and fair value is not material. Employees purchased
0.2 shares during 1997 and 1.1 shares remain available for use in the plan at
December 31, 1997.
POSTEMPLOYMENT BENEFITS
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS 112). This statement required the Company to recognize an
obligation for postemployment benefits provided to former or inactive employees,
their beneficiaries and covered dependents after employment but before
retirement. Additional accruals for postemployment benefits, subsequent to
adopting SFAS 112, were approximately $0.9 in 1997 and $0.8 in 1996 and 1995.
F-22
<PAGE> 120
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
11. RETIREMENT BENEFITS
PENSION PLANS
Beckman provides pension benefits covering substantially all of its
employees. Coulter provides similar benefits covering foreign employees.
Consolidated pension expense was $8.6 in 1997, $18.3 in 1996, and $13.3 in 1995.
Pension benefits for Beckman's domestic employees are based on age, years
of service and compensation rates. Components of combined pension expense
related to these plans were:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost..................................... $ 10.0 $ 10.8 $ 7.1
Interest cost.................................... 26.6 25.7 24.0
Actual return on plan assets..................... (66.2) (23.2) (23.8)
Net amortization and deferral.................... 35.9 1.0 1.2
------ ------ ------
Total............................................ $ 6.3 $ 14.3 $ 8.5
====== ====== ======
</TABLE>
Beckman's funding policy is to provide currently for accumulated benefits,
subject to federal regulations. Assets of the plans consist principally of
government fixed income securities and corporate stocks and bonds. The funded
status of the pension liabilities and assets and amounts recognized in the
consolidated financial statements with respect to Beckman's domestic plan were:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Vested benefit obligation................................ $ 353.6 $ 312.2
Accumulated benefit obligation........................... 356.2 314.2
Projected compensation increases......................... 51.7 45.0
Projected benefit obligation............................. 407.9 359.2
Plan assets at fair market value......................... (408.9) (314.1)
Projected benefit obligation (less than) in excess of
plan assets............................................ (1.0) 45.1
Unrecognized net (obligations) at transition............. (1.4) (1.9)
Unrecognized net (loss).................................. (15.2) (35.6)
Unrecognized prior service cost.......................... (6.4) (7.3)
(Prepaid) accrued pension cost........................... (24.0) 0.3
Assumptions used in calculations
Expected long-term rate of return...................... 9.8% 9.8%
Discount rate.......................................... 7.0% 7.8%
Average rate of increase in compensation............... 4.3% 4.3%
</TABLE>
Certain subsidiaries of Beckman and Coulter outside the U.S. have separate
pension plan arrangements which include both funded and unfunded plans. Unfunded
foreign pension obligations are recorded as a liability on the Company's
consolidated balance sheets. Pension expense for Beckman plans outside of the
U.S. was $4.5 in 1997, $4.0 in 1996, and $4.8 in 1995. Pension expenses for
Coulter plans was $0.5 for the two month period ended December 31, 1997.
Beckman and Coulter have separate defined contribution plans for their
respective domestic employees. Under each plan, eligible employees may
contribute a portion of their compensation. Employer contributions are primarily
based on a percentage of employee contributions. Additional Coulter
contributions to its plan are based on the age and salary levels of employees.
Beckman contributed $4.8 in 1997, $4.5 in 1996 and $3.6 in 1995. Coulter
contributed $2.0 for the two months ended December 31, 1997. Employees under
both plans
F-23
<PAGE> 121
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
generally become fully vested with respect to employer contributions after three
to five years of qualifying service as defined by each plan.
HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company and its subsidiaries presently provide certain health care and
life insurance benefits for retired U.S. employees and their dependents.
Eligibility for the plan and participant cost sharing is dependent upon the
participant's age at retirement, years of service and retirement date.
The postretirement benefits for both active and retired employees of
Coulter were continued after the acquisition. The amounts below reflect the
assumption of these additional liabilities and costs from November 1, 1997.
The net periodic cost for postretirement health care and life insurance
benefits includes the following:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Service cost........................................ $ 1.2 $ 1.4 $ 1.0
Interest cost....................................... 3.3 3.3 3.7
Net amortization.................................... (1.2) (0.5) (0.7)
----- ----- -----
Total..................................... $ 3.3 $ 4.2 $ 4.0
===== ===== =====
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet in "Other liabilities" at
December 31:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligations
Retirees.................................................. $38.9 $27.2
Fully eligible active plan participants................... 7.1 2.2
Other active plan participants............................ 27.1 17.3
----- -----
Total obligation.................................. 73.1 46.7
Plan assets................................................. -- --
Accumulated postretirement benefit obligation in excess of
plan assets............................................... 73.1 46.7
Unrecognized prior service cost............................. 1.1 --
Unrecognized net gain....................................... 20.8 17.8
----- -----
Accrued postretirement benefit liability.................... $95.0 $64.5
===== =====
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Assumptions used in calculations
Weighted average discount rate.................. 7.2% 7.8% 7.0%
Calculation of obligation, excluding Coulter:
Healthcare cost trend rate...................... 8.0% 8.0% 8.0%
Decreasing to ultimate rate by the year 2004.... 5.5% 5.5% 5.5%
Calculation of Coulter obligation:
Healthcare cost trend rate...................... 7.0% -- --
Decreasing to ultimate rate by year 2002........ 5.0% -- --
</TABLE>
An assumed 1% increase in the healthcare cost trend rate for each year
would have resulted in an increase in the net periodic pension cost by $0.7 in
1997, $0.9 in 1996 and $0.7 in 1995 and in the accumulated post retirement
benefit obligation by $10.9 in 1997 and by $7.0 in 1996.
F-24
<PAGE> 122
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
Employees outside the U.S. generally receive similar benefits from
government-sponsored plans.
12. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign environmental
laws and regulations. Although the Company continues to make expenditures for
environmental protection, it does not anticipate any significant expenditures in
order to comply with such laws and regulations which would have a material
impact on the Company's operations or financial position. The Company believes
that its operations comply in all material respects with applicable federal,
state and local environmental laws and regulations.
In 1983, the Company discovered organic chemicals in the groundwater near a
waste storage pond at its manufacturing facility in Porterville, California.
SmithKline Beckman, the Company's former controlling stockholder, agreed to
indemnify the Company with respect to this matter for any costs incurred in
excess of applicable insurance, eliminating any impact on the Company's earnings
or financial position. SmithKline Beecham p.1.c., the surviving entity of the
1989 merger between SmithKline Beckman and Beecham, assumed the obligation of
SmithKline Beckman in this respect.
In 1987 soil and groundwater contamination was discovered on property in
Irvine, California (the "property") formerly owned by the Company. In 1988 The
Prudential Insurance Company of America ("Prudential"), which purchased the
property from the Company, filed suit against the Company in U.S. District Court
in California for recovery of costs and other alleged damages with respect to
the soil and groundwater contamination. In 1990 the Company entered into an
agreement with Prudential for settlement of the lawsuit and for sharing current
and future costs of investigation, remediation and other claims.
Soil and groundwater remediation of the property have been in process since
1988. During 1994 the County agency overseeing the site soil remediation
formally acknowledged completion of remediation of a major portion of the soil,
although there remain other areas of soil contamination that may require further
remediation. In July 1997 the California Regional Water Quality Control Board,
the agency overseeing the site groundwater remediation, issued a closure letter
for the upper water bearing unit. The Company and Prudential continued to
operate a groundwater treatment system throughout 1997 and expect to continue
its operation in 1998.
Investigations on the property are continuing and there can be no assurance
that further investigation will not reveal additional contamination or result in
additional costs. The Company believes that additional remediation costs, if
any, beyond those already provided for the contamination discovered by the
current investigation will not have a material adverse effect on the Company's
operations or financial position.
LITIGATION
The Company is currently, and is from time to time, subject to claims and
suits arising in the ordinary course of its business, including those relating
to intellectual property, contractual obligations, competition and employment
matters. In certain such actions, plaintiffs request punitive or other damages
or nonmonetary relief, which may not be covered by insurance, and in the case of
nonmonetary relief, could, if granted, materially affect the conduct of the
Company's business. The Company accrues for potential liabilities involved in
these matters as they become known and can be reasonably estimated. In the
Company's opinion (taking third party indemnities into consideration), the
various asserted claims and litigation in which the Company is currently
involved are not reasonably likely to have a material adverse effect on the
Company's operations or financial position. However, no assurance can be given
as to the ultimate outcome with respect to such claims and litigation. The
resolution of such claims and litigation could be material to the Company's
operating results for any particular period, depending upon the level of income
for such period.
F-25
<PAGE> 123
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
In January 1996, Coulter, then unrelated to Beckman, notified Hematronix, a
competitive reagent manufacturer, that Hematronix was selling certain reagents
and controls that infringed upon certain of Coulter's patents. In response,
Hematronix filed a complaint against Coulter in April 1996, in the United States
District Court of the Eastern District of California. The complaint seeks a
declaratory judgment to invalidate the patents. The complaint also includes
antitrust and related business tort claims directed at Coulter's business and
leasing activities, and seeks actual, treble and punitive damages in an
unspecified amount, as well as injunctive relief. Coulter answered the complaint
by denying violations of the antitrust laws and business tort claims and
counterclaimed that Hematronix willfully infringed the patents at issue.
Discovery has been conducted by both sides and is continuing. The Company has
filed a motion for summary judgment on the antitrust and other non-patent
issues. The motion has been heard and a decision from the court is pending. The
Company believes that the patents at issue are valid and have been infringed
upon by Hematronix and that the antitrust claims are without merit. If the
matter does proceed to trial, the trial is scheduled for October 1998. Although
the plaintiff has claimed substantial damages, based on the Company's analysis
of the present facts and the existence of certain indemnities by the former
stockholders of Coulter, the Company believes that the ultimate outcome of this
litigation is not reasonably likely to have a material adverse effect on the
Company's operations or financial position.
Local authorities in Palermo (Sicily), Italy are investigating the
activities of officials at a local government hospital and laboratory as well as
representatives of the principal worldwide companies marketing diagnostics
equipment in Italy, including the Company's Italian subsidiary. The inquiry
focuses on past leasing practices for placement of diagnostics equipment which
were common industrywide practices throughout Italy, but now are alleged to be
improper. The Company believes the evidence in the case is weak and insufficient
to support a criminal conviction against certain identified employees (the
subsidiary is not a defendant). The Court has appointed economic experts to
evaluate and present a comprehensive economic report on the leasing practices of
the industry. Although it is very difficult to evaluate the political climate in
Italy and the activities of the Italian public prosecutors, the Company does not
expect this matter to have a material adverse effect on its operations or
financial position.
Through its Hybritech acquisition (see Note 3 "Acquisitions"), the Company
obtained a patent, referred to as the Tandem Patent, that generates royalty
income. The Tandem Patent is involved in an interference action in the U.S.
Patent and Trademark Office with a patent application owned by La Jolla Cancer
Research Foundation (the "Foundation"). If the Foundation wins the interference,
the Company would lose the Tandem Patent and the royalty income, and a new
patent would be issued to the Foundation covering those products. The Company
believes it has the stronger case and expects to prevail and does not expect
this matter to have a material adverse effect on its operations or financial
position.
As previously reported, in 1991 Forest City properties Corporation and F.C.
Irvine, Inc. (collectively, "Forest City"), former owners and developers of a
portion of the same real property in Irvine referred to under the caption
"Environmental Matters" herein, filed suit against Prudential in the California
Superior Court for the County of Los Angeles, alleging breach of contract and
damages caused by the pollution of the property. Forest City originally sought
damages of more than $20 but subsequently increased its demand to $40. Forest
City also sought additional remediation of the property. Although the Company is
not a named defendant in the Forest City action, it is obligated to contribute
to any resolution of that action pursuant to the Company's 1990 settlement
agreement with Prudential. See discussion of "Environmental Matters" above.
The trial of this matter was conducted in 1995, resulting in a jury verdict
in favor of Prudential. The Court subsequently granted Forest City's motion for
a new trial which Prudential appealed. Prior to the Court's consideration of the
appeal, Prudential settled the lawsuit with Forest City and requested the
Company to pay a portion of the settlement pursuant to the 1990 settlement
agreement. The Company does not agree with Prudential's claims and believes it
has significant defenses to them. Although the outcome of
F-26
<PAGE> 124
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
this dispute cannot be predicted with certainty, the Company believes that any
additional liability beyond that provided for will not have a material adverse
effect on the Company's operations or financial position.
As previously reported, since 1992 six toxic tort lawsuits have been filed
in Maricopa County Superior Court, Arizona by a number of residents of the
Phoenix/Scottsdale area against the Company (relating to a former manufacturing
site) and a number of other defendants, including Motorola, Inc., Siemens
Corporation, the cities of Phoenix and Scottsdale, and others. The Company is
indemnified by SmithKline Beecham p.l.c., the successor of its former
controlling stockholder, for any costs incurred in these matters in excess of
applicable insurance, and thus the outcome of these litigations, even if
unfavorable to the Company, should have no material effect on the Company's
operations or financial position. These suits are currently in the discovery
phase, with the first of several anticipated trials in the actions scheduled for
June 1998.
In addition, the Company and its subsidiaries are involved in a number of
lawsuits which the Company considers ordinary and routine in view of its size
and the nature of its business. The Company does not believe that any ultimate
liability resulting from any such lawsuits will have a material adverse effect
on its operations or financial position. See Environmental Matters discussion
above.
LEASE COMMITMENTS
The Company leases certain facilities, equipment and automobiles. Certain
of the leases provide for payment of taxes, insurance and other charges by the
lessee. Rent expense was $35.4 in 1997, $32.9 in 1996, and $32.4 in 1995.
As of December 31, 1997, minimum annual rentals payable under
non-cancelable operating leases aggregate $94.5, which is payable $30.1 in 1998,
$22.0 in 1999, $17.6 in 2000, $13.7 in 2001, $3.0 in 2002 and $8.1 thereafter.
OTHER
Under the Company's dividend policy, the Company pays a regular quarterly
dividend to its stockholders which amounted to $16.6 in 1997 and $14.7 in 1996.
In February of 1998, the Board of Directors declared a quarterly dividend of
$0.15 per share, which approximates $4.1 in total. This dividend is payable
April 2, 1998 to stockholders of record on February 3, 1998. The Credit Facility
restricts (but does not prohibit) the Company's ability to pay dividends.
13. EARNINGS (LOSS) PER SHARE
In accordance with SFAS 128, the following is a reconciliation of the
numerators and denominators of the basic and diluted EPS computations.
<TABLE>
<CAPTION>
1997
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Net (loss)......................... $(264.4) 27.6 $(9.58)
Effect of dilutive stock options... -- -- --
------- ---- ------
Diluted EPS(1)
Net (loss)......................... $(264.4) 27.6 $(9.58)
======= ==== ======
</TABLE>
- ---------------
(1) Under generally accepted accounting principles, as the Company was in a net
loss position in the current year, 1.0 million common share equivalents were
not used to compute diluted loss per share, as the effect was antidilutive.
F-27
<PAGE> 125
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
1996
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Net earnings....................... $ 74.7 28.0 $ 2.66
Effect of dilutive stock options... -- 0.9 (0.08)
------- ---- ------
Diluted EPS
Net earnings....................... $ 74.7 28.9 $ 2.58
======= ==== ======
</TABLE>
<TABLE>
<CAPTION>
1995
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Net earnings....................... $ 48.9 28.1 $ 1.74
Effect of dilutive stock options... -- 0.7 (0.04)
------- ---- ------
Diluted EPS
Net earnings....................... $ 48.9 28.8 $ 1.70
======= ==== ======
</TABLE>
14. BUSINESS SEGMENT INFORMATION
INDUSTRY SEGMENT
The Company is engaged primarily in the design, manufacture and sale of
laboratory instrument systems and related products.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Geographic areas
Sales
United States -- domestic.................... $ 889.2 $ 738.5 $ 606.1
United States -- export...................... 60.8 36.0 28.9
Europe....................................... 342.4 318.6 312.9
Asia and other areas......................... 191.5 163.1 160.2
Transfers between areas...................... (285.9) (228.2) (178.0)
-------- -------- -------
Total sales.......................... $1,198.0 $1,028.0 $ 930.1
======== ======== =======
Operating (loss) income
United States before research and
development............................... $ 162.9 $ 180.1 $ 137.2
Research and development(a).................. (123.6) (108.4) (91.7)
In-process research and development.......... (282.0) -- --
-------- -------- -------
United States................................ (242.7) 71.7 45.5
Europe....................................... 3.6 45.4 28.2
Asia and other areas......................... 2.1 5.4 9.4
-------- -------- -------
Total operating (loss) income(b)..... $ (237.0) $ 122.5 $ 83.1
======== ======== =======
Identifiable assets(c)
United States................................ $ 857.4 $ 503.3 $ 446.3
Europe....................................... 444.3 243.1 228.8
Asia and other areas......................... 218.5 94.0 89.4
Corporate.................................... 810.8 119.7 143.3
-------- -------- -------
Total assets......................... $2,331.0 $ 960.1 $ 907.8
======== ======== =======
</TABLE>
F-28
<PAGE> 126
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
- ---------------
(a) The Company's principal research and development efforts are performed in
the United States.
(b) Includes restructuring charges of $59.4 and $27.7 in 1997 and 1995
respectively. The Company did not incur restructuring charges in 1996.
(c) Identifiable assets are those assets used by the operations in each
geographic location. Corporate assets consist primarily of cash and
equivalents, short-term investments, deferred tax assets, lease receivables,
fixed assets of a corporate nature, intangible assets and goodwill. Asia and
other areas include, primarily, operations in Japan, Canada and Latin
America. Inter-area sales are made at terms that allow for a reasonable
profit to the seller. At December 31, 1997 trade receivables and other by
geographic area were United States $226.4, Europe $188.0 and Asia and other
areas $110.2. At December 31, 1996 trade receivables and other by geographic
area were United States $120.9, Europe $135.8 and Asia and other areas
$52.8.
15. SUPPLEMENTARY INFORMATION
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF ADDITIONS CHARGED TO END OF
PERIOD COST AND EXPENSES DEDUCTIONS OTHER PERIOD
------------ -------------------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1997.......... $ 9.6 $2.4(a) $ 3.5(b) $9.4(d) $17.4
0.5(c)
December 31, 1996.......... 9.1 2.2(a) 1.1(b) -- 9.6
0.6(c)
December 31, 1995.......... 10.4 0.7(a) 2.8(b) -- 9.1
(0.8)(c)
</TABLE>
- ---------------
(a) Provision charged to earnings.
(b) Accounts written-off.
(c) Adjustments from translating at current exchange rates.
(d) Allowance acquired as part of the Coulter acquisition.
F-29
<PAGE> 127
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
16. SUBSEQUENT EVENT
On March 4, 1998, the Company issued $160 of 7.10% Senior Notes due 2003
and $240 of 7.45% Senior Notes due 2008 (the "Offering"). The Company used the
proceeds from the offering to pay down $300 of the Term Loan Facility and $80 of
the Revolving Credit Facility under the Credit Agreement.
In connection with the Offering, certain of the Company's wholly owned
subsidiaries (collectively, "Guarantor Subsidiaries") jointly, fully, severally,
and unconditionally guaranteed such notes. Supplemental condensed financial
information of the Company, Guarantor Subsidiaries and Non-Guarantor
Subsidiaries, each on a combined basis is presented below. This financial
information is prepared using the equity method of accounting for the Company's
and the Guarantor Subsidiaries' investments in subsidiaries. This supplemental
financial information should be read in conjunction with the Consolidated
Financial Statements.
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
Assets:
Cash and equivalents................ $ 13.9 $ 7.2 $ 12.4 $ 33.5
Trade receivables and other......... 131.7 95.4 297.5 524.6
Inventories......................... 127.8 98.7 136.5 $ (30.7) 332.3
Other current assets................ 163.9 165.1 94.4 (337.1) 86.3
-------- -------- -------- --------- --------
Total current assets........ 437.3 366.4 540.8 (367.8) 976.7
Property, plant and equipment,
net.............................. 133.8 125.1 152.0 410.9
Intangibles, net.................... 28.5 401.5 14.9 444.9
Goodwill, net....................... 5.7 397.0 0.1 402.8
Other long-term assets.............. 1,120.6 208.1 294.1 (1,527.1) 95.7
-------- -------- -------- --------- --------
Total assets................ $1,725.9 $1,498.1 $1,001.9 $(1,894.9) $2,331.0
======== ======== ======== ========= ========
Liabilities:
Notes payable and current maturities
of long-term debt................ $ 7.7 $ 7.3 $ 53.9 $ 68.9
Accounts payable and accrued
expenses......................... 207.8 408.1 140.5 756.4
Other current liabilities........... 114.0 2.7 103.6 $ (150.7) 69.6
-------- -------- -------- --------- --------
Total current liabilities... 329.5 418.1 298.0 (150.7) 894.9
Long-term debt, less current
maturities....................... 1,122.9 4.6 53.8 1,181.3
Other long-term liabilities......... 179.7 346.0 155.4 (508.1) 173.0
-------- -------- -------- --------- --------
Total liabilities........... 1,632.1 768.7 507.2 (658.8) 2,249.2
Stockholders' equity.................. 93.8 729.4 494.7 (1,236.1) 81.8
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity...... $1,725.9 $1,498.1 $1,001.9 $(1,894.9) $2,331.0
======== ======== ======== ========= ========
</TABLE>
F-30
<PAGE> 128
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
Assets:
Cash and equivalents................ $ 27.9 $ 10.3 $ 4.5 $ 42.7
Trade receivables and other......... 103.8 16.6 189.1 309.5
Inventories......................... 112.7 16.2 75.9 $ (14.4) 190.4
Other current assets................ 83.2 17.6 35.9 (99.9) 36.8
-------- -------- -------- --------- --------
Total current assets........ 327.6 60.7 305.4 (114.3) 579.4
Property, plant and equipment,
net.............................. 165.0 13.3 85.2 263.5
Intangibles, net.................... 33.5 0.4 0.2 34.1
Goodwill, net....................... 1.9 11.8 13.7
Other long-term assets.............. 372.2 39.5 131.8 (474.1) 69.4
-------- -------- -------- --------- --------
Total assets................ $ 900.2 $ 125.7 $ 522.6 $ (588.4) $ 960.1
======== ======== ======== ========= ========
Liabilities:
Notes payable and current maturities
of long-term debt................ $ 2.6 $ 0.2 $ 16.6 $ 19.4
Accounts payable and accrued
expenses......................... 114.9 17.6 75.7 208.2
Other current liabilities........... 74.0 9.8 60.0 $ (92.1) 51.7
-------- -------- -------- --------- --------
Total current liabilities... 191.5 27.6 152.3 (92.1) 279.3
Long-term debt, less current
maturities....................... 152.6 0.4 23.6 176.6
Other long-term liabilities......... 163.2 8.6 98.9 (165.4) 105.3
-------- -------- -------- --------- --------
Total liabilities........... 507.3 36.6 274.8 (257.5) 561.2
Stockholders' equity.................. 392.9 89.1 247.8 (330.9) 398.9
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity...... $ 900.2 $ 125.7 $ 522.6 $ (588.4) $ 960.1
======== ======== ======== ========= ========
CONDENSED CONSOLIDATING STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
Sales................................. $ 513.9 $ 150.9 $1,069.5 $ (536.3) $1,198.0
Operating costs and expenses
Cost of sales....................... 214.2 106.3 798.5 (509.3) 609.7
Marketing, general, and
administrative................... 154.5 39.0 166.8 360.3
Research and development............ 87.6 33.8 2.2 123.6
In-process research and
development...................... 282.0 282.0
Restructuring charge................ 55.7 3.7 59.4
-------- -------- -------- --------- --------
Operating income (loss)............... 1.9 (310.2) 98.3 27.0 (237.0)
Nonoperating expense (income)......... 233.2 (8.8) (0.7) (208.8) 14.9
-------- -------- -------- --------- --------
(Loss) earnings before income taxes... (231.3) (301.4) 99.0 181.8 (251.9)
Income taxes.......................... 8.6 2.0 8.1 (6.2) 12.5
-------- -------- -------- --------- --------
Net (loss) earnings................... $ (239.9) $ (303.4) $ 90.9 $ 188.0 $ (264.4)
======== ======== ======== ========= ========
</TABLE>
F-31
<PAGE> 129
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Sales................................. $ 457.4 $ 112.8 $ 772.7 $ (314.9) $1,028.0
Operating costs and expenses
Cost of sales....................... 184.9 33.7 569.3 (310.1) 477.8
Marketing, general, and
administrative................... 147.1 21.4 150.8 319.3
Research and development............ 91.1 17.1 0.2 108.4
Restructuring charge................ (1.7) (4.0) 5.7
-------- -------- -------- --------- --------
Operating income...................... 36.0 44.6 46.7 (4.8) 122.5
Nonoperating (income) expense......... (64.9) (1.8) 0.2 77.5 11.0
-------- -------- -------- --------- --------
Earnings before income taxes.......... 100.9 46.4 46.5 (82.3) 111.5
Income taxes.......................... 18.1 5.3 10.2 3.2 36.8
-------- -------- -------- --------- --------
Net earnings.......................... $ 82.8 $ 41.1 $ 36.3 $ (85.5) $ 74.7
======== ======== ======== ========= ========
CONDENSED CONSOLIDATING STATEMENT
OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
Sales................................. $ 581.1 $ 64.4 $ 533.7 $ (249.1) $ 930.1
Operating costs and expenses
Cost of sales....................... 316.8 18.3 339.0 (246.9) 427.2
Marketing, general, and
administrative................... 149.2 8.2 143.0 300.4
Research and development............ 83.4 8.3 91.7
Restructuring charge................ 1.5 26.2 27.7
-------- -------- -------- --------- --------
Operating income...................... 30.2 29.6 25.5 (2.2) 83.1
Nonoperating (income) expense......... (26.1) (0.7) (9.9) 47.4 10.7
-------- -------- -------- --------- --------
Earnings before income taxes.......... 56.3 30.3 35.4 (49.6) 72.4
Income taxes.......................... 3.1 4.1 14.0 2.3 23.5
-------- -------- -------- --------- --------
Net earnings.......................... $ 53.2 $ 26.2 $ 21.4 $ (51.9) $ 48.9
======== ======== ======== ========= ========
</TABLE>
F-32
<PAGE> 130
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT
OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
Net cash provided (used) by operating
activities..................................... $ (32.2) $ 42.4 $127.6 $ 137.8
Cash flows from investing activities
Additions to property, plant and equipment..... (65.9) (11.6) (23.4) (100.9)
Net disposals of property, plant and
equipment................................... 12.0 5.4 1.0 18.4
Sales of short term investments................ 7.7 7.7
Proceeds from sale-leaseback transactions...... 39.6 39.6
Investments and acquisitions................... (897.3) 3.4 (893.9)
------- ------ ------ -------
Net cash (used) provided by investing
activities..................................... (911.6) 1.5 (19.0) (929.1)
Cash flows from financing activities
Dividends to stockholders...................... (16.6) (16.6)
Proceeds from issuance of stock................ 23.1 23.1
Purchases of treasury stock.................... (43.7) (43.7)
Notes payable borrowings (reductions).......... (3.5) 15.2 11.7
Long-term debt borrowings (reductions)......... 970.5 (39.1) (115.3) 816.1
------- ------ ------ -------
Net cash provided (used) by financing
activities..................................... 929.8 (39.1) (100.1) 790.6
Effect of exchange rates on cash and
equivalents.................................... (0.8) (0.8)
(Decrease) increase in cash and equivalents...... (14.0) 4.8 7.7 (1.5)
Cash and equivalents -- beginning of year........ 27.9 2.6 4.1 34.6
------- ------ ------ -------
Cash and equivalents -- end of year.............. $ 13.9 $ 7.4 $ 11.8 $ 33.1
======= ====== ====== =======
</TABLE>
F-33
<PAGE> 131
BECKMAN COULTER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT OF
CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
Net cash provided (used) by operating
activities..................................... $ 124.7 $ (7.3) $ 21.7 $ 139.1
Cash flows from investing activities
Additions to property, plant and equipment..... (44.1) (9.7) (56.7) (110.5)
Net disposals of property, plant and
equipment................................... 11.8 0.4 6.5 18.7
Sales of short term investments................ 0.1 0.1 0.2
Investments and acquisitions................... (38.0) 15.0 (23.0)
------- ------ ------ -------
Net cash used by investing activities............ (70.2) (9.3) (35.1) (114.6)
Cash flows from financing activities
Dividends to stockholders...................... (14.7) (14.7)
Proceeds from issuance of stock................ 21.5 21.5
Purchases of treasury stock.................... (35.9) (35.9)
Notes payable borrowings (reductions).......... (5.9) 3.5 (2.4)
Long-term debt borrowings (reductions)......... 8.0 0.3 7.0 15.3
------- ------ ------ -------
Net cash provided (used) by financing
activities..................................... (27.0) 0.3 10.5 (16.2)
Effect of exchange rates on cash and
equivalents.................................... 0.1 0.1
(Decrease) increase in cash and equivalents...... 27.5 (16.3) (2.8) 8.4
Cash and equivalents -- beginning of year........ 0.4 18.9 6.9 26.2
------- ------ ------ -------
Cash and equivalents -- end of year.............. $ 27.9 $ 2.6 $ 4.1 $ 34.6
======= ====== ====== =======
CONDENSED CONSOLIDATING STATEMENT OF
CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
Net cash provided (used) by operating
activities..................................... $ 66.8 $ 22.9 $(29.5) $ 60.2
Cash flows from investing activities
Additions to property, plant and equipment..... (65.5) (0.5) (37.2) (103.2)
Net disposals of property, plant and
equipment................................... 7.3 5.9 13.2
Sales (purchases) of short term investments.... (0.1) (7.9) 0.5 (7.5)
Investments and acquisitions................... (38.1) 22.6 (15.5)
------- ------ ------ -------
Net cash used by investing activities............ (96.4) (8.4) (8.2) (113.0)
Cash flows from financing activities
Dividends to stockholders...................... (12.3) (12.3)
Proceeds from issuance of stock................ 17.6 17.6
Purchases of treasury stock.................... (13.3) (13.3)
Notes payable borrowings (reductions).......... (4.2) 7.1 2.9
Long-term debt borrowings (reductions)......... 42.0 (2.1) 39.9
------- ------ ------ -------
Net cash provided by financing activities........ 29.8 5.0 34.8
Effect of exchange rates on cash and
equivalents.................................... 0.2 (0.2)
(Decrease) increase in cash and equivalents...... 0.4 14.5 (32.9) (18.0)
Cash and equivalents -- beginning of year........ 4.4 39.8 44.2
------- ------ ------ -------
Cash and equivalents -- end of year.............. $ 0.4 $ 18.9 $ 6.9 $ 26.2
======= ====== ====== =======
</TABLE>
F-34
<PAGE> 132
QUARTERLY INFORMATION (UNAUDITED)
(IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------------- ------------------ ------------------ ------------------
1997 1996 1997 1996 1997 1996 1997 1996
------ ------ ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................................ $231.9 $224.8 $270.6 $265.2 $271.6 $252.8 $ 423.9 $285.2
Cost of sales........................ 109.6 104.9 130.7 123.6 132.1 117.8 237.3 131.5
Marketing, general and
administrative..................... 74.8 73.7 79.7 83.3 82.9 77.7 122.9 84.6
Research and development............. 24.0 24.7 28.6 27.3 27.7 26.1 43.3 30.3
In-process research and
development........................ -- -- -- -- -- -- 282.0 --
Restructuring Charge................. -- -- -- -- -- -- 59.4 --
Operating income (loss).............. 23.5 21.5 31.6 31.0 28.9 31.2 (321.0) 38.8
Earnings (loss) before income
taxes.............................. 22.3 20.5 29.7 28.3 27.7 27.9 (331.6) 34.8
Net earnings (loss).................. $ 15.6 $ 13.7 $ 20.8 $ 19.0 $ 19.4 $ 18.7 $(320.2) $ 23.3
Basic earnings (loss) per share...... $ 0.56 $ 0.48 $ 0.75 $ 0.68 $ 0.71 $ 0.67 $(11.63) $ 0.83
Diluted earnings (loss) per share.... $ 0.54 $ 0.47 $ 0.72 $ 0.65 $ 0.68 $ 0.65 $(11.63) $ 0.81
Dividends per share.................. $ 0.15 $ 0.13 $ 0.15 $ 0.13 $ 0.15 $ 0.13 $ 0.15 $ 0.13
Stock price -- High.................. $ 44 3/8 $ 39 1/8 $ 49 3/16 $ 41 1/8 $ 52 5/16 $ 39 7/8 $ 44 1/2 $ 39 1/4
Stock price -- Low................... $ 37 7/8 $ 33 1/2 $ 40 3/8 $ 35 1/8 $ 39 3/4 $ 32 $ 37 3/8 $ 35
<CAPTION>
FOR THE YEAR
----------------------
1997 1996
-------- --------
<S> <C> <C>
Sales................................ $1,198.0 $1,028.0
Cost of sales........................ 609.7 477.8
Marketing, general and
administrative..................... 360.3 319.3
Research and development............. 123.6 108.4
In-process research and
development........................ 282.0 --
Restructuring Charge................. 59.4 --
Operating income (loss).............. (237.0) 122.5
Earnings (loss) before income
taxes.............................. (251.9) 111.5
Net earnings (loss).................. $ (264.4) $ 74.7
Basic earnings (loss) per share...... $ (9.58) $ 2.66
Diluted earnings (loss) per share.... $ (9.58) $ 2.58
Dividends per share.................. $ 0.60 $ 0.52
Stock price -- High.................. $ 52 5/16 $ 41 1/8
Stock price -- Low................... $ 37 3/8 $ 32
</TABLE>
F-35
<PAGE> 133
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Coulter Corporation:
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Coulter Corporation and subsidiaries (the
Company) for the seven months ended October 31, 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations of Coulter
Corporation and subsidiaries and their cash flows for the seven months ended
October 31, 1997 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Miami, Florida
December 12, 1997, except as
to note R, which is as
of March 4, 1998
F-36
<PAGE> 134
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Coulter Corporation:
We have audited the accompanying consolidated balance sheets of Coulter
Corporation (a Delaware corporation) and subsidiaries as of March 31, 1997 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended March 31, 1997.
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 generally accepted auditing
standards. 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 Coulter
Corporation and subsidiaries as of March 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1997 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Miami, Florida,
May 27, 1997 (except with respect to
the matters discussed in Note O and Note R, as
to which the dates are August 29, 1997 and
March 4, 1998, respectively).
F-37
<PAGE> 135
COULTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 28,782 $ 41,286
Accounts receivable, net of allowance for doubtful
accounts of $7,070 in 1997 and $6,543 in 1996.......... 189,484 173,507
Current portion of finance receivables, net............... 20,064 21,270
Inventories............................................... 117,502 103,866
Refundable income taxes................................... 1,527 2,885
Prepaid expenses and other current assets................. 23,607 17,179
-------- --------
Total current assets.............................. 380,966 359,993
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated
depreciation and amortization of $114,219 in 1997 and
$102,028 in 1996.......................................... 131,059 105,915
-------- --------
LONG-TERM PORTION OF FINANCE RECEIVABLES, NET............... 32,255 37,197
-------- --------
OTHER ASSETS................................................ 54,768 56,939
-------- --------
$599,048 $560,044
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Foreign bank overdraft facilities......................... $ 852 $ 403
Current maturities of long-term debt...................... 35,700 47,829
Note payable due to stockholder........................... 4,000 --
Notes payable............................................. 16,310 15,327
Accounts payable.......................................... 38,829 41,450
Accrued liabilities....................................... 93,351 107,015
Income taxes payable...................................... 6,552 9,953
Estimated warranty costs.................................. 15,578 13,870
Unearned service contract revenue......................... 33,975 35,636
-------- --------
Total current liabilities......................... 245,147 271,483
-------- --------
LONG-TERM DEBT, less current maturities..................... 135,468 71,895
-------- --------
NOTE PAYABLE DUE TO STOCKHOLDER............................. 14,550 21,550
-------- --------
ACCRUED PENSION COSTS (NOTE M).............................. 6,731 6,524
-------- --------
ACCRUED POSTRETIREMENT BENEFIT COSTS (NOTE M)............... 28,562 26,296
-------- --------
LONG-TERM UNEARNED SERVICE CONTRACT REVENUE................. 12,487 12,150
-------- --------
DEFERRED INCOME TAXES....................................... 4,114 3,188
-------- --------
MINORITY INTERESTS (NOTES H AND I).......................... 2,892 1,875
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTES G, O AND P)
STOCKHOLDERS' EQUITY:
Common stock:
Class A -- voting -- authorized and outstanding,
9,677 shares in 1997 and 10,000 shares in 1996 of $1
par value........................................... 10 10
Class B non-voting -- authorized 9,692 shares in 1997
and 10,000 shares in 1996; outstanding 1,060 shares
in 1997 and 1,368 shares in 1996 of $1 par value.... 1 1
Additional contributed capital............................ 47,955 55,702
Retained earnings......................................... 107,795 93,187
Cumulative translation adjustment......................... (6,664) (3,817)
-------- --------
Total stockholders' equity.................................. 149,097 145,083
-------- --------
$599,048 $560,044
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-38
<PAGE> 136
COULTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997
AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN
MONTHS
ENDED YEARS ENDED MARCH 31,
OCTOBER 31, --------------------------------
1997 1997 1996 1995
----------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES.................................................. $387,488 $700,887 $685,320 $654,257
COST OF SALES.............................................. 203,974 373,424 349,192 340,494
-------- -------- -------- --------
Gross profit..................................... 183,514 327,463 336,128 313,763
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............... 132,761 217,890 216,920 204,825
RESEARCH AND DEVELOPMENT EXPENSES.......................... 40,419 85,787 87,352 73,454
RESTRUCTURING CHARGES (Note K)............................. -- 5,947 -- --
-------- -------- -------- --------
Operating income................................. 10,334 17,839 31,856 35,484
-------- -------- -------- --------
OTHER EXPENSE (INCOME):
Interest expense......................................... 7,223 13,572 11,223 13,969
Interest income.......................................... (4,770) (9,048) (10,295) (11,618)
Foreign exchange (gain) loss (Note G).................... (963) (2,081) (2,940) 9,703
Other, net (Note H)...................................... 808 (4,745) (3,799) (1,400)
-------- -------- -------- --------
2,298 (2,302) (5,811) 10,654
-------- -------- -------- --------
Income before provision for income taxes......... 8,036 20,141 37,667 24,830
PROVISION FOR INCOME TAXES................................. 9,058 5,533 4,628 7,507
-------- -------- -------- --------
Net (loss) income................................ $ (1,022) $ 14,608 $ 33,039 $ 17,323
======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-39
<PAGE> 137
COULTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997
AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------
CLASS A CLASS B ADDITIONAL CUMULATIVE
---------------- --------------- CONTRIBUTED RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ------- ------ ------ ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994................. 10,000 $10 1,368 $ 1 $ 55,702 $ 42,825 $(6,718) $ 91,820
Net income.............................. -- -- -- -- -- 17,323 -- 17,323
Translation adjustment.................. -- -- -- -- -- -- 8,992 8,992
------ --- ------ ----- -------- -------- ------- --------
Balance at March 31, 1995................. 10,000 10 1,368 1 55,702 60,148 2,274 118,135
Net income.............................. -- -- -- -- -- 33,039 -- 33,039
Translation adjustment.................. -- -- -- -- -- -- (6,091) (6,091)
------ --- ------ ----- -------- -------- ------- --------
Balance at March 31, 1996................. 10,000 10 1,368 1 55,702 93,187 (3,817) 145,083
Purchase of treasury stock (Note L)..... (323) -- (308) -- (7,747) -- -- (7,747)
Net income.............................. -- -- -- -- -- 14,608 -- 14,608
Translation adjustment.................. -- -- -- -- -- -- (2,847) (2,847)
------ --- ------ ----- -------- -------- ------- --------
Balance at March 31, 1997................. 9,677 10 1,060 1 47,955 107,795 (6,664) 149,097
Sale of common stock (Note L)........... 216 -- -- -- 2,640 -- -- 2,640
Net loss................................ -- -- -- -- -- (1,022) -- (1,022)
Dividend distribution (Note H).......... -- -- -- -- -- (5,833) -- (5,833)
Translation adjustment.................. -- -- -- -- -- -- (1,474) (1,474)
------ --- ------ ----- -------- -------- ------- --------
Balance at October 31, 1997............... 9,893 $10 1,060 $ 1 $ 50,595 $100,940 $(8,138) $143,408
====== === ====== ===== ======== ======== ======= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-40
<PAGE> 138
COULTER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997
AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEARS ENDED MARCH 31,
OCTOBER 31, -----------------------------------
1997 1997 1996 1995
------------ --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income......................................... $ (1,022) $ 14,608 $ 33,039 $ 17,323
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 15,647 25,141 23,682 18,764
Provision for doubtful accounts......................... 1,483 2,609 2,222 3,031
Provision for inventory obsolescence.................... 7,955 12,370 7,777 7,594
Provision for postretirement benefit costs.............. 1,414 3,218 2,850 2,757
Gain on termination of pension plan..................... -- -- (3,776) --
Deferred income tax (benefit) expense................... (3,572) (4,570) (4,722) 285
Loss (gain) on disposal of property, plant and
equipment............................................. 476 327 (1,063) 146
Unrealized foreign exchange loss (gain) on forward
contracts............................................. 2,496 (703) (10,132) 6,476
CHANGE IN ASSETS AND LIABILITIES:
(Increase) decrease
Temporary investments................................... -- -- 3,758 4,638
Trade receivable........................................ 28,989 (16,944) 12,496 (8,562)
Inventories............................................. (13,505) (26,006) (20,401) (6,003)
Refundable income taxes................................. (1,158) 1,358 181 (1,742)
Prepaid expenses and other current assets............... (4,937) (3,474) 1,531 453
Other assets............................................ 1,223 3,751 4,015 (3,225)
Increase (decrease)
Accounts payable........................................ (5,236) (2,621) (1,834) 2,801
Accrued liabilities..................................... 2,274 (13,664) 13,015 (3,865)
Income taxes payable.................................... 10,245 (3,401) 3,469 (60)
Estimated warranty costs................................ (1,812) 1,708 (3,807) 890
Unearned service contract revenue....................... (2,397) (1,661) (201) 2,861
Accrued pension costs................................... (487) 207 (13,847) 5,035
Accrued postretirement benefit costs.................... (312) (952) (1,181) (678)
Long-term unearned service contract revenue............. (992) 337 1,103 2,482
--------- --------- --------- ---------
Net cash provided by (used in) operating activities..... 36,772 (8,362) 48,174 51,401
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment....... 1,983 3,582 4,114 4,542
Capital expenditures...................................... (17,976) (58,017) (31,067) (31,086)
Finance lease receivables originated...................... (19,582) (10,833) (17,685) (22,098)
Principal payments received from finance lease
receivables............................................. 15,292 15,339 29,677 27,772
Payment for business acquisition, net of cash acquired.... -- -- (22,198) --
(Decrease) increase in minority interests................. (1,531) 1,017 317 762
--------- --------- --------- ---------
Net cash used in investing activities................... (21,814) (48,912) (36,842) (20,108)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 47,839 238,158 142,069 74,446
Principal payments of long-term debt...................... (178,257) (182,274) (134,619) (108,552)
Principal payments of note payable due to stockholder..... -- (3,000) -- --
Proceeds from Beckman Instruments, Inc.................... 109,674 -- -- --
Purchase of treasury stock................................ -- (7,747) -- --
Proceeds from sale of stock............................... 2,640 -- -- --
Net (payments) proceeds from notes payable and foreign
bank overdraft facilities............................... (299) 2,030 (2,890) 4,623
--------- --------- --------- ---------
Net cash (used in) provided by financing activities..... (18,403) 47,167 4,560 (29,483)
--------- --------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (586) (2,397) (9,564) 11,921
--------- --------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (4,031) (12,504) 6,328 13,731
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD........ 28,782 41,286 34,958 21,227
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.............. $ 24,751 $ 28,782 $ 41,286 $ 34,958
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non cash dividend to stockholders......................... $ 5,833 $ -- $ -- $ --
Cash paid during the period for:
Interest................................................ $ 10,603 $ 13,406 $ 11,982 $ 13,740
========= ========= ========= =========
Income taxes............................................ $ 4,433 $ 12,742 $ 6,589 $ 7,422
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-41
<PAGE> 139
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- NATURE OF OPERATIONS
Coulter Corporation and subsidiaries (the "Company") is engaged in the
business of developing, manufacturing, distributing, financing and servicing
certain medical equipment (predominantly hematology instruments) and related
consumable products used in the healthcare industry, research centers and
universities. The Company's principal markets are North America, Europe and the
Far East.
The Company's future sales and profitability are largely dependent upon its
ability to continue to develop, manufacture, market, finance and service certain
medical equipment and related consumable products as described above. Sales can
be significantly affected by a variety of factors, including, among other
things, the timing of new product development, the availability of competing
products, and competitor strategies to expand market share. Certain raw
materials and components used in the manufacture of the Company's products are
available from limited sources. Changes in raw material suppliers could result
in delays in production and higher raw material costs.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Coulter
Corporation and all domestic and foreign subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain 1996 balances have been reclassified to conform to the 1997
presentation.
Revenue Recognition
In general, revenue is recognized when a product is shipped. When a
customer enters into an operating-type lease agreement, revenue is recognized
over the life of the lease. Under a sales-type lease agreement, revenue is
recognized at the time of shipment with interest income recognized over the life
of the lease. Service revenues are recognized ratably over the life of the
service agreement or as service is performed, if not under contract.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that have an
original maturity of three months or less.
Inventories
Inventories are stated at the lower-of-cost or market (principally using
the first-in, first-out method). Components of inventory cost include materials,
labor and manufacturing overhead. In evaluating whether inventory is stated at
the lower of cost or market, management considers such factors as inventory on
hand,
F-42
<PAGE> 140
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
estimated time to sell such inventory, and current market conditions. Reserves
are provided as appropriate. Inventory consists of the following:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Finished goods................................. $ 79,094 $ 72,011
Work in process................................ 14,732 12,595
Raw materials.................................. 23,676 19,260
-------- --------
$117,502 $103,866
======== ========
</TABLE>
Finance Receivables
For leases that qualify as capital leases under Statement of Financial
Accounting Standards No. 13, the Company records in its consolidated balance
sheets the gross lease receivable and estimated residual value of the leased
equipment reduced by the unearned lease income and allowance for doubtful
accounts. The unearned lease income is ratably recognized as revenue so as to
reflect a constant periodic rate of return on the net investment over the term
of the leases, usually five years. Fees and costs related to the establishment
of a lease are recognized as an adjustment to the yield of the related lease
ratably over the life of the lease.
Most equipment leases include service contracts and agreements to provide a
specified quantity of consumable products at a fixed price (payable monthly)
over the term of the lease. All income from these contracts is recognized as the
services are rendered and the consumable products are provided.
The portfolio of lease receivables is reviewed by the Company to determine
an appropriate allowance for doubtful accounts balance. The allowance for
doubtful accounts includes management's estimate of the amounts expected to be
lost on specific leases and for losses on other as of yet unidentified leases
included in direct finance lease receivable at March 31, 1997 and 1996. In
estimating the potential losses on leases, management relies on historical
experience by lease type and current industry trends. The amounts that the
Company will ultimately realize could differ materially in the near term from
the amounts assumed in arriving at the allowance for doubtful accounts reported
in the consolidated financial statements at March 31, 1997 and 1996.
Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Equipment...................................... $149,562 $127,998
Buildings...................................... 68,106 62,979
Equipment leased to others..................... 5,204 3,812
Leaseholds and leasehold improvements.......... 6,978 6,268
-------- --------
229,850 201,057
Less -- Accumulated depreciation and
amortization................................. $114,219 $102,028
-------- --------
115,631 99,029
Land........................................... 15,428 6,886
-------- --------
$131,059 $105,915
======== ========
</TABLE>
F-43
<PAGE> 141
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation is provided in amounts sufficient to allocate the cost of
depreciable assets to operations over their estimated service lives principally
using the straight-line method. The estimated service lives are as follows:
<TABLE>
<S> <C>
Buildings 15 - 50 years
Equipment 3 - 10 years
</TABLE>
Leaseholds and leasehold improvements are amortized on a straight-line
basis over the shorter of the lives of the leases or the improvements (generally
five years). Equipment is leased to others under operating lease terms ranging
from one to five years which include cancellation provisions. Such equipment is
recorded at cost and is generally depreciated over five years, using the
straight-line method of depreciation.
Accrued Liabilities
Accrued liabilities consist of obligations that are recorded when expenses
are incurred. As of March 31, 1997 and 1996, such liabilities are as follows (In
thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Payroll........................................ $14,375 $ 16,247
Pension........................................ 1,887 13,951
Vacation....................................... 11,852 10,819
Bonuses........................................ 4,149 12,279
Restructuring.................................. 5,947 --
Taxes, other than income....................... 10,227 11,958
Other.......................................... 44,914 41,761
------- --------
$93,351 $107,015
======= ========
</TABLE>
Recently Issued Accounting Standards
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of" ("SFAS 121") in fiscal year 1997. SFAS 121 establishes
accounting standards for recording the impairment of long-lived assets, certain
identifiable intangibles and excess of cost over fair value of net assets
acquired (goodwill). The adoption of SFAS 121 had no impact on the Company's
financial position or the results of its operations.
Excess of Cost Over Fair Value of Net Assets Acquired
Excess of cost over fair value of net assets acquired (goodwill) is stated
on the basis of cost and is amortized, principally on a straight-line basis,
over the estimated future periods not exceeding twenty years. Such cost is
reviewed for impairment based on an assessment of future operations to ensure
that it is appropriately valued.
Estimated Warranty Costs
The Company's warranty policy provides for repairs or replacements due to
defects in materials and workmanship in instrument products it manufactures for
a period of up to one year from the date of sale. Accordingly, a provision is
made for the cost of such anticipated warranty expense by a charge to operations
in the period of sale.
F-44
<PAGE> 142
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the financial reporting
and tax bases of assets and liabilities.
Unearned Service Contract Revenue
The Company sells contracts to provide repair service on its equipment for
specified terms. The customer pays for the contract prior to the service being
rendered. The contract amount is recorded as unearned service contract revenue
and the deferred income is amortized to operations on a straight-line basis over
the term of the contract, which is generally one to five years.
Research and Development Costs
Research and development costs are charged to operations as incurred.
Disclosures about Fair Value of Financial Instruments
The Company's financial instruments include cash, cash equivalents, notes
payable, foreign bank overdraft facilities, long-term debt and forward
contracts. Each of the financial instrument's carrying value approximates fair
value mainly due to their short-term nature, except for long-term debt (See Note
F).
NOTE C -- INTERNATIONAL OPERATIONS
The following summarizes the combined financial data of consolidated
foreign subsidiaries (after elimination of intercompany transactions):
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR ENDED MARCH 31,
ENDED OCTOBER 31, --------------------------------
1997 1997 1996 1995
----------------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net assets................... $119,522 $113,602 $115,945 $ 95,912
======== ======== ======== ========
Net sales.................... $187,639 $346,644 $355,394 $320,430
======== ======== ======== ========
Net income................... $ 12,371 $ 16,787 $ 18,269 $ 13,614
======== ======== ======== ========
</TABLE>
NOTE D -- LEASING ACTIVITIES
A summary of financial information regarding the Company's direct financing
lease activities is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
--------------------- ---------------------
CURRENT LONG-TERM CURRENT LONG-TERM
PORTION PORTION PORTION PORTION
-------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Future minimum lease payments............. $27,664 $39,819 $29,624 $45,858
Unearned lease income..................... (4,956) (6,307) (5,771) (7,345)
Allowance for doubtful accounts........... (2,644) (1,257) (2,583) (1,316)
------- ------- ------- -------
$20,064 $32,255 $21,270 $37,197
======= ======= ======= =======
</TABLE>
F-45
<PAGE> 143
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- LEASING ACTIVITIES (CONTINUED)
Future minimum lease payments receivable for direct financing leases
consist of the following at March 31, 1997 (In thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1998.............................................. $27,664
1999.............................................. 19,183
2000.............................................. 11,543
2001.............................................. 5,929
2002.............................................. 2,499
Thereafter........................................ 665
-------
$67,483
=======
</TABLE>
NOTE E -- NOTES PAYABLE, FOREIGN BANK OVERDRAFT FACILITIES AND NOTE PAYABLE DUE
TO STOCKHOLDER
Notes payable consist primarily of amounts due to banks at varying interest
rates ranging from 1.55% to 12.50% and are to be paid within twelve months.
Certain notes payable are secured by assets of foreign subsidiaries.
Additionally, certain foreign subsidiaries have unsecured overdraft facilities
with banks bearing interest up to 20.25%.
Additionally, the Company maintains a note payable due to a stockholder.
The note is unsecured and bears interest at a rate of 12% per annum. Principal
payments range from $1,000,000 to $1,550,000 due quarterly through March 2001.
Interest payments are due monthly.
F-46
<PAGE> 144
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F -- LONG-TERM DEBT
Long-term debt at March 31, 1997 and 1996, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks at rates ranging from 7% to 12%,
secured by finance receivables and related leased
equipment. Notes mature as the related finance receivables
are paid.................................................. $ 60,113 $ 61,239
Bankers acceptances and notes payable to bank at rates of
6.4% to 8.5% under an agreement which expires in August
1998...................................................... 50,054 9,700
Lease loans and revolving term loan at rates ranging from 5%
to 10.25%, secured by assets of a foreign subsidiary,
payable in monthly installments through fiscal year
2002...................................................... 4,323 3,296
Notes payable to various banks at rates ranging from 5.8% to
8.75%, due in quarterly and annual installments. This debt
was incurred for and secured by new building and
improvements.............................................. 3,079 3,960
Notes payable to bank at various interest rates ranging from
7.4% to 9.8% under the terms of a revolving credit
agreement. Secured by equipment leased to third parties
and building. Payable in monthly installments matching the
life of applicable lease contracts, but not exceeding 60
months.................................................... 3,742 6,184
Payable for settlement of patent and royalties infringement
(See Note J).............................................. 2,000 4,000
Mortgage notes secured by land and building at rates ranging
from 9.6% to 9.7%, payable in quarterly installments
through 2014.............................................. 7,710 8,969
Notes payable secured by land, building and trade
receivables with interest rates ranging from 1.55% to
4.25%. Principal and interest payments are due on a
quarterly and semi-annual basis through fiscal year
2000...................................................... 8,234 9,368
Mortgage note secured by land and building at a fixed rate
of 4.86%, payable in equal monthly payments through May
2016...................................................... 14,180 --
Unsecured revolving line of credit, interest payments are
due quarterly based on LIBOR rate plus 1.5%, principal
payment due August 1998................................... 3,924 --
Other....................................................... 13,809 13,008
-------- --------
171,168 119,724
Less -- current maturities of long-term debt........... 35,700 47,829
-------- --------
$135,468 $ 71,895
======== ========
</TABLE>
Future maturities of long-term debt are as follows (In thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1998............................................ $ 35,700
1999............................................ 83,194
2000............................................ 15,832
2001............................................ 10,007
2002............................................ 5,071
Thereafter...................................... 21,364
--------
$171,168
========
</TABLE>
The Company maintains bankers acceptances and a note payable revolving
credit agreement (the "Credit Agreement") up to a maximum of $60,000,000
principal amount of domestic and Eurodollar loan borrowings. This facility also
allows the Company to enter into forward contracts for the sale of foreign
currency (See Note G). The maximum borrowing amount is the lesser of $60,000,000
or the borrowing base, as defined, provided that the aggregate amount of issued
and unexpired letters of credit and drafts do not exceed
F-47
<PAGE> 145
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F -- LONG-TERM DEBT (CONTINUED)
$10,000,000. The Credit Agreement expires in August 1998. At March 31, 1997,
borrowings under the Credit Agreement of $50,054,000 were classified as
long-term debt. At March 31, 1996, borrowings of $9,700,000 were outstanding and
classified as current maturities of long-term debt.
Under the Credit Agreement, interest payable on the domestic note payable
is at the prime rate in effect for each interest period. Interest payable on the
Eurodollar and bankers acceptances is variable based on the LIBOR rate plus up
to 1.00% per annum.
The Credit Agreement is secured by certain domestic assets of the Company
and a licensing agreement relating to the use and benefit of certain intangibles
of the Company. The Credit Agreement is also guaranteed by the stockholders of
the Company.
The Credit Agreement contains certain covenants related to minimum
requirements for the maintenance of tangible net worth plus subordinated
indebtedness, maximum inventory to sales ratio, leverage ratio, consolidated
earnings before interest and taxes to net interest expense, intercompany
indebtedness and limitations on capital expenditures, investments and other
domestic indebtedness.
The Company is also restricted from making any distributions to the
stockholders. At March 31, 1997, the Company is in compliance with all required
covenants.
Based on the borrowing rates currently available to the Company for notes
payable and debt with similar terms and average maturities, management has
estimated the fair value of long-term debt to be $192,330,000 at March 31, 1997
and $140,745,000 at March 31, 1996.
NOTE G -- DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS
At March 31, 1997, 1996 and 1995, the Company had outstanding foreign
currency forward contracts which typically mature within one year. The purpose
of these contracts is to hedge the Company's foreign exchange exposure with
respect to foreign currency cash flows received from foreign subsidiaries. The
Company does not speculate in the foreign exchange market. The forward contracts
require the Company to sell foreign currencies at a contracted exchange rate. As
provided by the Credit Agreement, the Company is committed to sell such foreign
currencies to the bank. At March 31, 1997, 1996 and 1995 these sale commitments
were $64,552,000, $74,523,000, and $86,865,000 respectively. Additionally, the
Company is committed to sell $9,490,000, $12,801,000 and $16,708,000 in foreign
currencies to another bank as of March 31, 1997, 1996 and 1995, respectively.
Foreign exchange contracts are valued at the spot rate on March 31, 1997, 1996
and 1995, which approximates the quoted market rate. The difference between the
spot rate at inception of the foreign currency forward contract and the spot
rate at the consolidated balance sheets date results in an unrealized gain or
loss. The premium or discount represents the difference between the contracted
rate and the spot rate at the date of inception, and is amortized over the life
of the contract on a
F-48
<PAGE> 146
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G -- DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
straight-line basis. The following summarizes the notional amount of contracts,
unrealized gains and losses and amortized premiums at March 31, 1997, 1996 and
1995: (In thousands)
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
--------------------- ---------------------- ----------------------
U.S. UNREALIZED U.S. UNREALIZED U.S. UNREALIZED
DOLLARS GAIN DOLLARS GAIN DOLLARS GAIN
CURRENCY EQUIV. (LOSS) EQUIV. (LOSS) EQUIV. (LOSS)
-------- ------- ---------- ------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
British pound............. $22,053 $ (746) $19,990 $ 281 $ 28,664 $(1,218)
Japanese yen.............. 15,034 1,490 23,278 2,035 26,131 (3,383)
German mark............... 15,459 1,274 16,702 272 20,206 (1,632)
French franc.............. 13,279 979 17,206 38 18,012 (1,095)
Canadian dollar........... 6,054 95 7,692 (45) 8,013 79
Australian dollar......... 2,163 10 2,456 (133) 2,547 10
------- ------ ------- ------ -------- -------
$74,042 3,102 $87,324 2,448 $103,573 (7,239)
======= ======= ========
Premium amortization...... 578 529 84
------ ------ -------
$3,680 $2,977 $(7,155)
====== ====== =======
</TABLE>
The unrealized gains or losses and amortized premiums will be offset by any
foreign currency exchange gains or losses realized upon the settlement of the
cash flows received from the foreign subsidiaries or through the translation of
the foreign subsidiaries' financial statements, which are denominated in the
various foreign currencies noted above. The unrealized gains or losses and
amortized premiums are included in foreign exchange gain in the accompanying
consolidated statements of income. The counterparties to these foreign currency
transactions are major financial institutions and accordingly, the Company does
not anticipate nonperformance by such counterparties. Additionally, the Company
does not enter into leveraged derivative transactions.
NOTE H -- INVESTMENT IN JOINT VENTURES
In February 1995, Coulter Pharmaceutical, Inc. ("CPI"), was organized and
established for the purpose of researching, developing and marketing certain
potential cancer-curing products. As of March 31, 1997, a joint-venture partner
and other investors have contributed $63,624,000 in cash for an 84% ownership
interest. The Company contributed certain technology (with no net book value) in
exchange for a 16% and 51% ownership interest in CPI as of March 31, 1997 and
1996, respectively. As a result of cash contributions from certain outside
investors, the Company recorded $3,306,000, $7,203,000, $1,384,000 and
$1,667,000 as other income in the consolidated statements of income for the
seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996
and 1995, respectively. CPI incurred losses of $14,219,000, $17,203,000,
$4,718,000 and $216,000 for the seven months ended October 31, 1997 and for the
years ended March 31, 1997, 1996 and 1995, respectively. The Company's
proportionate share of such losses were $2,209,000, $3,998,000, $2,540,000 and
$145,000 and have been recorded as other expense in the consolidated statements
of operations for the seven months ended October 31, 1997 and for the years
ended March 31, 1997, 1996 and 1995, respectively. Management believes that the
Company has the ability to significantly influence the operating and financial
policies of CPI.
CPI executed a public offering of its stock during 1997. At March 31, 1997,
the market value of the Company's investment in CPI totalled $15,203,000. This
amount exceeds the carrying value of the Company's investment by $11,649,000.
In February 1997, Coulter Cellular Therapies, Inc. ("CCTI") was organized
and established for the purpose of researching, developing and marketing medical
technologies to treat cancer using cellular
F-49
<PAGE> 147
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H -- INVESTMENT IN JOINT VENTURES (CONTINUED)
therapeutic monoclonal antibodies. The Company contributed certain technology
(with no net book value) in exchange for a 68% ownership interest in CCTI. A
joint-venture partner contributed cash of $4,675,000 in exchange for the
remaining 32%. As a result of the joint-venture partner's contribution, the
Company recorded $3,179,000 as other income in the consolidated statements of
operations at March 31, 1997. The remaining contribution of $1,496,000 was
recorded as minority interest. From February 1997 to September 1997, CCTI was
consolidated with the Company; however, at October 31, 1997, CCTI was accounted
for using the equity method of accounting.
CCTI incurred losses of $1,935,000 and $246,000 for the seven months ended
October 31, 1997 and for the two months ended March 31, 1997, respectively,
whereby the Company's proportionate share of $1,316,000 and $167,000,
respectively, were charged to the consolidated statements of operations for the
seven months ended October 31, 1997 and for the year ended March 31, 1997,
respectively. At March 31, 1997, CCTI had a cash balance of $4,358,000; other
assets of $221,000; and accrued liabilities of $150,000 which are included in
the consolidated balance sheets at March 31, 1997.
In October 1997, the Board of Directors declared a dividend-in-kind to the
stockholders consisting of the common stock of both CPI and CCTI, 1,666,666 and
4,900,000 shares, respectively. Such stock had a book value of $5,833,000 at
October 31, 1997.
NOTE I -- BUSINESS ACQUISITION
On June 30, 1995, the Company acquired Immunotech, S.A. and subsidiaries
("IOT") which is engaged in the research, development, manufacturing and
distribution of monoclonal antibodies. The principal office of IOT is located in
Marseille, France. This business acquisition was accounted for under the
purchase method of accounting. The total cost of this acquisition was
$25,444,000 which exceeded the fair value of net assets acquired of IOT by
$13,195,000. The excess of cost over fair value of net assets acquired
(goodwill) is recorded in other assets in the consolidated balance sheets and is
being amortized on a straight-line basis over twenty years.
The Company acquired 97% of the common stock and 100% of the outstanding
warrants of IOT. The purchase price was paid in cash, except for $2,000,000
which will be paid in two equal interest-free installments in fiscal years 1998
and 1999. The unpaid purchase price is included in current and long-term debt in
the consolidated balance sheets.
The following summarizes the results of operations of the Company on a
proforma basis (unaudited) with the assumption that IOT was acquired on April 1,
1994 (In thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
Net sales...................................... $702,803 $692,199
======== ========
Net income..................................... $ 33,681 $ 18,265
======== ========
</TABLE>
NOTE J -- SETTLEMENT OF PATENT INFRINGEMENT
In November 1993, the Company agreed to pay a plaintiff $8,000,000 as
consideration to release and discharge the Company from any claims, liabilities
and damage caused by the infringement of certain patents. This amount was
recorded as a settlement of such infringement in the year ended March 31, 1994.
Payments of $8,000,000 have been remitted through March 31, 1997.
F-50
<PAGE> 148
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J -- SETTLEMENT OF PATENT INFRINGEMENT (CONTINUED)
Under the terms of the settlement, the Company is also obligated to pay
royalties on the net sales of certain equipment and related products at a
minimum of $1,000,000 per year through August 1998. For the seven month period
ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995
royalty expense of $1,012,000, $1,722,000, $1,895,000 and $1,848,000,
respectively, was recorded in the consolidated statements of income.
NOTE K -- RESTRUCTURING CHARGES
For the year ended March 31, 1997, the Company recorded estimated domestic
and foreign restructuring charges of $5,947,000. The objective of restructuring
is to reduce future costs and improve operating results. Restructuring included
the termination of certain employees and the discontinuance of certain research
and development activities. The charges consisted primarily of severance and
retirement incentive pay; the cost of extended employees' benefits; and
consulting fees. The Company believes that the accrued restructuring charge is
adequate to cover associated costs. These restructuring charges were included in
accrued liabilities in the consolidated balance sheets at March 31, 1997. The
function and number of employees terminated were as follows:
<TABLE>
<CAPTION>
FUNCTION NUMBER OF EMPLOYEES
-------- -------------------
<S> <C>
Administration.................................... 33
Research & Development............................ 46
Sales & Marketing................................. 25
Manufacturing..................................... 46
---
150
===
</TABLE>
NOTE L -- CHANGE IN STOCKHOLDERS' EQUITY
In August and September 1996, the Company purchased 323 shares of its Class
A and 308 shares of Class B common stock from the estate of a stockholder. The
purchase price per share was $12,222 and $12,338, respectively, resulting in a
total purchase price of $7,747,000 paid in cash. The shares were subsequently
retired and cancelled.
In October 1997, the Company sold 216 shares of its Class A common stock to
the estate of a stockholder. The price per share was $12,222 and resulted in a
total sale price of approximately $2,640,000 in cash.
NOTE M -- BENEFIT PLANS
Postretirement Benefits for Domestic Employees
The Company provides a Healthcare Benefits and Life Insurance Plan (the
"Plan") for retired domestic employees. Substantially all of the Company's
employees become eligible for benefits when they reach the age of 55 and meet
certain service requirements while working for the Company. Generally,
healthcare benefits are provided to individuals when they or their spouse become
eligible for Medicare benefits. Prior to eligibility for Medicare, retirees may
elect coverage if they pay the required participants' contribution.
The domestic accumulated postretirement benefit obligation represents the
present value of the estimated future benefits payable to current retirees and a
pro rata portion of estimated benefits payable to active employees after
retirement. The domestic postretirement benefit cost recorded in the
consolidated statements
F-51
<PAGE> 149
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M -- BENEFIT PLANS (CONTINUED)
of income for the years ended March 31, 1997, 1996 and 1995 includes the
following components (In thousands):
<TABLE>
<CAPTION>
FOR THE SEVEN FOR THE YEAR ENDED MARCH 31,
MONTHS ENDED -----------------------------
OCTOBER 31, 1997 1997 1996 1995
---------------- ------- ------- -------
<S> <C> <C> <C> <C>
Service cost...................................... $ 468 $ 997 $ 810 $ 733
Interest cost..................................... 946 2,221 2,040 2,024
------ ------ ------ ------
$1,414 $3,218 $2,850 $2,757
====== ====== ====== ======
</TABLE>
The Company funds the postretirement benefit costs each year through the
payment of medical claims and insurance premiums. The following table sets forth
the amounts recognized in the Company's consolidated balance sheets at March 31,
1997 and 1996 (In thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................... $13,815 $16,643
Fully eligible active participants..................... 5,194 4,133
Other active participants.............................. 11,151 7,445
------- -------
30,160 28,221
Unrecognized loss...................................... (1,598) (1,925)
------- -------
Accrued postretirement benefit costs................... $28,562 $26,296
======= =======
</TABLE>
Annual net periodic postretirement benefit costs were calculated using the
assumed discount rate of 7.50% for the seven months ended October 31, 1997,
7.75% for fiscal 1997, 8.50% for fiscal 1996 and 8.25% for fiscal 1995. The
accumulated postretirement benefit obligation was determined by using a discount
rate of 7.75% at March 31, 1997 and 1996.
If the healthcare cost trend rate increased by an additional 1.0%, the
accumulated postretirement benefit obligation would have increased by $5,662,000
(or 19%) as of March 31, 1997 and $4,571,000 (or 16%) as of March 31, 1996. The
aggregate of the service and interest cost would have increased by $334,000 (or
24%) for the seven months ended October 31, 1997, $826,000 (or 26%) for fiscal
1997, $707,000 (or 25%) for fiscal 1996 and $427,000 (or 16%) for fiscal 1995.
Savings Incentive and Retirement Plus Plan for Domestic Employees
The Coulter Corporation Savings Incentive and Retirement Plus Plan ("The
Plan") was established on March 31, 1996 by the Company as an amendment and
restatement of the Coulter Corporation Savings Incentive Plan established on
July 1, 1984. The Plan was created to provide various benefits through savings
and retirement contributions.
The Plan meets the requirements of the Employee Retirement Income Security
Act of 1974 ("ERISA") and the Internal Revenue Code Sections 401(a), 401(k) and
501(a). The Plan is exempt from federal income taxation and has received a
favorable tax determination letter from the Internal Revenue Service.
The Savings Incentive Segment ("SI Segment") of The Plan seeks to provide
retirement and other benefits for the employees, systematic savings, to
accumulate funds on a tax advantageous basis and to meet some of the larger
expenses incurred during their careers. The Company makes a matching
contribution equal to 100% of the first 1% of the savings contributions made by
the participant and 50% of the savings contribution from 2% to 6%. Savings
contributions in excess of 6% of annual compensation are not matched by the
Company. Participants' savings contributions and the Company's matching
contribution are paid to the SI
F-52
<PAGE> 150
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M -- BENEFIT PLANS (CONTINUED)
Segment on a monthly basis. For the seven months ended October 31, 1997 and for
the years ended March 31, 1997, 1996 and 1995, the Company's contributions to
the SI Segment of the Plan were $2,750,000, $4,801,000, $4,553,000 and
$4,511,000, respectively.
The Retirement Plus Segment ("RP Segment") of the Plan is a defined
contribution plan designed to provide retirement, disability and death benefits
to employees. Participants may retire at normal retirement age (65) to receive
benefits and those who terminate after completing five years of employment are
fully vested in such benefits. Retirement benefits can be received at an earlier
age. The employer's contributions are based on the age and salary levels of
employees as defined in The Plan and are paid on a quarterly basis. Employees do
not contribute to the RP Segment of The Plan. For the seven months ended October
31, 1997 and for the year ended March 31, 1997, the Company contributed
$3,680,000 and $7,290,000, respectively, to the RP Segment of The Plan.
Defined Benefit Plan for Domestic Employees
On December 31, 1995 and March 31, 1996, the Company curtailed and
terminated, respectively, its defined benefit plan (Coulter Corporation Pension
Plan) for domestic employees. On January 1, 1996, the Coulter Corporation
Retirement Plus Plan ("Plus Plan") was established as a defined contribution
plan. The Plus Plan was funded by employees' rollover contributions from the
terminated plan as well as quarterly contributions paid by the Company. For the
three months ended March 31, 1996, the Company's contributions were $1,681,000.
Effective March 31, 1996, the investment activity, administrative functions
and governmental reporting of the Plus Plan was combined with the Savings
Incentive Plan for improved effectiveness and efficiency.
The termination of the defined benefit plan resulted in a gain of
$3,776,000 which was recorded as other income in the consolidated statement of
operations for the year ended March 31, 1996. At March 31, 1996, the unfunded
defined benefit obligation of $12,270,000 was included in accrued liabilities in
the consolidated balance sheets. Full and final payment of such obligation
occurred in June 1996.
Domestic defined benefit pension costs recorded in the consolidated
statements of operations for the years ended March 31, 1996 and 1995 included
the following components:
<TABLE>
<CAPTION>
U.S. PLAN
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost during the year................................ $ 2,914 $ 3,538
Interest on projected benefit obligation and service cost... 4,889 5,675
Expected return on Plan assets.............................. (3,039) (2,968)
Amortization of unrecognized net assets at transition....... (237) (315)
Loss on net assets during the year deferred for future
recognition............................................... -- (713)
Amortization of unrecognized prior service cost and
losses.................................................... 157 259
------- -------
$ 4,684 $ 5,476
======= =======
</TABLE>
F-53
<PAGE> 151
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M -- BENEFIT PLANS (CONTINUED)
The following sets forth the unfunded status of the domestic plan at March
31, 1996:
<TABLE>
<CAPTION>
U.S. PLAN
1996
--------------
(IN THOUSANDS)
<S> <C>
Actuarial present value of benefit obligation:
Vested benefits........................................... $16,059
Nonvested benefits........................................ 566
-------
Accumulated benefit obligation.............................. 16,625
Fair value of assets held in the Plan....................... (4,355)
-------
Unfunded defined benefit obligation included in accrued
liabilities............................................... $12,270
=======
</TABLE>
The above amounts of the defined benefit obligation were measured based on
the following assumptions:
<TABLE>
<CAPTION>
U.S. PLAN
1996
---------
<S> <C>
Discount rate:
Pre-retirement............................................ 7.4%
Post-retirement........................................... 7.4%
</TABLE>
Defined Benefit Plans for Foreign Employees
The Company also sponsors noncontributory and contributory defined benefit
plans (the "Plans") covering certain foreign employees. The Plans call for
benefits to be paid to eligible employees at retirement based primarily upon
age, years of service and compensation rate. Disability and death benefits are
also available.
The Company's funding policy is to contribute as required by income tax
laws. Contributions to the Plans reflect benefits attributed to employees'
services to date, as well as services expected to be earned in the future.
Assets of the Plans consist primarily of common and preferred stocks, investment
grade corporate bonds, government obligations and short-term money market
instruments.
Net foreign pension costs recorded in the Company's consolidated statements
of income included the following components for the seven months ended October
31, 1997 and for the years ended March 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
FOREIGN PLANS
--------------------------------------------------
FOR THE
SEVEN MONTHS FOR THE YEAR ENDED MARCH 31,
ENDED OCTOBER 31, -----------------------------
1997 1997 1996 1995
----------------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost during the
year........................ $ 1,313 $ 2,299 $ 2,221 $ 2,065
Interest on projected benefit
obligation and service
cost........................ 1,728 2,805 2,795 2,317
Expected return on Plans
assets...................... (2,089) (4,387) (5,701) (2,612)
Amortization of unrecognized
net assets at transition.... (97) (143) (115) (119)
(Loss) gain on net assets
during the year deferred for
future recognition.......... (265) 818 2,875 305
------- ------- ------- -------
$ 590 $ 1,392 $ 2,075 $ 1,956
======= ======= ======= =======
</TABLE>
F-54
<PAGE> 152
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M -- BENEFIT PLANS (CONTINUED)
The following sets forth the funded status of the Plans and the amounts
shown in the Company's consolidated balance sheets at March 31, 1997 and 1996:
<TABLE>
<CAPTION>
FOREIGN PLANS
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits............................................ $28,824 $25,305
Nonvested benefits......................................... 2,415 2,322
------- -------
Accumulated benefit obligation............................. 31,239 27,627
Effect of anticipated future compensation levels........... 9,617 8,981
------- -------
Projected benefit obligation............................... 40,856 36,608
Fair value of assets held in the Plans..................... 45,006 39,563
------- -------
Funded excess of projected benefit obligation over fair
value of assets held in the Plans........................ (4,150) (2,955)
Net unrecognized gain from past experience different from
that assumed and effects of changes in assumptions....... 10,076 8,889
Unrecognized prior service cost............................ (918) (667)
Unrecognized net assets at transition...................... 1,874 1,652
Pension costs included in accrued liabilities.............. (151) (395)
------- -------
Accrued pension costs...................................... $ 6,731 $ 6,524
======= =======
</TABLE>
The above amounts of the projected benefit obligation are measured based on
the following assumptions:
<TABLE>
<CAPTION>
FOR THE SEVEN MONTHS FOR THE YEAR ENDED MARCH 31,
ENDED OCTOBER 31, -----------------------------
1997 1997 1996
-------------------- ------------- -------------
<S> <C> <C> <C>
Discount rate:
Pre-retirement.................................... 4.0 - 7.0% 4.0 - 8.0% 5.5 - 8.5%
Post-retirement................................... 4.0 - 7.0% 4.0 - 8.0% 5.5 - 8.5%
Weighted-average rate of compensation increase...... 3.0 - 5.0% 3.0 - 6.0% 3.0 - 6.5%
Weighted-average of expected long-term rate of
return on Plans assets............................ 3.0 - 8.0% 3.0 - 8.5% 3.0 - 8.5%
Straight-line amortization of unrecognized net
assets at transition.............................. 16 - 20 yrs. 16 - 20 yrs. 16 - 20 yrs.
</TABLE>
NOTE N -- SIGNIFICANT CUSTOMER
During the seven months ended October 31, 1997 and the years ended March
31, 1997, 1996 and 1995, a customer accounted for approximately 17%, 17%, 16%,
and 14%, respectively, of total Company revenues. At March 31, 1997 and 1996
amounts due from this customer aggregated $22,726,000 and $19,766,000 and are
included in accounts receivable in the accompanying consolidated balance sheets.
F-55
<PAGE> 153
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O -- SALE OF THE COMPANY
Effective November 1, 1997, the Company was acquired by Beckman
Instruments, Inc. (Beckman) who purchased 100% of the outstanding shares of the
Company's common stock pursuant to a Stock Purchase Agreement, dated August 29,
1997. The purchase price was $875,000,000 in cash, the assumption of
approximately $180,000,000 of indebtedness and $100,000,000 of other
obligations.
As of October 31, 1997, the Company recorded a payable due to Beckman for
$109,674,000 since certain of the Company's indebtedness had been extinguished
by Beckman. No repayment terms have been determined, however interest of 7% per
annum is being charged to the Company.
NOTE P -- INCOME TAXES
The provision for income taxes for the seven months ended October 31, 1997
and for the years ended March 31, 1997, 1996 and 1995, includes the following
components:
<TABLE>
<CAPTION>
FOR THE SEVEN MONTHS FOR THE YEAR ENDED MARCH 31,
ENDED OCTOBER 31, ----------------------------
1997 1997 1996 1995
-------------------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current income tax expense
U.S. Federal................................ $ 4,989 $ 1,230 $ 143 $1,932
U.S. state and local........................ 1,766 383 200 499
Foreign..................................... 5,875 8,490 9,007 4,791
------- ------- ------- ------
12,630 10,103 9,350 7,222
------- ------- ------- ------
Deferred income tax (benefit) expense
U.S. Federal................................ (3,882) (4,000) (4,200) --
U.S. state and local........................ (405) (500) (600) --
Foreign..................................... 715 (70) 78 285
------- ------- ------- ------
(3,572) (4,570) (4,722) 285
------- ------- ------- ------
Provision for income taxes.................... $ 9,058 $ 5,533 $ 4,628 $7,507
======= ======= ======= ======
</TABLE>
F-56
<PAGE> 154
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE P -- INCOME TAXES (CONTINUED)
The following is a summary of the Company's deferred tax asset (liability)
positions at March 31, 1997 and 1996 (In thousands):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Nondeductible reserves:
Postretirement benefits...................... $ -- $ 10,853 $ -- $ 9,992
Warranty and installation.................... 4,921 -- 4,112 --
Inventories.................................. 5,407 -- 4,860 --
Vacation..................................... 4,093 -- 3,911 --
Unrealized foreign exchange gain............. (750) -- (1,014) --
Other........................................ 5,463 5,094 2,977 2,662
Excess of book over tax basis of net assets
used in leasing operations................... -- (11,669) -- (13,016)
Excess of book over tax basis of investments in
joint-ventures............................... -- (3,563) -- --
U.S. tax credit carryforwards.................. 900 19,900 -- 25,000
------- -------- ------- --------
20,034 20,615 14,846 24,638
Valuation allowance............................ (6,392) (21,205) (4,923) (25,457)
------- -------- ------- --------
$13,642 $ (590) $ 9,923 $ (819)
======= ======== ======= ========
</TABLE>
The current portion of deferred tax assets is included in prepaid expenses
and other current assets in the accompanying consolidated balance sheets. At
March 31, 1997, it includes $10,700,000 related to domestic operations and
$2,942,000 related to foreign operations (primarily operations in Japan). At
March 31, 1997, the non-current portion consists of a deferred tax asset of
$3,524,000, relating to operations in France and the U.S., which is included in
other assets, and a deferred tax liability of $4,114,000, which is reported as a
separate line item on the accompanying consolidated balance sheets.
The Company has recognized its domestic current and non-current deferred
tax assets derived from temporary books/tax differences as it expects to
generate sufficient taxable income in the future to realize these benefits. Such
deferred tax assets have been calculated using regular tax rates with a
corresponding reduction, through the valuation allowance, to reflect the
deferred tax assets at the lower alternative minimum tax rate. Domestic deferred
tax assets derived from tax credit carryforwards in the amount of $900,000 are
included in prepaid expenses, as such credits are projected to be utilized next
year. Other Domestic deferred tax assets derived from tax credit carryforwards
have been fully reserved, however, through the valuation allowance, due to
uncertainties regarding the Company's ability to generate sufficient taxable
income in the U.S. and limitations on the recognition of certain credit
carryforwards under U.S. tax laws. The deferred tax assets relating to
operations in France and Japan have been recognized, as in the opinion of
management it is more likely than not that the foreign subsidiaries to which the
deferred assets relate will generate sufficient taxable income to realize such
deferred tax assets. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of the future taxable
income necessary to realize such assets are reduced.
F-57
<PAGE> 155
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE P -- INCOME TAXES (CONTINUED)
Below is a summary showing the amounts and expiration dates of the tax
credit carryforwards available on a tax basis to reduce future U.S. consolidated
federal income tax liabilities (In thousands):
<TABLE>
<CAPTION>
YEAR OF FOREIGN TAX INVESTMENT TAX R & D TAX
EXPIRATION CREDIT CREDIT CREDIT
- ---------- ----------- -------------- ---------
<S> <C> <C> <C>
1999 $1,158 $ -- $ --
2000 -- 1 1,400
2001 1,655 173 100
2002 -- -- 500
2003 -- -- 300
2004 -- -- 1,000
2005 -- -- 1,100
2006 -- -- 600
2007 -- -- 900
2008 -- -- 1,200
2009 -- -- 1,500
2010 -- -- 2,100
2011 -- -- 600
2012 -- -- 1,600
------ ---- -------
$2,813 $174 $12,900
====== ==== =======
</TABLE>
On an Alternative Minimum Tax ("AMT") basis, the carryforwards are the same
as above, except for the foreign tax credit. The AMT foreign tax credit
carryforward is $2,300,000 expiring in 1998, $2,200,000 expiring in 1999,
$700,000 expiring in 2000, $2,400,000 expiring in 2001 and $1,463,000 expiring
in 2002. The minimum tax credit carryforward is $4,900,000 and may be carried
forward indefinitely.
The difference between the reported tax provision and the provision
computed by applying the statutory U.S. federal income tax rate currently in
effect to income before income taxes for the seven months ended October 31, 1997
and for each of the three years ended March 31, 1997, is primarily due to the
effect of AMT, state and foreign income tax rates and the tax impact of the gain
on distribution of stock to shareholders of $5,332,000 for the seven months
ended October 31, 1997. Additionally, the Company recognized deferred tax
benefits related to changes in the valuation allowance of $2,300,000,
$4,500,000, $4,800,000 and $1,800,000 for the seven months ended October 31,
1997 and for the years ended March 31, 1997, 1996 and 1995, respectively.
A provision has not been made for U.S. income taxes, or additional foreign
income taxes, on undistributed earnings of foreign subsidiaries. It is not
practicable to estimate the amount of additional tax that might be payable on
the foreign earnings, however, the Company believes that U.S. foreign tax
credits would largely eliminate any U.S. tax and offset any foreign tax on such
earnings.
The Company's U.S. federal income tax returns for the years 1991 through
1993 are currently under review by the Internal Revenue Service ("IRS"). In the
opinion of management, the final result of the IRS's audit will not have a
material adverse effect on the Company's financial position or results of
operations.
The Company's subsidiary in Brazil is contesting a tax assessment issued
several years ago, covering 1989 through 1991. At this time, it is not possible
to estimate the amount of any additional tax liability. However, in the opinion
of management, the ultimate liability will be substantially offset by available
net operating loss carryforwards and will not have a material impact on the
Company's financial position and results of operations.
F-58
<PAGE> 156
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE Q -- COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases a substantial portion of its warehouse, office space,
production and office equipment under long-term, noncancellable operating
leases. Rental expense was approximately $10,111,000 in the seven months ended
October 1997, $11,350,000 in fiscal 1997, $11,744,000 in fiscal 1996 and
$11,722,000 in fiscal 1995.
As of March 31, 1997, commitments for base rentals for operating leases and
future payments for computer services rendered by an independent management
information systems company, excluding taxes and insurance, are as follows (In
thousands):
<TABLE>
<S> <C>
1998.............................................. $ 6,232
1999.............................................. 4,065
2000.............................................. 1,136
2001.............................................. 847
2002.............................................. 646
Thereafter........................................ 1,407
-------
$14,333
=======
</TABLE>
Legal Matters
In January, 1996, the Company notified Hematronix, Inc. ("Hematronix"), a
competitive reagent manufacturer, that it believed Hematronix was selling
certain reagents and controls that infringed certain Company owned patents. In
response to these claims by the Company, Hematronix filed a complaint on April
15, 1996 in the United States District Court for the Eastern District of
California against the Company. The complaint seeks a declaratory judgment that
certain patents of the Company are invalid and thus not infringed. The complaint
also includes antitrust and related business tort claims regarding the Company's
sales and leasing activities. Currently at issue are four (4) United States
patents and the various antitrust claims raised by Hematronix. The Company has
counterclaimed that Hematronix has willfully infringed each of the patents at
issue. In addition, the Company has answered Hematronix's antitrust complaint
and denied violation of any of the antitrust laws or business tort claims set
forth by Hematronix in the complaint.
A trial is set for 1998. The patent infringement matter will be tried first
and the antitrust issues will be tried in a separate trial. The Company's
management believes that it will prevail with regard to the infringement matters
in the patent actions, and that as a result of such finding the antitrust case
will not go forward. The Company is seeking a permanent injunction with regard
to the patents claimed to be infringed and reasonable royalties resulting from
such infringement.
Certain other claims, suits and complaints in the ordinary course of
business have been filed or are pending against the Company. In the opinion of
management, all such matters are without merit or are of such kind and involve
such amounts that their resolution, net of related insurance coverage, would not
have a material effect on the consolidated financial position or results of
operations of the Company.
Long Term Incentive Plan
Effective April 1, 1995, the Company established a Long Term Performance
Plan (the "LTPP") to inspire and reinforce outstanding performance in selected
key employees whose efforts contribute substantially to the achievement of the
Company's long term goals and objectives. The LTPP provides for financial awards
to certain employees based on the Company's achievement of certain financial
objectives during the cumulative period from April 1, 1995 to March 31, 1998.
The Company has accrued $3,800,000 and $1,500,000 related to the LTPP as of
March 31, 1997 and 1996, respectively. These amounts are included in accrued
liabilities in the accompanying consolidated balance sheets.
F-59
<PAGE> 157
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT
On March 4, 1998, Beckman Instruments, Inc (the Company's parent subsequent
to the acquisition discussed in note O to the financial statements) issued $160
million of 7.10% Senior Notes due 2003 and $240 million of 7.45% Senior Notes
due 2008 (the "Offering"). In connection with the Offering, certain subsidiaries
of Coulter Corporation jointly, fully, severally, and unconditionally guaranteed
the Senior notes. Supplemental condensed financial information of the Guarantor
Subsidiaries and Non-Guarantor Subsidiaries, each on a combined basis is
presented below. These financial statements are prepared using the equity method
of accounting for the Guarantor Subsidiaries' investments in subsidiaries. This
supplemental financial information should be read in conjunction with the
Consolidated Financial Statements.
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1997
Assets:
Cash and cash equivalents.................... $ 9,576 $ 19,206 $ 28,782
Accounts receivable, net..................... 71,168 118,316 189,484
Inventories.................................. 82,459 43,494 $ (8,451) 117,502
Other assets................................. 52,248 26,249 (33,299) 45,198
-------- -------- --------- --------
Total current assets................. 215,451 207,265 (41,750) 380,966
Property, plant, and equipment, net.......... 74,789 56,270 131,059
Other assets................................. 143,932 70,970 (127,879) 87,023
-------- -------- --------- --------
Total assets......................... $434,172 $334,505 $(169,629) $599,048
======== ======== ========= ========
Liabilities:
Notes payable and current maturities of
long-term debt............................ 36,743 20,119 56,862
Accounts payable and accrued liabilities..... 82,293 49,887 132,180
Other liabilities............................ 28,053 61,351 (33,299) 56,105
-------- -------- --------- --------
Total current liabilities............ 147,089 131,357 (33,299) 245,147
Long-term debt, less current maturities...... 103,076 46,942 150,018
Other liabilities............................ 33,493 24,359 (5,958) 51,894
-------- -------- --------- --------
Total liabilities.................... 283,658 202,658 (39,257) 447,059
Minority interests............................. 1,417 1,475 2,892
Stockholders' equity........................... 149,097 130,372 (130,372) 149,097
-------- -------- --------- --------
Total liabilities and stockholders'
equity............................. $434,172 $334,505 $(169,629) $599,048
======== ======== ========= ========
</TABLE>
F-60
<PAGE> 158
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT (CONTINUED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1996
Assets:
Cash and cash equivalents.................... $ 9,109 $ 32,177 $ 41,286
Accounts receivable, net..................... 59,880 113,627 173,507
Inventories.................................. 69,158 43,039 $ (8,331) 103,866
Other assets................................. 49,788 19,267 (27,721) 41,334
-------- -------- --------- --------
Total current assets................. 187,935 208,110 (36,052) 359,993
Property, plant, and equipment, net.......... 64,654 41,261 105,915
Other assets................................. 149,929 86,807 (142,600) 94,136
-------- -------- --------- --------
Total assets......................... $402,518 $336,178 $(178,652) $560,044
======== ======== ========= ========
Liabilities:
Notes payable and current maturities of
long-term debt............................ 39,549 24,010 63,559
Accounts payable and accrued expenses........ 96,837 51,628 148,465
Other liabilities............................ 26,938 68,164 (35,643) 59,459
-------- -------- --------- --------
Total current liabilities............ 163,324 143,802 (35,643) 271,483
Note payable and long-term debt, less current
maturities................................ 62,159 31,286 93,445
Other liabilities............................ 31,249 18,777 (1,868) 48,158
-------- -------- --------- --------
Total liabilities.................... 256,732 193,865 (37,511) 413,086
Minority interests............................. 703 1,172 1,875
Stockholders' equity........................... 145,083 141,141 (141,141) 145,083
-------- -------- --------- --------
Total liabilities and stockholders'
equity............................. $402,518 $336,178 $(178,652) $560,044
======== ======== ========= ========
</TABLE>
F-61
<PAGE> 159
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT (CONTINUED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997
Net sales...................................... $259,443 $212,473 $ (84,428) $387,488
Operating costs and expenses
Cost of sales................................ 150,642 139,619 (86,287) 203,974
Selling, general, and administrative
expenses.................................. 78,567 54,194 132,761
Research and development charges............. 40,016 403 40,419
-------- -------- --------- --------
Operating (loss) income................. (9,782) 18,257 1,859 10,334
Non operating (income) expenses................ (11,397) (62) 13,757 2,298
-------- -------- --------- --------
Income before provision for income taxes....... 1,615 18,319 (11,898) 8,036
Provision for income taxes................... 2,637 6,420 1 9,058
-------- -------- --------- --------
Net (loss) income.............................. $ (1,022) $ 11,899 $ (11,899) $ (1,022)
======== ======== ========= ========
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
Net sales...................................... $464,020 $392,310 $(155,443) $700,887
Operating costs and expenses
Cost of sales................................ 272,631 262,183 (161,390) 373,424
Selling, general, and administrative
expenses.................................. 118,545 99,345 217,890
Research and development charges............. 80,276 5,511 85,787
Restructuring charges........................ 5,002 945 5,947
-------- -------- --------- --------
Operating (loss) income................. (12,434) 24,326 5,947 17,839
Nonoperating (income) expenses................. (24,141) 2,116 19,723 (2,302)
-------- -------- --------- --------
Income before provision for income taxes....... 11,707 22,210 (13,776) 20,141
Provision for income taxes................... (2,901) 8,668 (234) 5,533
-------- -------- --------- --------
Net income..................................... $ 14,608 $ 13,542 $ (13,542) $ 14,608
======== ======== ========= ========
</TABLE>
F-62
<PAGE> 160
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT (CONTINUED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
Net sales...................................... $434,989 $396,092 $(145,761) $685,320
Operating costs and expenses
Cost of sales................................ 240,735 259,733 (151,276) 349,192
Selling, general, and administrative
expenses.................................. 116,381 100,539 216,920
Research and development charges............. 83,748 3,604 87,352
-------- -------- --------- --------
Operating (loss) income................. (5,875) 32,216 5,515 31,856
Nonoperating (income) expenses................. (34,693) 3,714 25,168 (5,811)
-------- -------- --------- --------
Income before provision for income taxes....... 28,818 28,502 (19,653) 37,667
Provision for income taxes................... (4,221) 9,340 (491) 4,628
-------- -------- --------- --------
Net income..................................... $ 33,039 $ 19,162 $ (19,162) $ 33,039
======== ======== ========= ========
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1995
Net sales...................................... $444,369 $354,539 $(144,651) $654,257
Operating costs and expenses
Cost of sales................................ 244,969 245,324 (149,799) 340,494
Selling, general, and administrative
expenses.................................. 114,329 90,496 204,825
Research and development charges............. 73,382 72 73,454
-------- -------- --------- --------
Operating income........................ 11,689 18,647 5,148 35,484
Nonoperating (income) expenses................. (8,337) 901 18,090 10,654
-------- -------- --------- --------
Income before provision for income taxes....... 20,026 17,746 (12,942) 24,830
Provision for income taxes................... 2,703 5,002 (198) 7,507
-------- -------- --------- --------
Net (loss) income.............................. $ 17,323 $ 12,744 $ (12,744) $ 17,323
======== ======== ========= ========
</TABLE>
F-63
<PAGE> 161
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT (CONTINUED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------------ ------------- ------------
<S> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997
Net cash provided by operating activities................. $ 5,095 $ 31,677 $ 36,772
-------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..... 894 1,089 1,983
Capital expenditures.................................... (12,734) (5,242) (17,976)
Finance lease receivables originated.................... (19,839) 257 (19,582)
Principal payments received from finance lease
receivables.......................................... 19,225 (3,933) 15,292
Dividends (paid) received............................... 7,768 (7,768) --
Investments and acquisitions............................ 646 (646) --
Decrease in minority interests.......................... (1,417) (114) (1,531)
-------- --------- ---------
Net cash used by investing activities..................... (5,457) (16,357) (21,814)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................ 7,879 39,960 47,839
Principal payments of long-term debt.................... (59,291) (118,966) (178,257)
Principal payments of note payable due to stockholder... (18,550) 18,550 --
Proceeds from Beckman Instruments, Inc.................. 109,674 109,674
Proceeds from sale of stock............................. 2,640 2,640
Net (payments) proceeds from notes payable and foreign
bank overdraft facilities............................ (57,603) 57,304 (299)
Capitalization of intercompany debt..................... 6,037 (6,037) --
-------- --------- ---------
Net cash used in financing activities..................... (9,214) (9,189) (18,403)
-------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. -- (586) (586)
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents...... (9,576) 5,545 (4,031)
Cash and cash equivalents at beginning of year............ 9,576 19,206 28,782
-------- --------- ---------
Cash and cash equivalents at end of year.................. $ -- $ 24,751 $ 24,751
======== ========= =========
</TABLE>
F-64
<PAGE> 162
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT (CONTINUED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------------ ------------- ------------
<S> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1997
Net cash provided by (used in) operating activities....... $(22,524) $ 14,162 $ (8,362)
-------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..... 1,348 2,234 3,582
Capital expenditures.................................... (26,731) (31,286) (58,017)
Finance lease receivables originated.................... (10,833) (10,833)
Principal payments received from finance lease
receivables.......................................... 15,339 15,339
Dividends (paid) received............................... 14,628 (14,628) --
Investments and acquisitions............................ (724) 724 --
Increase in minority interests.......................... 714 303 1,017
-------- --------- ---------
Net cash used in investing activities..................... (6,259) (42,653) (48,912)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................ 212,001 26,157 238,158
Principal payments of long-term debt.................... (170,890) (11,384) (182,274)
Principal payments of note payable due to stockholder... (3,000) (3,000)
Purchase of treasury stock.............................. (7,747) (7,747)
Bank overdraft facilities............................... 2,030 2,030
Capitalization of intercompany debt..................... (1,114) 1,114 --
-------- --------- ---------
Net cash provided by financing activities................. 29,250 17,917 47,167
-------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. -- (2,397) (2,397)
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents...... 467 (12,971) (12,504)
Cash and cash equivalents at beginning of year............ 9,109 32,177 41,286
-------- --------- ---------
Cash and cash equivalents at end of year.................. $ 9,576 $ 19,206 $ 28,782
======== ========= =========
</TABLE>
F-65
<PAGE> 163
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R -- SUBSEQUENT EVENT (CONTINUED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------------ ------------- ------------
<S> <C> <C> <C>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996
Net cash provided by operating activities................. $ 5,659 $ 42,515 $ 48,174
-------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..... 1,569 2,545 4,114
Capital expenditures.................................... (18,693) (12,374) (31,067)
Finance lease receivables originated.................... (17,685) (17,685)
Principal payments received from finance lease
receivables.......................................... 29,677 29,677
Dividends (paid) received............................... 9,595 (9,595) --
Payment for business acquisition, net of cash
acquired............................................. (5,950) (16,248) (22,198)
(Decrease) increase in minority interests............... (59) 376 317
-------- --------- ---------
Net cash used in investing activities..................... (1,546) (35,296) (36,842)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................ 124,575 17,494 142,069
Principal payments of long-term debt.................... (120,357) (14,262) (134,619)
Bank overdraft facilities............................... (2,890) (2,890)
Capitalization of intercompany debt..................... (6,990) 6,990 --
-------- --------- ---------
Net cash (used in) provided by financing activities....... (2,772) 7,332 4,560
-------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. 41 (9,605) (9,564)
-------- --------- ---------
Increase in cash and cash equivalents..................... 1,382 4,946 6,328
Cash and cash equivalents at beginning of year............ 7,727 27,231 34,958
-------- --------- ---------
Cash and cash equivalents at end of year.................. $ 9,109 $ 32,177 $ 41,286
======== ========= =========
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1995
Net cash provided by operating activities................. $ 44,156 $ 7,245 $ 51,401
-------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment..... 4,224 318 4,542
Capital expenditures.................................... (26,655) (4,431) (31,086)
Finance lease receivables originated.................... (22,098) (22,098)
Principal payments received from finance lease
receivables.......................................... 27,772 27,772
Dividends (paid) received............................... 5,943 (5,943) --
Increase in minority interests.......................... 762 762
-------- --------- ---------
Net cash used in investing activities..................... (10,052) (10,056) (20,108)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................ 64,610 9,836 74,446
Principal payments of long-term debt.................... (96,549) (12,003) (108,552)
Bank overdraft facilities............................... 4,623 4,623
-------- --------- ---------
Net cash (used in) provided by financing activities....... (31,939) 2,456 (29,483)
-------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. 274 11,647 11,921
-------- --------- ---------
Net increase in cash and cash equivalents................. 2,439 11,292 13,731
Cash and cash equivalents at beginning of year............ 5,288 15,939 21,227
-------- --------- ---------
Cash and cash equivalents at end of year.................. $ 7,727 $ 27,231 $ 34,958
======== ========= =========
</TABLE>
F-66
<PAGE> 164
COULTER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
NET SALES................................................... $330,279 $316,749
COST OF SALES............................................... 172,651 163,431
-------- --------
Gross profit...................................... 157,628 153,318
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 108,262 108,890
RESEARCH AND DEVELOPMENT EXPENSES........................... 36,873 43,010
-------- --------
Operating income.................................. 12,493 1,418
-------- --------
OTHER EXPENSE (INCOME):
Interest expense.......................................... 6,541 6,030
Interest income........................................... (4,204) (4,053)
Foreign exchange gain..................................... (2,092) (72)
Other, net................................................ 3,460 (848)
-------- --------
3,705 1,057
-------- --------
Income before provision for income taxes.......... 8,788 361
PROVISION FOR INCOME TAXES.................................. 2,374 95
-------- --------
Net income........................................ $ 6,414 $ 266
======== ========
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these statements.
F-67
<PAGE> 165
COULTER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 6,414 $ 266
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 12,478 11,828
Provision for doubtful accounts......................... 1,526 1,140
Provision for inventory obsolescence.................... 7,146 6,451
Provision for postretirement benefit costs.............. 1,541 1,622
Deferred income tax benefit............................. (3,474) (5,240)
Loss on disposal of property, plant and equipment....... 335 146
Unrealized foreign exchange loss on forward contracts... 1,459 983
CHANGE IN ASSETS AND LIABILITIES:
(Increase) decrease in --
Accounts receivable..................................... 28,867 16,642
Inventories............................................. (10,270) (27,933)
Refundable income taxes................................. (894) (46)
Prepaid expenses and other current assets............... (1,780) (2,316)
Other assets............................................ (3,018) (823)
Increase (decrease) in --
Accounts payable........................................ (7,136) (10,876)
Accrued liabilities..................................... (493) (26,552)
Income taxes payable.................................... 1,789 926
Estimated warranty costs................................ (1,833) (2,497)
Unearned service contract revenue....................... (1,438) (407)
Accrued pension costs................................... 345 14
Accrued postretirement benefit costs.................... (238) (326)
Long-term unearned service contract revenue............. (1,565) (967)
-------- --------
Net cash provided by (used in) operating activities..... 29,761 (37,965)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment....... 2,549 4,076
Capital expenditures...................................... (14,367) (36,899)
Finance receivables originated............................ (14,126) (4,730)
Principal payments received from finance receivables...... 13,318 10,129
Decrease in minority interests............................ (777) (508)
-------- --------
Net cash used in investing activities............... (13,403) (27,932)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 32,498 86,461
Principal payments of long-term debt...................... (47,812) (30,167)
Principal payments of notes payable due to stockholder.... (1,000) (1,000)
Purchase of treasury stock................................ -- (7,747)
Net proceeds from notes payable and foreign bank overdraft
facilities.............................................. 85 390
-------- --------
Net cash (used in) provided by financing activities..... (16,229) 47,937
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (1,823) (1,834)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (1,694) (19,794)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD........ 28,782 41,286
-------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.............. $ 27,088 $ 21,492
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest................................................ $ 6,681 $ 7,043
======== ========
Income taxes............................................ $ 2,910 $ 6,727
======== ========
</TABLE>
The accompanying notes to unaudited condensed consolidated financial statements
are an integral part of these statements.
F-68
<PAGE> 166
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. REPORT BY MANAGEMENT
The accompanying unaudited condensed financial statements of Coulter
Corporation and subsidiaries (the "Company") have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information related to the Company's organization,
significant accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited condensed financial
statements reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly state the financial
position and the results of operations for the periods presented and the
disclosures herein are adequate to make the information presented not
misleading. Operating results for the interim periods presented are not
indicative of the results that can be expected for a full year.
The Company's latest fiscal year ended on March 31, 1997. The accompanying
unaudited condensed financial statements have been prepared in connection with a
proposed business combination with Beckman Instruments, Inc. ("Beckman") (see
Note 5) and reflect results for the six months ended September 30, 1997 and
1996.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.
3. RESTRUCTURING CHARGES
During the year ended March 31, 1997 the Company recorded restructuring
charges of $5,947,000. The objective of the charges was to reduce future costs
and improve operating results. The charge consisted primarily of severance and
retirement incentive pay; the cost of extended employees' benefits; and
consulting fees. The restructuring costs remaining to be paid at March 31, 1997
were $5,713,000 and are included in accrued liabilities in the March 31, 1997
condensed consolidated balance sheet. For the six-month period ended September
30, 1997, $4,853,000 was charged against this accrual.
4. COMMITMENTS AND CONTINGENCIES
Legal Matters
In January, 1996, the Company notified Hematronix, Inc. ("Hematronix"), a
competitive reagent manufacturer, that it believed Hematronix was selling
certain reagents and controls that infringe certain Coulter owned patents. In
response to these claims by the Company, Hematronix filed a complaint on April
15, 1996 in the United States District Court for the Eastern District of
California against the Company. The complaint seeks a declaratory judgment that
certain patents of the Company are invalid and thus not infringed. The complaint
also includes antitrust and related business tort claims regarding the Company's
sales and leasing activities. Currently at issue are four (4) United States
patents and the various antitrust claims raised by Hematronix. The Company has
counterclaimed that Hematronix has willfully infringed each of the patents at
issue. In addition, the Company has answered Hematronix's antitrust complaint
and denied violation of any of the antitrust laws or business tort claims set
forth by Hematronix in the complaint.
A trial is set for 1998. The patent infringement matter will be tried first
and the antitrust issues will be tried in a separate trial. The Company's
management believes that it will prevail with regard to the infringement matters
in the patent actions, and that as a result of such finding the antitrust case
will not go
F-69
<PAGE> 167
COULTER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
forward. The Company is seeking a permanent injunction with regard to the
patents claimed to be infringed and reasonable royalties resulting from such
infringement.
Certain other claims, suits and complaints in the ordinary course of
business have been filed or are pending against the Company. In the opinion of
management, all such matters are without merit or are of such kind and involve
such amounts that their resolution, net of related insurance coverage, would not
have a material effect on the consolidated financial position or results of
operations of the Company.
Taxes
A provision has not been made for U.S. income taxes, or additional foreign
income taxes, on undistributed earnings of foreign subsidiaries. It is not
practicable to estimate the amount of additional tax that might be payable on
the foreign earnings, however, the Company believes that U.S. foreign tax
credits would largely eliminate any U.S. tax and offset any foreign tax on such
earnings.
The Company's subsidiary in Brazil is contesting a tax assessment issued
several years ago, covering 1989 through 1991. At this time, it is not possible
to estimate the amount of any additional tax liability. However, in the opinion
of management, the ultimate liability will be substantially offset by available
net operating loss carryforwards and will not have a material impact on the
Company's financial position and results of operations.
The Company's U.S. federal income tax returns for the years 1991 through
1993 are currently under review by the Internal Revenue Service ("IRS"). In the
opinion of management, the final result of the IRS's audit will not have a
material adverse effect on the Company's financial position or results of
operations.
Employment Agreements
The Company maintains employment agreements (the "Employment Agreements")
with certain executives. These Employment Agreements provide for severance
payments in the event these executives are involuntarily terminated following a
change of control of the Company (as defined). The Employment Agreements have
terms which range from one to three years.
5. PURCHASE AGREEMENT
On August 29, 1997, the Company and its stockholders entered into a Stock
Purchase Agreement (the "Agreement") with Beckman Instruments, Inc. ("Beckman").
In connection with the Agreement, Beckman will acquire all of the Company's
shares in exchange for $875 million in cash and the assumption of liabilities.
Beckman, a Delaware corporation, provides systems, chemistries, software and
supplies, which automate and simplify biological analysis for use in life
science and clinical diagnostics laboratories. The merger is intended to be
accounted for under the purchase accounting method. Completion of the
transaction is subject to, among other things, regulatory approvals.
In the event the Agreement receives all required approvals, the Company
anticipates incurring liabilities related to the accelerated achievement of
certain incentive plans and the granting of other discretionary bonus awards for
its U.S. and foreign employees. The Company estimates that it will incur a total
liability of approximately $100 million related to these programs.
6. SUBSEQUENT EVENTS
On October 20, 1997, the Board of Directors agreed to distribute as a
dividend all of the Company's shares of Coulter Pharmaceuticals, Inc. and 4.9
million shares of Coulter Cellular Therapies, Inc. to the respective
shareholders of record as of October 30, 1997. This distribution was completed
on November 14, 1997. In connection with this transaction, the Company expects
to incur a tax liability of $5 million.
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<PAGE> 168
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
THE LETTER OF TRANSMITTAL IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE
EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN ANY
CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 1
Risk Factors............................... 13
The Exchange Offer......................... 19
Use of Proceeds............................ 26
The Acquisition............................ 27
Capitalization............................. 28
Pro Forma Financial Statements............. 29
Selected Historical Financial Information
of Beckman............................... 34
Selected Historical Financial Information
of Coulter............................... 35
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations............................... 36
Business................................... 48
Management................................. 60
Description of Credit Facility............. 62
Description of Notes....................... 64
Certain United States Federal Tax
Considerations........................... 90
Plan of Distribution....................... 90
Available Information...................... 91
Incorporation of Certain Documents by
Reference................................ 91
Legal Matters.............................. 91
Independent Public Accountants............. 92
Index to Financial Statements.............. F-1
=================================================
</TABLE>
============================================================
BECKMAN
COULTER, INC.
OFFER TO EXCHANGE
7.10% SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING
7.10% SENIOR NOTES DUE 2003
AND
7.45% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING
7.45% SENIOR NOTES DUE 2008
----------------
PROSPECTUS
----------------
, 1998
============================================================
<PAGE> 169
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Third Restated Certificate of Incorporation provides that
a director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to the
registrant 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 (the "DGCL"), or (iv) for
any transaction from which the director derived an improper personal benefit.
The Registrant's Third Restated Certificate of Incorporation and Bylaws
provide generally that each person who is or was a director or officer of the
registrant shall be indemnified and held harmless by the registrant to the
fullest extent authorized by the DGCL. Section 145 of the DGCL permits a
corporation, subject to certain limitations, to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or was serving
in any of such capacities for another entity at the request of the corporation,
against expenses (including attorneys' fees), judgments, fines and certain
settlements actually and reasonably incurred by such person.
The Registrant maintains directors' and officers' liability insurance which
covers certain liabilities and expenses of directors and officers of the
Registrant and covers the Registrant for reimbursement of payments to directors
and officers in respect of such liabilities and expenses.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
2.1 Stock Purchase Agreement among Coulter Corporation, the
Stockholders of Coulter Corporation and the Company, dated
as of August 29, 1997 (incorporated by reference to Exhibit
2.1 of the Company's Report on Form 8-K dated November 13,
1997, File No. 001-10109). [Note: Confidential treatment has
been requested for portions of this document.]
3.1 Third Restated Certificate of Incorporation of the Company,
June 5, 1992 (incorporated by reference to Exhibit 3.1 of
the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December
31, 1992, File No. 001-10109).
3.2 Amended and Restated By-Laws of the Company, as of November
30, 1994 (incorporated by reference to Exhibit 3.2 of the
Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December
31, 1994, File No. 001-10109).
4.1 Indenture dated as of March 4, 1998 by and between the
Company, The First National Bank of Chicago, as trustee, and
Beckman Instruments (Naguabo) Inc., SmithKline Diagnostics,
Inc., Hybritech Incorporated, Coulter Leasing Corporation
and Coulter Corporation.
4.2 Registration Rights Agreement dated March 4, 1998 by and
between the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Salomon Brothers Inc, Citicorp
Securities, Inc., Credit Suisse First Boston Corporation,
Morgan Stanley & Co. Incorporated, BancAmerica Roberston
Stephens, First Chicago Capital Markets, Inc. and Goldman,
Sachs & Co.
4.3 Specimen Certificate of 7.10% Debentures Due March 4, 2003
(the "Initial 2003 Notes") (included in Exhibit 4.1 hereto).
4.4 Specimen Certificate of 7.10% Debentures Due March 4, 2003
(the "Exchange 2003 Notes") (included in Exhibit 4.1
hereto).
</TABLE>
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<PAGE> 170
<TABLE>
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4.5 Specimen Certificate of 7.45% Debentures Due March 4, 2008
(the "Initial 2008 Notes") (included in Exhibit 4.1 hereto).
4.6 Specimen Certificate of 7.45% Debentures Due March 4, 2008
(the "Exchange 2008 Notes") (included in Exhibit 4.1
hereto).
5.1 Opinion of Latham & Watkins regarding the validity of the
Exchange Notes.
8.1 Opinion of Latham & Watkins regarding certain federal income
tax matters.
10.1 Credit Agreement dated as of October 31, 1997 by and among
the Company, as Borrower, the Initial Lenders and the
Initial Issuing Banks named therein, and Citicorp USA, Inc.
as Agent (incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarterly period ended
September 30, 1997, File No. 001-10109).
10.2 Guaranty dated as of October 31, 1997 made by each Guarantor
Subsidiary (as defined in the Credit Agreement, Exhibit 10.1
herein) of the Company, in favor of the Lender Parties (as
defined in the Credit Agreement) (incorporated by reference
to Exhibit 10.2 of the Company's Quarterly Report to the
Securities and Exchange Commission on Form 10-Q for the
quarterly period ended September 30, 1997, File No.
001-10109).
10.3 Line of Credit Promissory Note in favor of Mellon Bank,
N.A., dated as of October 6, 1993 (incorporated by reference
to Exhibit 10.21 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1992, File No. 001-10109).
10.4 Loan Agreement (Multiple Advance), dated September 30, 1993,
between Beckman Instruments (Japan) Limited and the
Industrial Bank of Japan, Limited (English translation,
including certification as to accuracy; original document
executed in Japanese) (incorporated by reference to Exhibit
10.21 of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year ended
December 31, 1993, File No. 001-10109).
10.5 Term Loan Agreement, dated as of September 30, 1993, between
Beckman Instruments (Japan) Limited and Citibank, N.A.,
Tokyo Branch (incorporated by reference to Exhibit 10.22 of
the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December
31, 1993, File No. 001-10109).
10.6 Term Loan Agreement, dated as of December 9, 1993, between
Beckman Instruments (Japan) Limited and The Dai-Ichi Kangyo
Bank Limited (English translation, including certification
as to accuracy; original document executed in Japanese)
(incorporated by reference to Exhibit 10.23 of the Company's
Annual Report to the Securities and Exchange Commission on
Form 10-K for the fiscal year ended December 31, 1993, File
No. 001-10109).
10.7 Benefit Equity Amended and Restated Trust Agreement between
the Company and Mellon Bank, N.A., as Trustee, for
assistance in meeting stock-based obligations of the
Company, dated as of February 10, 1997 (incorporated by
reference to Exhibit 10.7 of the Company's Annual Report to
the Securities and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1997, File No. 001-10109).
10.8 The Company's Executive Incentive Plan, adopted by the
Company in 1996 (incorporated by reference to Exhibit 10 of
the Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly period
ended March 31, 1996, File No. 001-10109).
10.9 Amendment No. 1 to the Company's Executive Incentive Plan,
adopted in 1996 (incorporated by reference to Exhibit 10.9
of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year ended
December 31, 1996, File No. 001-10109).
</TABLE>
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<TABLE>
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10.10 The Company's Annual Incentive Plan for 1997, adopted by the
Company in 1997 (incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly period
ended June 30, 1997, File No. 001-10109).
10.11 The Company's Incentive Compensation Plan of 1990, amended
and restated April 4, 1997, with amendments approved by
stockholders April 3, 1997 and effective January 1, 1997
(incorporated by reference to Exhibit 10 of the Company's
Quarterly Report to the Securities and Exchange Commission
on Form 10-Q for the quarterly period ended March 31, 1997,
File No. 001-10109).
10.12 Amendment to the Company's Incentive Compensation Plan of
1990 adopted December 5, 1997 (incorporated by reference to
Exhibit 4.1 to Post-Effective Amendment No. 1 to the Form
S-8 Registration Statement filed January 13, 1998,
Registration No. 333-24851).
10.13 The Company's Incentive Compensation Plan, as amended by the
Company's Board of Directors on October 26, 1988 and as
amended and restated by the Company's Board of Directors on
March 28, 1989 (incorporated by reference to Exhibit 10.16
of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year ended
December 31, 1989, File No. 001-10109).
10.14 Amendment to the Company's Incentive Compensation Plan,
adopted December 5, 1997 (incorporated by reference to
Exhibit 4.2 to Post Effective Amendment No. 1 to the Form
S-8 Registration statement, filed January 13, 1998,
Registration No. 33-31573).
10.15 Restricted Stock Agreement and Election (Cycle
Two -- Economic Value Added Incentive Plan), adopted by the
Company in 1995 (incorporated by reference to Exhibit 10 of
the Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly period
ended September 30, 1995, File No. 001-10109).
10.16 Restricted Stock Agreement and Election (Cycle
Three -- Economic Value Added Incentive Plan), adopted by
the Company in 1996 (incorporated by reference to Exhibit
10.15 of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year period
ended December 31, 1996, File No. 001-10109).
10.17 Form of Restricted Stock Agreement, dated as of January 3,
1997, between the Company and certain of its Executive
Officers and certain other key employees (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report
to the Securities and Exchange Commission on Form 10-Q for
the quarterly period ended June 30, 1997, File No.
001-10109).
10.18 Beckman Instruments, Inc. Supplemental Pension Plan, adopted
by the Company October 24, 1990 (incorporated by reference
to Exhibit 10.4 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1990, File No. 001-10109).
10.19 Amendment 1995-1 to the Company's Supplemental Pension Plan,
adopted by the Company in 1995, effective as of October 1,
1993 (incorporated by reference to Exhibit 10.17 of the
Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December
31, 1996, File No. 001-10109).
10.20 Amendment 1996-1 to the Company's Supplemental Pension Plan,
dated as of December 9, 1996 (incorporated by reference to
Exhibit 10.18 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1996, File No. 001-10109).
10.21 Stock Option Plan for Non-Employee Directors (Amended and
Restated effective as of August 7, 1997), (incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on October 8, 1997, Registration No. 333-37429).
</TABLE>
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<TABLE>
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10.22 Form of Change in Control Agreement, dated as of May 1,
1989, between the Company, certain of its Executive Officers
and certain other key employees (incorporated by reference
to Exhibit 10.34 of the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the
fiscal year ended December 31, 1989, File No. 001-10109).
10.23 Agreement Regarding Retirement Benefits of Arthur A.
Torrellas, adopted December 1, 1993 and dated December 20,
1993, between the Company and Arthur A. Torrellas
(incorporated by reference to Exhibit 10.24 of the Company's
Annual Report to the Securities and Exchange Commission on
Form 10-K for the fiscal year ended December 31, 1993, File
No. 001-10109).
10.24 Amendment to the December 1, 1993 Agreement Regarding
Retirement Benefits of Arthur A. Torrellas, dated as of May
30, 1995, between the Company and Arthur A. Torrellas
(incorporated by reference to Exhibit 10.2 of the Company's
Quarterly Report to the Securities and Exchange Commission
on Form 10-Q for the quarterly period ended June 30, 1995,
File No. 001-10109).
10.25 Second Amendment to the December 1, 1993 Agreement Regarding
Retirement Benefits of Arthur A. Torrellas, dated as of
December 16, 1996, between the Company and Arthur A.
Torrellas (incorporated by reference to Exhibit 10.24 of the
Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December
31, 1996, File No. 001-10109).
10.26 Third Amendment to the December 1, 1993 Agreement Regarding
Retirement Benefits of Arthur A. Torrellas, dated as of July
18, 1997, between the Company and Arthur A. Torrellas
(incorporated by reference to Exhibit 10.26 of the Company's
Annual Report to the Securities and Exchange Commission on
Form 10-K for the fiscal year ended December 31, 1997, File
No. 001-10109).
10.27 Agreement Regarding Retirement Benefits of Albert Ziegler,
dated June 16, 1995, between the Company and Albert Ziegler
(incorporated by reference to exhibit 10.22 of the Company's
Annual Report to the Securities and Exchange Commission on
Form 10-K/A for the fiscal year ended December 31, 1995,
File No. 001-10109).
10.28 Agreement Regarding Retirement Benefits of Fidencio M.
Mares, adopted and dated April 30, 1996, between the Company
and Fidencio M. Mares (incorporated by reference to Exhibit
10.3 of the Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly period
ended June 30, 1996, File No. 001-10109).
10.29 Amendment 1997-1 to the Company's Employees' Stock Purchase
Plan, adopted effective January 1, 1998 and dated October
20, 1997 (incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report to the Securities and Exchange
Commission on Form 10-Q for the quarterly period ended
September 30, 1997, File No. 001-10109).
10.30 The Company's Executive Deferred Compensation Plan,
effective January 1, 1998, dated November 5, 1997
(incorporated by reference to Exhibit 10.4 of the Company's
Quarterly Report to the Securities and Exchange Commission
on Form 10-Q for the quarterly period ended September 30,
1997, File No. 001-10109).
10.31 The Company's Executive Restoration Plan, effective January
1, 1998, dated November 5, 1997 (incorporated by reference
to Exhibit 10.5 of the Company's Quarterly Report to the
Securities and Exchange Commission on Form 10-Q for the
quarterly period ended September 30, 1997, File No.
001-10109).
10.32 The Company's Amended and Restated Deferred Directors' Fee
Program, amended as of June 5, 1997 (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report
to the Securities and Exchange Commission on Form 10-Q for
the quarterly period ended September 30, 1997, File No.
001-10109).
</TABLE>
II-4
<PAGE> 173
<TABLE>
<C> <S>
10.33 Amendment 1997-2 to the Company's Supplemental Pension Plan, adopted as of October 31, 1997
(incorporated by reference to Exhibit 10.7 of the Company's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No.
001-10109).
10.34 Form of Restricted Stock Award Agreement between the Company and its non-employee Directors, effective
as of October 3, 1997 (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement
on Form S-8 filed with the Securities and Exchange Commission on October 8, 1997, Registration No.
333-37429).
10.35 Form of Stock Option Grant for non-employee Directors (incorporated by reference to Exhibit 4.3 of the
Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on
October 8, 1997, Registration No. 333-37429).
10.36 The Company's Employees' Stock Purchase Plan, amended and restated as of November 1, 1996, filed in
connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission
on December 19, 1995, File No. 33-65155 (incorporated by reference to Exhibit 10.29 of the Company's
Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December
31, 1997, File No. 001-10109).
10.37 The Company's Option Gain Deferral Program, dated January 14, 1998 (incorporated by reference to
Exhibit 4.2 of Post-Effective Amendment No. 1 to the Form S-8 Registration Statement filed with the
Securities and Exchange Commission on January 13, 1998, Registration No. 333-24851).
10.38 Form of Coulter's Special Incentive Plan and Sharing Bonus Plan, assumed by the Company October 31,
1997 (incorporated by reference to Exhibit 10.38 of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109).
10.39 Distribution Agreement, dated as of April 11, 1989, among SmithKline Beckman Corporation the Company
and Allergan, Inc. (incorporated by reference to Exhibit 3 to SmithKline Beckman Corporation's Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 14, 1989, File No.
1-4077).
10.40 Amendment to the Distribution Agreement effective as of June 1, 1989 between SmithKline Beckman
Corporation, the Company and Allergan, Inc. (incorporated by reference to Exhibit 10.26 of Amendment
No. 2 to the Company's Form S-1 registration statement, File No. 33-28853).
10.41 Cross-Indemnification Agreement between the Company and SmithKline Beckman Corporation (incorporated by
reference to Exhibit 10.1 of Amendment No. 1 to the Company's Form S-1 registration statement, File No.
33-24572).
11.1 Statement regarding computation of per share earnings (incorporated by reference to Note 1 Summary of
Significant Accounting Policies and Note 13 Earnings Per Share of the Consolidated Financial Statements
of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1997, File No. 001-10109).
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries (incorporated by reference to Exhibit 21 of the Company's Annual Report to the Securities
and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109).
23.1 Consent of KPMG Peat Marwick LLP, dated April 17, 1998.
23.2 Consent of Arthur Andersen LLP, dated April 14, 1998.
23.3 Consent of KPMG Peat Marwick LLP, dated April 17, 1998.
24.1 Power of Attorney of Beckman Instruments, Inc. (included on signature page to this Registration
Statement on Form S-4).
</TABLE>
II-5
<PAGE> 174
<TABLE>
<C> <S>
25.1 Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of The First National Bank
of Chicago.
27.1 Financial Data Schedule (incorporated by reference to
Exhibit 27 of the Company's Annual Report to the Securities
and Exchange Commission on Form 10-K for the fiscal year
ended December 31, 1997, File No. 001-10109).
99.1 Letter of Transmittal dated , 1998 and certain other
ancillary documents.
</TABLE>
(b) Financial Statement Schedules:
None.
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act"), may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have 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 of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or the registrant in the successful defense of
any action, suit 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.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 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.
(c) 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-6
<PAGE> 175
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements on Form S-4 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fullerton, State of California, on the 2nd day of April, 1998.
BECKMAN INSTRUMENTS, INC.
By: /s/ WILLIAM H. MAY
------------------------------------
Name: William H. May
Title: Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of Form S-4 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fullerton, State of California, on the 2nd day of April, 1998.
BECKMAN INSTRUMENTS (NAGUABO) INC.
By: /s/ WILLIAM H. MAY
------------------------------------
Name: William H. May
Title: Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of Form S-4 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fullerton, State of California, on the 2nd day of April, 1998.
HYBRITECH INCORPORATED
By: /s/ WILLIAM H. MAY
------------------------------------
Name: William H. May
Title: Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of Form S-4 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fullerton, State of California, on the 2nd day of April, 1998.
SMITHKLINE DIAGNOSTICS, INC.
By: /s/ D. K. WILSON
------------------------------------
Name: Dennis K. Wilson
Title: Vice President, Finance
II-7
<PAGE> 176
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of Form S-4 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fullerton, State of California, on the 2nd day of April, 1998.
COULTER CORPORATION
By: /s/ WILLIAM H. MAY
------------------------------------
Name: William H. May
------------------------------------
Title: Vice President and Assistant
Secretary
------------------------------------
POWER OF ATTORNEY
Each person whose signature appears below appoints Louis T. Rosso, John P.
Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and
each of them, as his or her true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement or any
subsequent registration statements pursuant to Rule 462 (including any
amendments thereto), and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ LOUIS T. ROSSO Chairman of the Board, Chief April 2, 1998
- ----------------------------------------------------- Executive Officer and
Louis T. Rosso Director (Principal
Executive Officer)
/s/ JOHN P. WAREHAM President, Chief Operating April 2, 1998
- ----------------------------------------------------- Officer and Director
John P. Wareham
/s/ D. K. WILSON Vice President, Finance and April 2, 1998
- ----------------------------------------------------- Chief Financial Officer
Dennis K. Wilson (Principal Financial
Officer)
/s/ JAMES T. GLOVER Vice President and April 2, 1998
- ----------------------------------------------------- Controller (Principal
James T. Glover Accounting Officer)
/s/ HUGH K. COBLE Director April 2, 1998
- -----------------------------------------------------
Hugh K. Coble
/s/ CAROLYN K. DAVIS Director April 2, 1998
- -----------------------------------------------------
Carolyn K. Davis, Ph.D.
/s/ Director
- -----------------------------------------------------
Peter B. Dervan
/s/ DENNIS C. FILL Director April 2, 1998
- -----------------------------------------------------
Dennis C. Fill
</TABLE>
II-8
<PAGE> 177
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ CHARLES A. HAGGERTY Director April 2, 1998
- -----------------------------------------------------
Charles A. Haggerty
/s/ GAVIN S. HERBERT Director April 2, 1998
- -----------------------------------------------------
Gavin S. Herbert
/s/ WILLIAM N. KELLEY Director April 2, 1998
- -----------------------------------------------------
William N. Kelley, M.D.
/s/ FRANCIS P. LUCIER Director April 2, 1998
- -----------------------------------------------------
Francis P. Lucier
/s/ C. RODERICK O'NEIL Director April 2, 1998
- -----------------------------------------------------
C. Roderick O'Neil
/s/ BETTY WOODS Director April 2, 1998
- -----------------------------------------------------
Betty Woods
</TABLE>
II-9
<PAGE> 178
BECKMAN INSTRUMENTS (NAGUABO) INC.
POWER OF ATTORNEY
Each person whose signature appears below appoints Louis T. Rosso, John P.
Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and
each of them, as his or her true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement or any
subsequent registration statements pursuant to Rule 462 (including any
amendments thereto), and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JOHN P. WAREHAM President (Principal April 2, 1998
- ----------------------------------------------------- Executive Officer)
John P. Wareham
/s/ PAUL GLYER Treasurer (Principal April 2, 1998
- ----------------------------------------------------- Financial Officer)
Paul Glyer
/s/ JAMES T. GLOVER Vice President and April 2, 1998
- ----------------------------------------------------- Controller (Principal
James T. Glover Accounting Officer)
/s/ WILLIAM H. MAY Director April 2, 1998
- -----------------------------------------------------
William H. May
/s/ DENNIS K. WILSON Director April 2, 1998
Dennis K. Wilson
- -----------------------------------------------------
/s/ GERALD KIRSCHNER Director April 3, 1998
- -----------------------------------------------------
Gerald Kirschner
</TABLE>
II-10
<PAGE> 179
HYBRITECH INCORPORATED
POWER OF ATTORNEY
Each person whose signature appears below appoints Louis T. Rosso, John P.
Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and
each of them, as his or her true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement or any
subsequent registration statements pursuant to Rule 462 (including any
amendments thereto), and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JOHN P. WAREHAM President and Director April 2, 1998
- ----------------------------------------------------- (Principal Executive
John P. Wareham Officer)
/s/ D. K. WILSON Vice President, Finance and April 2, 1998
- ----------------------------------------------------- Chief Financial Officer
Dennis K. Wilson (Principal Financial
Officer)
/s/ JAMES T. GLOVER Vice President, Controller April 2, 1998
- ----------------------------------------------------- and Director (Principal
James T. Glover Accounting Officer)
/s/ WILLIAM H. MAY Director April 2, 1998
- -----------------------------------------------------
William H. May
</TABLE>
II-11
<PAGE> 180
SMITHKLINE DIAGNOSTICS, INC.
POWER OF ATTORNEY
Each person whose signature appears below appoints Louis T. Rosso, John P.
Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and
each of them, as his or her true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement or any
subsequent registration statements pursuant to Rule 462 (including any
amendments thereto), and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ALBERT ZIEGLER President (Principal April 2, 1998
- ----------------------------------------------------- Executive Officer)
Albert Ziegler
/s/ D. K. WILSON Vice President, Finance April 2, 1998
- ----------------------------------------------------- (Principal Financial
Dennis K. Wilson Officer)
/s/ PAUL GLYER Treasurer (Principal April 2, 1998
- ----------------------------------------------------- Accounting Officer)
Paul Glyer
/s/ JOHN P. WAREHAM Director April 2, 1998
- -----------------------------------------------------
John P. Wareham
/s/ JAMES T. GLOVER Director April 2, 1998
- -----------------------------------------------------
James T. Glover
/s/ WILLIAM H. MAY Director April 2, 1998
- -----------------------------------------------------
William H. May
</TABLE>
II-12
<PAGE> 181
COULTER CORPORATION
POWER OF ATTORNEY
Each person whose signature appears below appoints Louis T. Rosso, John P.
Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and
each of them, as his or her true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement or any
subsequent registration statements pursuant to Rule 462 (including any
amendments thereto), and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ EDGAR VIVANCO President (Principal April 9, 1998
- ----------------------------------------------------- Executive Officer)
Edgar Vivanco
/s/ GENE BABCOCK Vice President, Finance April 8, 1998
- ----------------------------------------------------- (Principal Financial
Gene Babcock Officer)
/s/ PAUL GLYER Treasurer (Principal April 2, 1998
- ----------------------------------------------------- Accounting Officer)
Paul Glyer
/s/ JOHN P. WAREHAM Director April 2, 1998
- -----------------------------------------------------
John P. Wareham
/s/ JAMES T. GLOVER Director April 2, 1998
- -----------------------------------------------------
James T. Glover
/s/ WILLIAM H. MAY Director April 2, 1998
- -----------------------------------------------------
William H. May
</TABLE>
II-13
<PAGE> 1
EXHIBIT 4.1
================================================================================
BECKMAN INSTRUMENTS, INC., as Issuer,
THE NOTE GUARANTORS named herein, as Note Guarantors,
and
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
--------------
Senior Indenture
Dated as of March 4, 1998
--------------
==============================================================================
<PAGE> 2
Certain Sections of this Indenture relating to Sections 310 through 318,
inclusive, of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
Section 310(a)(1)..........................................................609
(a)(2)..................................................................609
(a)(3).......................................................Not Applicable
(a)(4).......................................................Not Applicable
(b).....................................................................608
610
Section 311(a).............................................................613
(b).....................................................................613
Section 312(a).............................................................701
702
(b).....................................................................702
(c).....................................................................702
Section 313(a).............................................................703
(b).....................................................................703
(c).....................................................................703
(d).....................................................................703
Section 314(a).............................................................704
(a)(4)..................................................................102
1004
(b)..........................................................Not Applicable
(c)(1)..................................................................102
(c)(2)..................................................................102
(c)(3).......................................................Not Applicable
(d)..........................................................Not Applicable
(e).....................................................................102
Section 315(a).............................................................601
(b).....................................................................602
(c).....................................................................601
(d).....................................................................601
(e).....................................................................514
Section 316(a).............................................................512
(a)(1)(A)...............................................................502
512
(a)(1)(B)...............................................................513
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(a)(2).......................................................Not Applicable
(b).....................................................................508
(c).....................................................................104
</TABLE>
<PAGE> 4
Certain Sections of this Indenture relating to Sections 310 through 318,
inclusive, of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
Section 310(a)(1)..........................................................609
(a)(2)..................................................................609
(a)(3).......................................................Not Applicable
(a)(4).......................................................Not Applicable
(b).....................................................................608
610
Section 311(a).............................................................613
(b).....................................................................613
Section 312(a).............................................................701
702
(b).....................................................................702
(c).....................................................................702
Section 313(a).............................................................703
(b).....................................................................703
(c).....................................................................703
(d).....................................................................703
Section 314(a).............................................................704
(a)(4)..................................................................102
1004
(b)..........................................................Not Applicable
(c)(1)..................................................................102
(c)(2)..................................................................102
(c)(3).......................................................Not Applicable
(d)..........................................................Not Applicable
(e).....................................................................102
Section 315(a).............................................................601
(b).....................................................................602
(c).....................................................................601
(d).....................................................................601
(e).....................................................................514
Section 316(a).............................................................512
(a)(1)(A)...............................................................502
512
(a)(1)(B)...............................................................513
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
(a)(2).......................................................Not Applicable
(b).....................................................................508
(c).....................................................................104
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
Section 317(a)(1)..........................................................503
(a)(2)..................................................................504
(b)....................................................................1003
Section 318(a).............................................................107
</TABLE>
- -------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS ....................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................................ 1
SECTION 102. Compliance Certificates and Opinions................................... 24
SECTION 103. Form of Documents Delivered to Trustee................................. 25
SECTION 104. Acts of Holders; Record Dates.......................................... 25
SECTION 105. Notices, Etc., to Trustee, Company and Note Guarantor.................. 27
SECTION 106. Notice to Holders; Waiver.............................................. 28
SECTION 107. Conflict with Trust Indenture Act...................................... 28
SECTION 108. Effect of Headings and Table of Contents............................... 28
SECTION 109. Successors and Assigns................................................. 28
SECTION 110. Separability Clause.................................................... 28
SECTION 111. Benefits of Indenture.................................................. 28
SECTION 112. Governing Law.......................................................... 28
SECTION 113. Legal Holidays......................................................... 29
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally........................................................ 29
SECTION 202. Form of Trustee's Certificate of Authentication........................ 30
SECTION 203. Restrictive and Global Security Legends................................ 30
</TABLE>
i
<PAGE> 8
<TABLE>
<S> <C> <C>
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount; Series; Terms.................................................. 32
SECTION 302. Denominations.......................................................... 33
SECTION 303. Execution, Authentication, Delivery and Dating......................... 33
SECTION 304. Temporary Securities................................................... 34
SECTION 305. Registration, Registration of Transfer and Exchange.................... 34
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....................... 35
SECTION 307. Payment of Interest; Interest Rights Preserved......................... 36
SECTION 308. Persons Deemed Owners.................................................. 37
SECTION 309. Cancellation........................................................... 37
SECTION 310. Computation of Interest................................................ 37
SECTION 311. Book-Entry Provisions for Global Securities............................ 37
SECTION 312. Transfer Provisions.................................................... 38
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................................ 45
SECTION 402. Application of Trust Money............................................. 46
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default...................................................... 47
SECTION 502. Acceleration of Maturity; Rescission and Annulment..................... 48
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee................................................................ 49
SECTION 504. Trustee May File Proofs of Claim....................................... 50
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities................................................. 50
SECTION 506. Application of Money Collected......................................... 50
SECTION 507. Limitation on Suits.................................................... 51
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest........................................................... 51
SECTION 509. Restoration of Rights and Remedies..................................... 52
</TABLE>
ii
<PAGE> 9
<TABLE>
<S> <C> <C>
SECTION 510. Rights and Remedies Cumulative......................................... 52
SECTION 511. Delay or Omission Not Waiver........................................... 52
SECTION 512. Control by Holders..................................................... 52
SECTION 513. Waiver of Past Defaults................................................ 52
SECTION 514. Undertaking for Costs.................................................. 53
SECTION 515. Waiver of Usury, Stay or Extension Laws................................ 53
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.................................... 53
SECTION 602. Notice of Defaults..................................................... 53
SECTION 603. Certain Rights of Trustee.............................................. 53
SECTION 604. Not Responsible for Recitals or Issuance of Securities................. 54
SECTION 605. May Hold Securities.................................................... 55
SECTION 606. Money Held in Trust.................................................... 55
SECTION 607. Compensation and Reimbursement......................................... 55
SECTION 608. Conflicting Interests.................................................. 55
SECTION 609. Corporate Trustee Required; Eligibility................................ 55
SECTION 610. Resignation and Removal; Appointment of Successor...................... 56
SECTION 611. Acceptance of Appointment by Successor................................. 57
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business................................................... 58
SECTION 613. Preferential Collection of Claims Against Company...................... 58
SECTION 614. Appointment of Authenticating Agent.................................... 58
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.............. 60
SECTION 702. Preservation of Information; Communications to Holders................. 60
SECTION 703. Reports by Trustee..................................................... 60
SECTION 704. Reports by Company..................................................... 61
</TABLE>
iii
<PAGE> 10
<TABLE>
<S> <C> <C>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................... 61
SECTION 802. Successor Substituted.................................................. 62
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders..................... 62
SECTION 902. Supplemental Indentures With Consent of Holders........................ 63
SECTION 903. Execution of Supplemental Indentures................................... 64
SECTION 904. Effect of Supplemental Indentures...................................... 64
SECTION 905. Conformity with Trust Indenture Act.................................... 64
SECTION 906. Reference in Securities to Supplemental Indentures..................... 64
SECTION 907. Revocation and Effect of Consents...................................... 64
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest............................. 65
SECTION 1002. Maintenance of Office or Agency........................................ 65
SECTION 1003. Money for Securities Payments to Be Held in Trust...................... 66
SECTION 1004. Statement by Officers as to Default.................................... 67
SECTION 1005. Existence.............................................................. 67
SECTION 1006. Maintenance of Properties.............................................. 67
SECTION 1007. Payment of Taxes and Other Claims...................................... 67
SECTION 1008. Limitation on Liens.................................................... 67
SECTION 1009. Limitation on Sale and Leaseback Transactions.......................... 69
SECTION 1010. Limitation on Incurrence of Indebtedness............................... 69
SECTION 1011. Limitation on Restricted Payments...................................... 69
SECTION 1012. Change of Control...................................................... 71
SECTION 1013. Future Note Guarantors................................................. 71
SECTION 1014. Provision of Financial Statements and Reports.......................... 72
SECTION 1015. Waiver of Certain Covenants............................................ 72
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption.................................................... 72
SECTION 1102. Election to Redeem; Notice to Trustee.................................. 73
SECTION 1103. Selection by Trustee of Securities to Be Redeemed...................... 73
SECTION 1104. Notice of Redemption................................................... 73
SECTION 1105. Deposit of Redemption Price............................................ 74
SECTION 1106. Securities Payable on Redemption Date.................................. 74
SECTION 1107. Securities Redeemed in Part............................................ 74
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or Covenant
Defeasance.................................................... 75
SECTION 1202. Defeasance and Discharge............................................... 75
SECTION 1203. Covenant Defeasance.................................................... 75
SECTION 1204. Conditions to Defeasance or Covenant Defeasance........................ 76
SECTION 1205. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions................. 77
SECTION 1206. Reinstatement.......................................................... 78
ARTICLE THIRTEEN
GUARANTEE OF SECURITIES
SECTION 1301. Unconditional Guarantee................................................ 78
SECTION 1302. Additional Note Guarantors............................................. 80
SECTION 1303. Release of a Note Guarantee............................................ 80
SECTION 1304. Waiver of Subrogation.................................................. 81
SECTION 1305. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc.............................. 81
SECTION 1306. Article Thirteen Applicable to Paying Agents........................... 81
SECTION 1307. No Suspension of Remedies.............................................. 82
</TABLE>
v
<PAGE> 12
INDENTURE, dated as of March 4, 1998, among Beckman Instruments,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 2500
Harbor Boulevard, Fullerton, California 92834, as issuer, the Note Guarantors
named herein (the "Note Guarantors"), as guarantors, and The First National Bank
of Chicago, a national banking association duly organized and existing under the
laws of the United States, as Trustee (herein called the "Trustee").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of (i) its 7.10% Senior Notes due 2003
(the "Initial 2003 Notes") and 7.45% Senior Notes due 2008 (the "Initial 2008
Notes" and, together with the Initial 2003 Notes, the "Initial Securities") and
(ii) its 7.10% Senior Notes due 2003, Series B and 7.45% Senior Notes due 2008,
Series B to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement (the "Exchange 2003 Notes" and the "Exchange 2008
Notes", respectively, and, together, the "Exchange Securities"), in each case to
be issued as in this Indenture provided. The Initial 2003 Notes and the Exchange
2003 Notes are hereinafter collectively called the "2003 Notes", and the Initial
2008 Notes and the Exchange 2008 Notes are hereinafter collectively called the
"2008 Notes". The Initial Securities and the Exchange Securities are hereinafter
collectively called the "Securities".
Each Note Guarantor has duly authorized the execution and delivery
of this Indenture to provide for its senior Note Guarantee of the Securities, as
in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company and each Note Guarantor, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities of each series, as
follows:
<PAGE> 13
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Acquired Debt" means (x) Indebtedness of any Person (the "Acquired
Person") existing at the time the Acquired Person merges or consolidates with or
into, or becomes a Restricted Subsidiary of, the Company or any Restricted
Subsidiary, or (y) Indebtedness of any Person assumed by the Company or any
Restricted Subsidiary in connection with its acquisition of assets from such
Person, in each case excluding Indebtedness incurred in connection with, or in
contemplation of, the Acquired Person merging or consolidating with or into, or
becoming a Restricted Subsidiary of, the Company or any Restricted Subsidiary,
or such acquisition of assets.
"Acquisition" means the acquisition by the Company of all of the
capital stock of Coulter on October 31, 1997.
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
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<PAGE> 14
"Adjusted Treasury Rate" means, with respect to any Redemption Date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25% in the case of the 2003
Notes, and 0.375%, in the case of the 2008 Notes.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Members" has the meaning specified in Section 311.
"Asset Sale" means (i) any sale, lease, conveyance or other
disposition by the Company or any Restricted Subsidiary of any assets (including
by way of a sale-and-leaseback) other than (a) in the ordinary course of
business, (b) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company, which shall not be an "Asset
Sale" but instead shall be governed by the provisions of Section 801 and (c) any
"fee in lieu of" or other disposition of assets to any governmental authority or
agency that continue in use by the Company or any Restricted Subsidiary, so long
as the Company or any Restricted Subsidiary may obtain title to such assets at
any time upon reasonable notice by paying a nominal fee, or (ii) the issuance or
sale of Capital Stock of any Restricted Subsidiary, in the case of each of
clauses (i) and (ii), whether in a single transaction or a series of related
transactions, to any Person (other than the Company or a Restricted Subsidiary)
for Net Proceeds in excess of $1.0 million.
"Attributable Value," when used with respect to any sale and
leaseback transaction means, as of the time of determination, the total
obligation (discounted to present value at the interest rate assumed in making
calculations in accordance with FAS 13) of the lessee for rental payments (other
than amounts required to be paid on account of property taxes as well as
maintenance, repairs, insurance, water rates and other items which do not
constitute payments for property rights) during the remaining portion of the
base term of the lease included in such sale and leaseback transaction.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
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<PAGE> 15
"Bank Indebtedness" means any and all Indebtedness or other amounts,
whether outstanding on the Issue Date or thereafter incurred, payable under or
in respect of the Credit Facility or any refinancing in respect thereof, and any
Refinancing Indebtedness in respect thereof, including in each case (without
limitation) principal, premium (if any), interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Company or any Restricted Subsidiary whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, Guarantees, other monetary obligations of any nature
and all other amounts payable under or in respect of any of the foregoing (and,
without limitation, whether incurred in accordance with any clause of the
definition of "Permitted Indebtedness" or the first sentence of Section 1010, or
otherwise).
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or any Note Guarantor, as the
case may be, to have been duly adopted by the Board of Directors or the board of
directors (or designated committee thereof) of the relevant Note Guarantor and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"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 Lease Obligation" of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
"Capital Stock" of any Person means (i) in the case of a
corporation, corporate stock, (ii) in the case of an association, limited
liability company or business entity, any and all Equity Interests, (iii) in the
case of a partnership, partnership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person, including any Preferred Stock.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any instrumentality or agency thereof and backed by the full faith and credit of
the United States, in each case
4
<PAGE> 16
maturing within one year from the date of acquisition thereof; (ii) marketable
direct obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality or agency
thereof maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Services or Moody's Investors Service, Inc.;
(iii) commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 from
Standard & Poor's Ratings Services or at least P-1 from Moody's Investors
Service, Inc.; (iv) certificates of deposit, time deposits or bankers'
acceptances (or, with respect to foreign banks, similar instruments) maturing
within one year from the date of acquisition thereof issued by (x) any lender
under the Credit Agreement or (y) a commercial banking institution that is a
member of the Federal Reserve System or a commercial banking institution
organized and located in a country recognized by the United States of America,
in each case, having combined capital and surplus and undivided profits in
excess of $500,000,000 (or the foreign currency equivalent thereof); (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; (vi) investments in
money market funds which invest substantially all their assets in securities of
the types described in clauses (i) through (v) above; and (vii) other short-term
investments utilized by Foreign Subsidiaries in accordance with normal
investment practices for cash management not exceeding $20 million in aggregate
principal amount outstanding at any time.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or con solidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, or (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 35% of the voting stock of the Company.
"Change of Control Downgrade" means, with respect to any Change of
Control, a downgrade in the rating assigned to any Securities arising out of or
otherwise attributable to such Change of Control (whether or not such Change of
Control has occurred at the time of such downgrade), which downgrade (i) if
prior to an Investment Grade Rating Date, is by any Rating Agency and (ii) if on
or after an Investment Grade Rating Date, is by any two Rating
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<PAGE> 17
Agencies unless, after giving effect to such downgrade, the rating assigned to
such Securities by either of such two Rating Agencies is Investment Grade. For
purposes of the foregoing, and without limiting the generality thereof, a Change
of Control Downgrade with respect to any Change of Control shall be deemed to
have occurred if such Change of Control Downgrade occurs during any 90-day
period beginning prior to and ending after the occurrence of such Change of
Control.
"Change of Control Triggering Event" means the later to occur of (i)
any Change of Control and (ii) a Change of Control Downgrade with respect to
such Change of Control. Both a Change of Control and a Change of Control
Downgrade shall be required for a Change of Control Triggering Event to occur.
"Commission" means the Securities and Exchange Commission, from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Company" means Beckman Instruments, Inc. (which is expected to be
renamed, subject to stockholder approval, Beckman Coulter, Inc.), a Delaware
corporation, until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate securities of comparable maturity
to the remaining term of such Securities. "Independent Investment Banker" means
one of the Reference Treasury Dealers appointed by the Trustee after
consultation with the Company.
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<PAGE> 18
"Comparable Treasury Price" means, with respect to any redemption
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Treasury Reference
Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.
"Consolidated Cash Flow" means, with respect to any period, the
Consolidated Net Income for such period, plus without duplication (i)
Consolidated Interest Expense for such period, plus (ii) provision for taxes
based on income, profits or capital, to the extent such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) depreciation,
amortization (including, without limitation, amortization of goodwill and other
intangibles) and all other non-cash charges (excluding any non-cash charge which
requires an accrual or reserve for cash charges for any future period), to the
extent such depreciation, amortization and other non-cash charges were deducted
in computing such Consolidated Net Income.
"Consolidated Coverage Ratio" means, with respect to any date of
determination, the ratio of (i) the aggregate amount of Consolidated Cash Flow
for the period of the most recent four consecutive fiscal quarters ended prior
to such date for which consolidated financial statements of the Company are
available, to (ii) Consolidated Interest Expense for such four fiscal quarters,
provided that:
(1) if since the beginning of such period the Company or any
Restricted Subsidiary has incurred any Indebtedness that remains
outstanding on such date of determination, or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio involves an
incurrence of Indebtedness (including without limitation any Acquired
Debt), Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to
such Indebtedness and the application of the proceeds thereof (and, in the
case of any Ac-
7
<PAGE> 19
quired Debt, the related acquisition) as if such Indebtedness had been
incurred (and any such acquisition had occurred) on the first day of such
period;
(2) if since the beginning of such period the Company or any
Restricted Subsidiary has repaid, repurchased, defeased, retired or
otherwise discharged (a "Discharge") any Indebtedness that is no longer
outstanding on such date of determination, or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio involves a
Discharge of Indebtedness, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving effect
to such Discharge of such Indebtedness, including with the proceeds of any
such new Indebtedness, as if such Discharge had occurred on the first day
of such period;
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have disposed of any company, any business,
any group of assets constituting an operating unit, or any other assets
out of the ordinary course of business (a "Sale"), (x) Consolidated Cash
Flow for such period shall be reduced by an amount equal to the
Consolidated Cash Flow (if positive) directly attributable to the assets
that are the subject of such Sale for such period or increased by an
amount equal to the Consolidated Cash Flow (if negative) directly
attributable thereto for such period and (y) Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated
Interest Expense directly attributable to any Indebtedness of the Company
or any Restricted Subsidiary discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Sale for
such period (and, if the Capital Stock of any Restricted Subsidiary is
sold, transferred or otherwise disposed of, the Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after
such sale, transfer or disposition);
(4) if since the beginning of such period the Company or any
Restricted Subsidiary shall have acquired (by merger or otherwise, and
whether accounted for as a purchase, a pooling of interests or otherwise)
any company, any business, any group of assets constituting an operating
unit, or any other assets out of the ordinary course of business (a
"Purchase"), Consolidated Cash Flow and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto
(including the incurrence of any related Indebtedness) as if such Purchase
had occurred on the first day of such period; and
(5) if since the beginning of such period any Person became a
Restricted Subsidiary or was merged or consolidated with or into the
Company or any Restricted
8
<PAGE> 20
Subsidiary, in each case in a Purchase, and since the beginning of such
period such Person shall have Discharged any Indebtedness or made any Sale
or Purchase that would have required an adjustment pursuant to clause (2),
(3) or (4) above if made by the Company or a Restricted Subsidiary during
such period, Consolidated Cash Flow and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto as
if such Discharge, Sale or Purchase occurred on the first day of such
period.
If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at the
option of the Company, either a fixed or floating rate. If any Indebtedness that
is being given pro forma effect was incurred under a revolving credit facility,
the interest expense on such Indebtedness shall be computed based upon the
average daily balance of such Indebtedness during the applicable period (being
the relevant four-quarter period, or, if shorter, the portion thereof beginning
on the date such facility was first drawn upon). In making any calculation of
the Consolidated Coverage Ratio for any period prior to the date of the closing
of the Acquisition, the Acquisition shall be deemed to have taken place on the
first day of such period.
"Consolidated Interest Expense" means, with respect to any period,
the sum (without duplication) of (i) the interest expense of the Company and its
Restricted Subsidiaries for such period, plus (ii) all cash dividends paid
during such period by the Company and its Restricted Subsidiaries with respect
to any Disqualified Stock (other than to the Company or a Restricted
Subsidiary), and minus (iii) to the extent otherwise included in Consolidated
Interest Expense, amortization or write-off of financing costs, in each case
under clauses (i) through (iii) as determined on a consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any period, the net
income (or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP consistently applied,
adjusted by excluding, to the extent included in calculating such net income (or
loss), without duplication, (i) any extraordinary gain or loss as recorded on
the statement of operations in accordance with GAAP, (ii) the portion of net
income (or loss) of the Company and its Restricted Subsidiaries allocable to the
Company's equity in the net income (or loss) of any unconsolidated Person or
Unrestricted Subsidiary, except (in the case of such net income) to the extent
of the amount of
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<PAGE> 21
dividends or distributions actually paid or made to the Company or any of its
Restricted Subsidiaries by such other Person during such period, (iii) net
income (or loss) of any Person combined with the Company or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) any gain or loss realized upon any
Asset Sale (other than sales of leases of customer-leased equipment) and any
gain or loss realized upon the sale or other disposition of any Capital Stock of
any Person, (v) the net income of any Restricted Subsidiary if the declaration
of dividends or similar distributions by that Restricted Subsidiary of that net
income to the Company is at the time restricted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation (other than pursuant to
any statute, rule or governmental regulation that permits such dividends or
similar distributions payments after the passage of time, not to exceed 120
days, or after the filing or providing of notice with respect to such dividends
or similar distributions) applicable to that Restricted Subsidiary or its
stockholders (other than pursuant to the Securities or the Indenture), except to
the extent that any dividend or distribution was or could have been made by the
Restricted Subsidiary to the Company or another Restricted Subsidiary during
such period in compliance with such restrictions, (vi) non-cash, nonrecurring
charges (excluding any non-cash charge which requires an accrual or reserve for
cash charges for any future period), (vii) any nonrecurring charges related to
the Acquisition or any acquisition by the Company or any Restricted Subsidiary
after the Issue Date and (viii) all deferred financing costs written off and
premium paid in connection to any early extinguishment of Indebtedness.
"Consolidated Net Tangible Assets" of the Company means the
aggregate amount of assets (less applicable reserves and other properly
deductible items) after deducting therefrom (a) all current liabilities
(excluding any indebtedness for money borrowed having a maturity of less than 12
months from the date of the most recent consolidated balance sheet of the
Company but which by its terms is renewable or extendable beyond 12 months from
such date at the option of the borrower) and (b) all goodwill, trade names,
patents, unamortized debt discount and expense and any other like intangibles,
all as set forth on the most recent consolidated balance sheet of the Company
and computed in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee in the
Borough of Manhattan, The City of New York at which at any particular time its
corporate trust business shall be administered, which office on the Issue Date
is located at 14 Wall Street, 8th Floor, NY, NY 10005.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Coulter" means Coulter Corporation, a Delaware corporation.
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<PAGE> 22
"Covenant Defeasance" has the meaning specified in Section 1203.
"Credit Agreement" means the credit agreement dated as of October
31, 1997, among the Company, the banks and other financial institutions party
thereto from time to time, and Citicorp USA, Inc., as agent, Citicorp
Securities, Inc. as arranger, and Merrill Lynch & Co., as syndication agent, as
such agreement may be amended, supplemented, waived or otherwise modified from
time to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agents and lenders or other agents and lenders or otherwise,
and whether provided under the original Credit Agreement or otherwise).
"Credit Facility" means the collective reference to the Credit
Agreement, any notes and letters of credit issued pursuant thereto and any
guarantees, security agreements, pledges, mortgages, letter of credit
applications and other collateral documents, and other instruments and
documents, executed and delivered pursuant to or in connection with any of the
foregoing, in each case as the same may be amended, supplemented, waived or
otherwise modified from time to time, or refunded, refinanced, restructured,
replaced, renewed, repaid, increased or extended from time to time (whether in
whole or in part, whether with the original agent and lenders or other agents
and lenders or otherwise, and whether provided under the original Credit
Agreement or otherwise).
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Default" means any event that is, or after the giving of notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1202.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Disqualified Stock" means (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable
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<PAGE> 23
at the option of the holder thereof (other than upon a change of control of the
Company in circumstances where the holders of the Securities would have similar
rights), in whole or in part on or prior to the stated maturity of any
Securities.
"Dollars" and "$" means lawful money of the United States of
America.
"Equipment Held for Resale" means instrument systems and related
accessories and components manufactured or assembled by the Company that are
owned and held for placement in facilities of the Company's customers.
"Equity Interest" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including limited liability company interests, in such Person.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Exchange Offer" means the offer by the Company to the Holders of
the Initial Securities to exchange all of the Initial Securities for Exchange
Securities, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in first recital of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that (i) such Exchange
Securities shall not contain terms with respect to transfer restrictions and
shall be registered under the Securities Act, and (ii) certain provisions
relating to an increase in the stated rate of interest thereon shall be
eliminated) that are issued and exchanged for the Initial Securities in
accordance with the Exchange Offer, as provided for in the Registration Rights
Agreement and this Indenture.
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<PAGE> 24
"Exchange 2003 Notes" and "Exchange 2008 Notes" have the respective
meanings specified in the first recital to this Indenture.
"Fair Market Value" means, with respect to any asset or property,
the sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
that is (i) not organized under the laws of the United States of America or any
state thereof or the District of Columbia and (ii) conducts its principal
operations outside the United States.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Issue Date, including those 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
statement by such other entity as approved by a significant segment of the
United States accounting profession.
"Global Securities" has the meaning set forth in Section 201.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"incur" has the meaning specified in Section 1010.
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<PAGE> 25
"Indebtedness" means, with respect to any Person, without
duplication, and whether or not contingent, (i) all indebtedness of such Person
for borrowed money or which is evidenced by a note, bond, debenture or similar
instrument, (ii) all obligations of such Person to pay the deferred or unpaid
purchase price of property or services, which purchase price is due more than
one year after the date of placing such property in service or taking delivery
and title thereto or the completion of such service, (iii) all Capital Lease
Obligations of such Person, (iv) all obligations of such Person in respect of
letters of credit or bankers' acceptances issued or created for the account of
such Person, (v) to the extent not otherwise included in this definition, all
net obligations of such Person under all Interest Rate Agreements, Currency
Agreement Obligations or Commodity Price Protection Agreements of such Person,
(vi) all liabilities of others of the kind described in the preceding clause
(i), (ii) or (iii) secured by any Lien on any property owned by such Person even
if such Person has not assumed or otherwise become liable for the payment
thereof, to the extent of the value of the property subject to such Lien, (vii)
all Disqualified Stock issued by such Person, and (viii) to the extent not
otherwise included, any Guarantee by such Person of any other Person's
indebtedness or other obligations described in clauses (i) through (vii) above.
"Indebtedness" of the Company and its Restricted Subsidiaries shall not include
(i) current trade payables incurred in the ordinary course of business and
payable in accordance with customary practices and (ii) non-interest bearing
installment obligations and accrued liabilities incurred in the ordinary course
of business which are not more than 90 days past due.
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of each series
of the Securities.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the Securities, to pay principal of,
premium, if any, and interest on the Securities when due and payable, whether at
maturity, by acceleration, call for redemption or repurchase or otherwise, and
all other amounts due or to become due under or in connection with this
Indenture, the Securities or the Note Guarantees and the performance of all
other obligations to the Trustee (including, but not limited to, payment of all
amounts due the Trustee under Section 607 hereof) and the Holders of the
Securities of either series under this Indenture, the Securities and the Note
Guarantees, according to the terms thereof.
"Initial Securities" has the meaning specified in the recitals to
this Indenture.
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<PAGE> 26
"Initial 2003 Notes" and "Initial 2008 Notes" have the respective
meanings specified in the first recital to this Indenture.
"Interest Payment Date," when used with respect to any Security,
means the date specified in such Security as the fixed date on which any
installment of interest is due and payable.
"Interest Rate Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement, but excluding advances, loans and other
extension of credit to customers, directors, officers and employees in the
ordinary course of business) to, capital contribution (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others) to, or any purchase or acquisition of Capital
Stock, bonds, securities or other similar instruments issued by, such Person and
shall include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and
Section 1011, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of the
assets (net of liabilities) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude
the Fair Market Value of the assets (net of liabilities) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of
such transfer, in each case as determined by the Board of Directors in good
faith.
"Investment Company Act" means the Investment Company Act of 1940
and any statute successor thereto, in each case as amended from time to time.
"Investment Grade" means a rating in one of the four highest
categories (without regard to subcategories within such rating categories) by a
Rating Agency.
"Investment Grade Rating Date" means the first date on which the
Securities are rated Investment Grade by two Rating Agencies.
"Issue Date" means the date on which Securities are first issued
under the Indenture.
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<PAGE> 27
"Lien" means, with respect to any property or assets, any mortgage
or deed of trust, pledge, hypothecation, assignment, security interest, lien,
encumbrance, or other security arrangement of any kind or nature whatsoever on
or with respect to such property or assets (including any conditional sale or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Maturity," when used with respect to any Security, means the date
on which the principal of such Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, call for redemption or otherwise.
"Net Proceeds" from an Asset Sale means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Sale or received
in any other noncash form) therefrom, in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all federal, state, provincial, foreign and local taxes required to be paid
or accrued as a liability under GAAP, as a consequence of such Asset Sale, (ii)
all payments made on any Indebtedness that is secured by any assets subject to
such Asset Sale, in accordance with the terms of any Lien upon such assets,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Sale, or to any other Person (other than the Company or a Restricted Subsidiary)
owning a beneficial interest in the assets disposed of in such Asset Sale and
(iv) appropriate amounts to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Sale and retained by the Company or any Restricted Subsidiary after such Asset
Sale.
"Note Guarantee" means each Guarantee of the Securities by Coulter,
Beckman Instruments (Naguabo), Inc., Hybritech Incorporated, SmithKline
Diagnostics, Inc. and Coulter Leasing Corporation pursuant to this Indenture,
and any Guarantee of the Securities that may from time to time be executed and
delivered pursuant to this Indenture.
"Note Guarantor" means each of Coulter, Beckman Instruments
(Naguabo), Inc., Hybritech Incorporated, SmithKline Diagnostics, Inc. and
Coulter Leasing Corporation and any Restricted Subsidiary that has issued a Note
Guarantee.
"Notice of Default" means a written notice of the kind specified in
Section 501(4) or 501(5).
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<PAGE> 28
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, a Vice Chairman of the Board, the President or a Vice President,
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Offshore Global Security" has the meaning set forth in Section 201.
"Offshore Physical Security" has the meaning set forth in
Section 201.
"Offshore Security Exchange Date" has the meaning set forth in
Section 203.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of
the date of determination, all Securities heretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1202; and
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
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<PAGE> 29
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Permitted Indebtedness" means:
(i) Indebtedness incurred by the Company pursuant to the Credit
Facility in an aggregate principal amount not to exceed $1,100.0 million
outstanding at any time, minus the aggregate amount of all scheduled
repayments of principal, and all mandatory prepayments of principal with
Net Proceeds from Asset Sales, and plus (in the case of any refinancing
thereof) the aggregate amount of fees, underwriting discounts, premiums
and other costs and expenses incurred in connection with such refinancing;
provided that, so long as no term loan Indebtedness remains outstanding
under the Credit Facility, the Company shall be permitted to incur
revolving credit Indebtedness thereunder in an aggregate principal amount
not to exceed $800 million outstanding at any time;
(ii) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount outstanding at any time not exceeding, as to all such Foreign
Subsidiaries, the greater of (a) $75 million and (b) an amount equal to
the sum of (x) 80% of the combined book value of the net account
receivables owned by Foreign Subsidiaries that are shown on the
consolidated balance sheet of the Company as of the end of the most
recently ended fiscal quarter for which financial statements of the
Company are available plus (y) 50% of the combined book value of the
inventory owned by Foreign Subsidiaries that is shown on such balance
sheet, all as calculated on a combined basis and in accordance with GAAP;
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<PAGE> 30
(iii) Indebtedness represented by the Initial Securities or the
Exchange Securities, any Guarantees in respect thereof, and any
Indebtedness arising by reason of any Lien granted to secure any of the
foregoing Indebtedness;
(iv) Indebtedness owed by any Restricted Subsidiary to the Company
or to another Restricted Subsidiary, or owed by the Company to any
Restricted Subsidiary; provided, however, that any such Indebtedness shall
be at all times held by a Person that is either the Company or a
Restricted Subsidiary of the Company; provided, further, however, that
upon either (a) the transfer or other disposition of any such Indebtedness
to a Person other than the Company or another Restricted Subsidiary or (b)
the sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of any such Restricted Subsidiary
to a Person other than the Company or another Restricted Subsidiary, the
incurrence of such Indebtedness shall be deemed to be an incurrence that
is not permitted by this clause (iv);
(v) Indebtedness of the Company or any Restricted Subsidiary in the
form of Purchase Money Obligations or Capital Lease Obligations, in an
aggregate amount not in excess of $30 million outstanding at any time;
(vi) Indebtedness of the Company or any Restricted Subsidiary
arising in the ordinary course of business (a) pursuant to Interest Rate
Agreements designed to protect the Company or any Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the Company
or any Subsidiary as long as such obligations do not exceed the aggregate
principal amount of such Indebtedness then outstanding, (b) under any
Currency Hedging Arrangements, which if related to Indebtedness do not
increase the amount of such Indebtedness other than as a result of foreign
exchange fluctuations, or (c) under any Commodity Price Protection
Agreements, which if related to Indebtedness do not increase the amount of
such Indebtedness other than as a result of foreign exchange fluctuations;
(vii) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring of a check, draft or similar instrument of such
Person drawn against insufficient funds, provided that such Indebtedness
is extinguished within five Business Days of its incurrence;
(viii) Indebtedness of the Company or any Restricted Subsidiary
consisting of Guarantees, indemnities, or obligations in respect of
purchase price adjustments, in connection with the acquisition or
disposition of assets;
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<PAGE> 31
(ix) Indebtedness of the Company or any Restricted Subsidiary in
respect of (a) judgment, performance, surety and other bonds provided by
such Person with respect to obligations of such Person in the ordinary
course of business, (b) letters of credit securing obligations incurred in
the ordinary course of business or (c) other letters of credit in an
amount not to exceed $5 million in the aggregate outstanding at any time;
(x) Indebtedness of the Company or any Restricted Subsidiary
consisting of Guarantees in respect of loans or advances made to officers
or employees of the Company or any Restricted Subsidiary, or Guarantees
otherwise made on their behalf, (a) in respect of travel, entertainment
and moving related expenses incurred in the ordinary course of business,
or (b) in the ordinary course of business not exceeding $500,000 in the
aggregate outstanding at any time;
(xi) Any Refinancing Indebtedness incurred in respect of any
Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii)
of this definition of "Permitted Indebtedness," any Capital Lease
Obligations described in clause (v) of this definition of "Permitted
Indebtedness" or any Indebtedness permitted to be incurred pursuant to the
first sentence of Section 1010;
(xii) Indebtedness of the Company or any Restricted Subsidiary that
is outstanding on the Issue Date;
(xiii) Acquired Debt of any Restricted Subsidiary, provided that at
the time of the incurrence thereof and after giving effect thereto on a
pro forma basis, (x) no De fault or Event of Default will have occurred
and be continuing or would result therefrom and (y) the Company could
incur at least $1.00 of additional Indebtedness pursuant to the first
sentence of Section 1010;
(xiv) Indebtedness of any Restricted Subsidiary in an aggregate
principal amount not exceeding $10 million outstanding at any time, as to
all such Restricted Subsidiaries that incur Indebtedness pursuant to this
clause (xiv);
(xv) Guarantees by the Company of any Indebtedness of any Restricted
Subsidiary incurred by such Subsidiary in compliance with Section 1010,
provided that if such Indebtedness is subordinated in right of payment to
any other Indebtedness, such Guarantee shall be subordinated in right of
payment to the Securities at least to the same extent as such Indebtedness
is so subordinated to such other Indebtedness;
(xvi) any Guarantee by any Note Guarantor of Bank Indebtedness of
the Company incurred pursuant to clause (i), (xi) or (xvii) of this
definition of "Permitted
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<PAGE> 32
Indebtedness" or the first sentence of Section 1010, provided that (a) if
such Indebtedness is subordinated in right of payment to any other
Indebtedness, such Guarantee shall be subordinated in right of payment to
the Securities at least to the same extent as such Indebtedness is so
subordinated to such other Indebtedness, and (b) upon such Person no
longer being a Note Guarantor, there shall be deemed to have occurred a
new incurrence of such Guarantee not permitted by this clause (xvi); and
(xvii) Indebtedness of the Company in addition to that described in
clauses (i), (iii) through (xii) and (xv) above, and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all such
Indebtedness incurred pursuant to this clause (xvii) does not exceed $50
million outstanding at any time.
For purposes of determining compliance with any such
Dollar-denominated restriction on the incurrence of Indebtedness denominated in
a foreign currency, the Dollar-equivalent principal amount of such Indebtedness
incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such Indebtedness was incurred, in the
case of term debt, or first committed, in the case of revolving credit debt,
provided that (x) the Dollar-equivalent principal amount of any such
Indebtedness outstanding on the Issue Date shall be calculated based on the
relevant currency exchange rate in effect on the Issue Date, (y) if such
Indebtedness is incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable
Dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such
Dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced, and (z) the
Dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency and incurred pursuant to the Credit Facility shall be calculated based
on the relevant currency exchange rate in effect on, at the Company's option,
(i) the Issue Date, (ii) any date on which any of the respective commitments
under the Credit Facility shall be reallocated between or among facilities or
subfacilities thereunder, or on which such rate is otherwise calculated for any
purpose thereunder, or (iii) the date of such incurrence. The principal amount
of any Indebtedness incurred to refinance other Indebtedness, if incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness incurred pursuant to and in
compliance with, Section 1010, (i) any other obligation of the obligor on such
Indebtedness (or of any other Person that
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<PAGE> 33
could have incurred such Indebtedness as the obligor thereon in compliance with
such covenant) arising under any Guarantee, Lien or letter of credit supporting
such Indebtedness shall be disregarded to the extent that such Guarantee, Lien
or letter of credit secures the principal amount of such Indebtedness; (ii) in
the event that Indebtedness is entitled to be incurred pursuant to the first
paragraph of such covenant or meets the criteria of more than one of the types
of Indebtedness described in the definition of "Permitted Indebtedness", the
Company, in its sole discretion, shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
such clauses; and (iii) the amount of Indebtedness issued at a price that is
less than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in accordance with GAAP.
Indebtedness of any Person that is not a Restricted Subsidiary,
which Indebtedness is outstanding at the time such Person becomes a Restricted
Subsidiary or is merged with or into or consolidated with the Company or a
Restricted Subsidiary, shall be deemed to have been incurred at the time such
Person becomes a Restricted Subsidiary or is merged with or into or consolidated
with the Company or a Restricted Subsidiary, and Indebtedness which is assumed
at the time of the acquisition of any asset shall be deemed to have been
incurred at the time of such acquisition. Accrual of interest, the accretion of
accreted value of principal, and the payment of interest in the form of
additional Indebtedness having the same terms as the original Indebtedness on
which such payment is made (which payment is made pursuant to the terms of such
original Indebtedness as initially issued), will not be deemed an incurrence of
Indebtedness for purposes of Section 1010.
"Permitted Investments" means (i) any Investment in the Company or
any Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any
Investment in a Person if, as a result of such Investment, (a) such Person
becomes a Restricted Subsidiary, or (b) such Person either (1) is merged,
consolidated or amalgamated with or into the Company or one of its Restricted
Subsidiaries and the Company or such Restricted Subsidiary is the surviving
Person, or (2) transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or one of its Restricted Subsidiaries; (iv)
Investments in accounts and notes receivable acquired in the ordinary course of
business; (v) any securities or other Investments received in connection with
any sale or other disposition of property or assets (including Equity
Interests); (vi) obligations under any Interest Rate Agreement, Currency Hedging
Arrangement or Commodity Price Protection Agreement permitted pursuant to
Section 1010; (vii) securities or other Investments received in settlement of
debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement
of any Lien, or in satisfaction of judgments, including in connection with any
bankruptcy proceeding or other reorganization of another Person; (viii)
Investments in existence or made pursuant to legally binding written commitments
in existence on the Issue Date; (ix) pledges or deposits with respect to leases
or utilities, provided to third
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<PAGE> 34
parties in the ordinary course of business; (x) bonds secured by assets leased
to and operated by the Company or any Restricted Subsidiary that were issued in
connection with the financing of such assets so long as the Company or any
Restricted Subsidiary may obtain title to such assets at any time by paying a
nominal fee, canceling such bonds and terminating the transaction; (xi)
Investments in a joint venture or similar entity that is not a Restricted
Subsidiary, made in the ordinary course of business; (xii) Investments in
customers or suppliers, not to exceed $10 million in the aggregate outstanding
at any time; and (xiii) Investments in an amount not exceeding $50 million in
the aggregate outstanding at any time.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Securities" has the meaning set forth in Section 201.
"Place of Payment" has the meaning specified in Section 1002.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock" as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Capital Stock of any other class of such
Person.
"Principal Property" means any real property of the Company or any
of its Subsidiaries, and any equipment located at or comprising a part of any
such property, having a net book value, as of the date of determination, in
excess of the greater of $50 million and 10% of Consolidated Net Tangible Assets
of the Company; provided, however, that Principal Property shall not include
Equipment Held for Resale.
"Private Placement Legend" has the meaning set forth in Section 203.
"Purchase Money Obligation" means any Indebtedness secured by a Lien
on assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Company or any Restricted Subsidiary at any time after the Issue Date;
provided that (i) any security agreement or
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<PAGE> 35
conditional sales or other title retention contract pursuant to which the Lien
on such assets is created (collectively a "Security Agreement") shall be entered
into within 180 days after the purchase or substantial completion of the
construction of such assets and shall at all times be confined solely to the
assets so purchased or acquired, any additions and accessions thereto and any
proceeds therefrom, (ii) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness and (iii) (a) the
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis in the case of any additions and accessions)
shall not at the time such Security Agreement is entered into exceed 100% of the
purchase price to the Company or any Restricted Subsidiary of the assets subject
thereto or (b) the Indebtedness secured thereby shall be with recourse solely to
the assets so purchased or acquired, any additions and accessions thereto and
any proceeds therefrom.
"Rating Agency" means each of Standard & Poor's Ratings Services,
Duff & Phelps Credit Rating Co. and Moody's Investors Service, Inc. (or, in any
case, if such Person ceases to rate the Securities for reasons outside the
control of the Company, any other "nationally recognized statistical rating
organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange
Act) selected by the Company as a replacement Rating Agency).
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Treasury Dealer" means each of Merrill Lynch & Co.,
Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston
Corporation, Morgan Stanley & Co. Incorporated, BancAmerica Robertson Stephens,
First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. and their
respective successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New York City (a
"Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer.
"Refinancing Indebtedness" means any Indebtedness incurred in
connection with or given in exchange for the renewal, extension, substitution,
refunding, defeasance, refinancing, repayment or replacement (a "refinancing")
of any Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii)
of the definition of "Permitted Indebtedness," any Capital Lease Obligations
described in clause (v) of the definition of "Permitted Indebtedness"
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or any Indebtedness permitted to be incurred pursuant to the first sentence of
Section 1010; provided, however, that (a) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount (or accrued
amount, if less) of the Indebtedness so renewed, extended, substituted,
refunded, defeased, refinanced or replaced ("refinanced"), plus the reasonable
fees, underwriting discounts, premiums and other costs and expenses incurred in
connection therewith), (b) such Refinancing Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being refinanced; (c) if the Indebtedness being
refinanced is subordinated in right of payment to any Securities, such
Refinancing Indebtedness shall be at least as subordinated in right of payment
to the Securities as the Indebtedness being refinanced; and (d) the obligor on
such Refinancing Indebtedness shall be the obligor on the Indebtedness being
refinanced, the Company, or (in the case of Indebtedness of a Foreign Subsidiary
that is being refinanced) any Foreign Subsidiary; it being understood that any
Indebtedness incurred pursuant to clauses (i), (ii) or (v) of the definition of
"Permitted Indebtedness" that is so refinanced shall be deemed to remain
outstanding for the purpose of determining compliance with any limitations or
restrictions set forth in such clauses.
"Registration Rights Agreement" means the Registration Rights
Agreement dated on or about the Issue Date among the Company and the Initial
Purchasers for the benefit of themselves and the Holders, as the same may be
amended from time to time in accordance with the terms thereof.
"Registration Statement" means any Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of either series means the date specified for
that purpose in Section 301.
"Resale Restriction Termination Date" has the meaning specified in
the Private Placement Legend set forth in Section 203.
"Responsible Officer," when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
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"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means (i) any dividend or other distribution
declared or paid on any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in Capital
Stock (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or dividends or distributions payable to the Company or any
Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or
distributions has any stockholder other than the Company or another Restricted
Subsidiary, to such stockholder on no more than a pro rata basis, measured by
value)); (ii) any payment to purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any Restricted Subsidiary (other than
any Capital Stock owned by the Company or any Restricted Subsidiary, or from all
holders of such Capital Stock of a Restricted Subsidiary on a pro rata basis);
(iii) any payment to purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is subordinated in right of payment to any
Securities (other than a purchase, redemption, defeasance or other acquisition
or retirement for value in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of such acquisition or retirement); or (iv) any Restricted Investment.
"Restricted Payment Amount" means the sum of:
(a) an amount equal to 50% of the Company's aggregate cumulative
Consolidated Net Income accrued on a cumulative basis from the Issue Date
(or, if such aggregate cumulative Consolidated Net Income for such period
shall be a deficit, minus 100% of such deficit), plus
(b) the aggregate amount of all net cash proceeds received since the
Issue Date by the Company (1) as capital contributions in the form of
common equity to the Company after the Issue Date, (2) from the issuance
and sale (other than to a Restricted Subsidiary) of its Capital Stock
(other than Disqualified Stock), (3) from the issuance to a Person who is
not a Subsidiary of the Company of any options, warrants or other rights
to acquire Capital Stock of the Company (in each case, exclusive of any
Disqualified Stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of any Securities) and (4) from the issuance
and sale by the Company or any Restricted Subsidiary after the Issue Date
of Disqualified Stock or debt securities that have been converted into or
exchanged for Capital Stock of the Company (other than Disqualified
Stock), plus the amount of cash received by the Company or any Restricted
Subsidiary upon such conversion or exchange, in each case to the extent
that such proceeds are not used to redeem, repurchase, retire or otherwise
acquire Capital Stock or any
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Indebtedness of the Company or any Restricted Subsidiary, pursuant to
clause (ii) or (iii) of the second paragraph of Section 1011, plus
(c) the amount of the net reduction in Investments by the Company in
Unrestricted Subsidiaries resulting from (x) the payment of cash dividends
or the repayment in cash of the principal of loans or the cash return on
any Investment, in each case to the extent received by the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or
extinguishment of any Guarantee of Indebtedness of any Unrestricted
Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries of the Company (valued as provided in the
definition of "Investment"), such aggregate amount of the net reduction in
Investments not to exceed in the case of any Unrestricted Subsidiaries the
amount of Restricted Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted Payments, plus
(d) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the amount of cash proceeds received with respect to such Restricted
Investment, net of taxes and the cost of disposition, not to exceed the
amount of Restricted Investments made after the Issue Date.
"Restricted Subsidiary" means any Subsidiary of the Company which
owns or leases a Principal Property; provided that, prior to an Investment Grade
Rating Date, "Restricted Subsidiary" means any Subsidiary of the Company (other
than an Unrestricted Subsidiary) for all purposes other than as used in Sections
1008 and 1009.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"series," when used with respect to the Securities, means the 2003
Notes or the 2008 Notes, as applicable.
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"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, when used with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
purchase of such security at the option of the holder thereof upon the happening
of any contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" of a Person means a Person more than 50% of the
outstanding voting stock or other Equity Interests of which is owned, directly
or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting" stock or other Equity Interests means stock or other Equity Interests
which ordinarily has voting power for the election of directors, trustees or
similar managers, whether at all times or only so long as no senior class of
stock or other Equity Interests has such voting power by reason of any
contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of either series shall mean the Trustee with respect
to Securities of that series.
"2003 Notes" and "2008 Notes" have the respective meanings specified
in the first recital to this Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors as provided below) and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate (a
"Designation") any Subsidiary of the Company (other
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than a Subsidiary that owns any Capital Stock of, or owns, or holds any Lien on,
any property of the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated) to be an Unrestricted
Subsidiary if: (a) no Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; (b) the Company could make an
Investment (other than a Permitted Investment) at the time of such Designation
(assuming the effectiveness thereof) in an amount (the "Designation Amount")
equal to the Fair Market Value of the Capital Stock of such Subsidiary on such
date; and (c) the Company could incur $1.00 of additional Indebtedness under the
first sentence of Section 1010 at the time of such Designation (assuming the
effectiveness thereof). The Board of Directors may revoke (a "Revocation") any
Designation of a Subsidiary as an Unrestricted Subsidiary if: (a) no Default
shall have occurred and be continuing at the time of and after giving effect to
such Revocation; (b) the Company could incur $1.00 of additional Indebtedness
under the first sentence of Section 1010 at the time of such Revocation
(assuming the effectiveness thereof); and (c) all Liens and Indebtedness of such
Unrestricted Subsidiary outstanding immediately following such Revocation would,
if incurred at such time, have been permitted to be incurred under the
Indenture. Any Designation or Revocation must be evidenced by a Board Resolution
certifying compliance with the foregoing provisions.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
1011 for all purposes of the Indenture in the Designation Amount. The Company
shall not, and shall not permit any Restricted Subsidiary to, at any time (i)
provide a Guarantee of any Indebtedness of any Unrestricted Subsidiary, (ii) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (iii) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary), except
to the extent permitted under Section 1011.
"U.S. Global Security" has the meaning set forth in Section 201.
"U.S. Government Obligation" has the meaning specified in
Section 1204.
"U.S. Physical Security" has the meaning set forth in Section 201.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
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"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
SECTION 102. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act. Each
such certificate or opinion shall be given in the form of an Officers'
Certificate, if to be given by an officer of the Company, or an Opinion of
Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 1004) shall include,
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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SECTION 103. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company or a Note
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or any Note Guarantor stating that the information with respect to such
factual matters is in the possession of the Company or any Note Guarantor,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Indenture to be given, made or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying
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that the individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the execution
of any such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security
Register.
Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company or any Note Guarantor in reliance thereon, whether or not notation of
such action is made upon such Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of either series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date (or their duly designed
proxies), and no other Holders, shall be entitled to take the relevant action,
whether or not such Persons remain Holders after such record date; provided that
no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Company from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice
of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
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The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of either series entitled to
join in the giving or making of (i) any Notice of Default, (ii) any declaration
of acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities of the relevant series in the manner
set forth in Section 106, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the party hereto which set such record date shall be deemed to
have initially designated the 180th day after such record date as the Expiration
Date with respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
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SECTION 105. Notices, Etc., to Trustee, Company and Note Guarantor.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any Note
Guarantor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate
Trust Office, Attention: Corporate Trust Services Division, or
(2) the Company or any Note Guarantor by the Trustee or by any
Holder shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first- class postage
prepaid, to the Company or such Note Guarantor addressed to it at the
address of the Company's principal office specified in the first paragraph
of this instrument or at any other address previously furnished in writing
to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date
(if any), and not earlier than the earliest date (if any), prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with a provision of the Trust Indenture
Act which is required under the Trust Indenture Act to be a part of and govern
this Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust
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Indenture Act which may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
SECTION 108. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 109. Successors and Assigns. All covenants and agreements in
this Indenture by each of the Company and the Note Guarantors shall bind its
successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause. In case any provision in this
Indenture, in the Securities or in any Note Guarantee shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture. Nothing in this Indenture, in
the Securities or in any Note Guarantee, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 112. Governing Law. THIS INDENTURE, THE SECURITIES AND THE
NOTE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS).
SECTION 113. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal (and premium,
if any) need not be made at such Place of Payment on such date, but may be made
on the next succeeding Business Day at such Place of Payment with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity.
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ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally. The Securities of each series and the
Trustee's certificate of authentication relating thereto shall be in
substantially the forms set forth, or referenced, in this Article and Exhibit A
annexed hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
The terms and provisions contained in the Securities annexed hereto
as Exhibit A shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company, the Note Guarantors and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A under
the Securities Act may be issued in the form of one or more permanent global
Securities in substantially the form set forth in Exhibit A and contain each of
the legends set forth in Section 203 (the "U.S. Global Security"), deposited
with the Trustee, as custodian for the Depositary or its nominee, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold in offshore transactions in
reliance on Regulation S under the Securities Act shall be issued in the form of
a single permanent global Security in substantially the form set forth in
Exhibit A (the "Offshore Global Security") deposited with the Trustee, as
custodian for the Depositary or its nominee, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Offshore Global Security may from time to time be increased or
decreased by adjustments made in the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided. Initial Securities
issued pursuant to Section 305 in
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exchange for or upon transfer of beneficial interests in the U.S. Global
Security or the Offshore Global Security (x) shall be in the form of permanent
certificated Securities substantially in the form set forth in Exhibit A and
shall contain the Private Placement Legend as set forth in Section 203 (the
"U.S. Physical Securities") or (y), on or after the Offshore Security Exchange
Date and subject to Section 203, shall be in the form of permanent certificated
Securities substantially in the form set forth in Exhibit A (the "Offshore
Physical Securities"), respectively, as hereinafter provided.
The Offshore Physical Securities and the U.S. Physical Securities
are sometimes collectively herein referred to as the "Physical Securities". The
U.S. Global Security and the Offshore Global Security are sometimes collectively
referred to as the "Global Securities".
Exchange Securities shall be issued substantially in the form set
forth in Exhibit A.
SECTION 202. Form of Trustee's Certificate of Authentication. The
Trustee's certificates of authentication shall be in substantially the following
form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
By
-------------------------------------
Authorized Officer
Dated:
SECTION 203. Restrictive and Global Security Legends. Unless and
until (a) (i) an Initial Security is exchanged for an Exchange Security in an
Exchange Offer pursuant to an effective Exchange Offer Registration Statement or
(ii) an Initial Security is sold pursuant to an effective Shelf Registration
Statement, in each case pursuant to the Registration Rights Agreement, or (b)
the Resale Restriction Termination Date as herein provided, (A) each U.S. Global
Security and U.S. Physical Security shall bear the following legend set forth
below (the "Private Placement Legend") on the face thereof and (B) the Offshore
Global Security and Offshore Physical Securities shall bear the Private
Placement Legend on the face thereof until
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at least 41 days after the date hereof (the "Offshore Security Exchange Date")
and receipt by the Company and the Trustee of a certificate substantially in the
form provided in Exhibit C:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
("RULE 144A")) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501 (A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) OUTSIDE THE UNITED STATES PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS
(a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
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DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE. AS USED HEREIN, THE TERMS "UNITED STATES,"
"OFFSHORE TRANSACTION," AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE LEGEND WILL BE
REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
Each Global Security, whether or not an Initial Security, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY") TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE.
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ARTICLE THREE
THE SECURITIES
SECTION 301. Amount; Series; Terms. The titles of the Initial 2003
Notes and the Exchange 2003 Notes shall be the "7.10% Senior Notes due 2003" and
the "7.10% Senior Notes due 2003, Series B", respectively. The titles of the
Initial 2008 Notes and the Exchange 2008 Notes shall be the "7.45% Senior Notes
due 2008" and the "7.45% Senior Notes due 2008, Series B", respectively. The
aggregate principal amount of Securities that may be authenticated and delivered
under this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
of the series pursuant to Section 304, 305, 306, 906 or 1107) shall be limited
to $160,000,000 in the case of the 2003 Notes and $240,000,000 in the case of
the 2008 Notes.
The final Stated Maturity of the 2003 Notes shall be March 4, 2003,
and the final Stated Maturity of the 2008 Notes shall be March 4, 2008. The 2003
Notes shall bear interest at the rate of 7.10% per annum, and the 2008 Notes
shall bear interest at the rate of 7.45% per annum, in each case from March 4,
1998 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as further provided in the form of Security annexed
hereto as Exhibit A. The Interest Payment Dates on which such interest shall be
payable shall be March 4 and September 4 of each year, and the Regular Record
Dates for any interest payable on each such Interest Payment Date shall be the
immediately preceding February 19 and August 19, respectively.
The principal of, and premium, if any, and interest on the
Securities shall be payable at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan, The City of New York, provided,
however, that at the option of the Company payment of interest on a Security may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Upon a Change of Control Triggering Event, each Holder of Securities
will have the right to require that Company purchase all or any part (equal to
$1,000 or an integral multiple thereof) of the Securities held by such Holder,
as further provided in Section 1012.
The Securities will be redeemable at the option of the Company as
provided in Article Eleven. The Securities will not be entitled to the benefit
of a sinking fund.
The Securities shall be substantially in the form of Exhibit A to
this Indenture, as further provided in Article Two.
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SECTION 302. Denominations. The Securities of each series shall be
issuable only in registered form without coupons and only in denominations of
$1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
On Company Order, the Trustee shall authenticate for original issue
Initial 2003 Notes and Initial 2008 Notes in an aggregate principal amount not
to exceed $160,000,000 in the case of the 2003 Notes and $240,000,000 in the
case of the 2008 Notes. On Company Order, the Trustee shall authenticate for
original issue Exchange 2003 Notes and Exchange 2008 Notes in an aggregate
principal amount not to exceed $160,000,000 in the case of the 2003 Notes and
$240,000,000 in the case of the 2008 Notes; provided that such Exchange
Securities shall be issuable only upon the valid surrender for cancellation of
Initial Securities of a like aggregate principal amount in accordance with an
Exchange Offer pursuant to the Registration Rights Agreement. In each case, the
Trustee shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel of the Company that it may reasonably request in connection with such
authentication of Securities. Such Company Order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of 2003 Notes
outstanding at any time shall not exceed $160,000,000. The aggregate principal
amount of 2008 Notes outstanding at any time shall not exceed $240,000,000.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
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SECTION 304. Temporary Securities. Pending the preparation of
definitive Securities of either series, the Company may execute, and upon
Company Order the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities of either series are issued, the Company
will cause definitive Securities of that series to be prepared without
unreasonable delay. After the preparation of definitive Securities of such
series, the temporary Securities of such series shall be exchangeable for
definitive Securities of such series upon surrender of the temporary Securities
of such series at the office or agency of the Company in a Place of Payment for
that series, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities of either series, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount. Until so exchanged, the temporary
Securities of either series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such series and tenor.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency of the Company in a Place of Payment being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security of a
series at the office or agency of the Company in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount.
At the option of the Holder, Securities of either series may be
exchanged for other Securities of the same series, of any authorized
denominations and of like tenor and aggregate principal amount, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute,
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and the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of either series are to be redeemed in part, the
Company shall not be required (A) to issue, register the transfer of or exchange
any Securities of that series (or of that series and specified tenor, as the
case may be) during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of any such Securities selected
for redemption under Section 1103 and ending at the close of business on the day
of such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If
any mutilated Security is surrendered to the Trustee, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Security of the same series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
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of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of either series issued pursuant to this Section
in lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the Place of
Payment, provided, however, that at the option of the Company payment of
interest on a Security may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
Any interest on any Security of either series which is payable, but
is not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of having been such Holder,
and such Defaulted Interest may be paid by the Company, at its selection in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The
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Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to
each Holder of Securities of such series in the manner set forth in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of either series in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such Securities
may be listed, and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of and any premium and (subject to Section 307) any interest on such
Security and for all other purposes whatsoever,
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whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation. All Securities surrendered for payment,
redemption, registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of as
directed by a Company Order.
SECTION 310. Computation of Interest. Interest on the Securities of
each series shall be computed on the basis of a 360-day year of twelve 30-day
months.
SECTION 311. Book-Entry Provisions for Global Securities. (a) Each
Global Security initially shall (i) be registered in the name of the Depositary
for such Global Securities or the nominee of such Depositary, (ii) be delivered
to the Trustee as custodian for such Depositary and (iii) bear legends as set
forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security,
and the Depositary may be treated by the Company, the Note Guarantors, the
Trustee and any agent of the Company, the Note Guarantors or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Note Guarantors, the Trustee or any agent of the Company, the Note Guarantors or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a beneficial owner of any Security. The registered
holder of a Global Security may grant proxies and otherwise authorize any
person, including Agent Members and persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective
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nominees. Interests of beneficial owners in a Global Security may be transferred
or exchanged for Physical Securities in accordance with the applicable rules and
procedures of the Depositary and the provisions of Sections 305 and 312. In
addition, U.S. Physical Securities or Offshore Physical Securities shall be
transferred to all beneficial owners in exchange for their beneficial interests
in the U.S. Global Security or the Offshore Global Security, respectively, if
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the applicable Global Security or the Depositary
ceases to be a "Clearing Agency" registered under the Exchange Act and a
successor depositary is not appointed by the Company within 90 days, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Physical Securities under the Indenture or (iii) an Event of
Default has occurred and is continuing and the Security Registrar has received a
written request from the Depositary to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners for Physical
Securities pursuant to paragraph (b), the Security Registrar shall record on its
books and records the date and a decrease in the principal amount of such Global
Security in an amount equal to the beneficial interest in the Global Security
being transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Securities of like tenor and
principal amount of authorized denominations.
(d) In connection with a transfer of an entire Global Security to
beneficial owners pursuant to paragraph (b), the applicable Global Security
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the applicable Global Security, an equal aggregate principal amount
at maturity of U.S. Physical Securities (in the case of the U.S. Global
Security) or Offshore Physical Securities (in the case of the Offshore Global
Security), as the case may be, of authorized denominations.
(e) Any beneficial interest in one of the Global Securities that is
transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(f) Any Physical Security delivered in exchange for an interest in a
Global Security pursuant to paragraph (b) shall, unless such exchange is made on
or after the Resale
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Restriction Termination Date and except as otherwise provided in Section 203 and
Section 312, bear the Private Placement Legend.
SECTION 312. Transfer Provisions.
Unless and until (i) an Initial Security is exchanged for an
Exchange Security in the Exchange Offer pursuant to an effective Registration
Statement or (ii) an Initial Security is sold pursuant to an effective
Registration Statement, in each case, pursuant to the Registration Rights
Agreement, the following provisions shall apply:
(a) General. The provisions of this Section 312 shall apply to all
transfers involving any Physical Security and any beneficial interest in any
Global Security.
(b) Certain Definitions. As used in this Section 312 only,
"delivery" of a certificate by a transferee or transferor means the delivery to
the Security Registrar by such transferee or transferor of the applicable
certificate duly completed; "holding" includes both possession of a Physical
Security and ownership of a beneficial interest in a Global Security, as the
context requires; "transferring" a Global Security means transferring that
portion of the principal amount of the transferor's beneficial interest therein
that the transferor has notified the Security Registrar that it has agreed to
transfer; and "transferring" a Physical Security means transferring that portion
of the principal amount thereof that the transferor has notified the Security
Registrar that it has agreed to transfer.
As used in this Indenture, "Accredited Investor Certificate" means a
certificate substantially in the form set forth in Exhibit D; "Regulation S
Certificate" means a certificate substantially in the form set forth in Exhibit
E; "Rule 144A Certificate" means a certificate substantially in the form set
forth in Exhibit F; and "Non-Registration Opinion and Supporting Evidence" means
a written opinion of counsel reasonably acceptable to the Company to the effect
that, and such other certification or information as the Company may reasonably
require to confirm that, the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
(c) Deemed Delivery of a Rule 144A Certificate in Certain
Circumstances. A Rule 144A Certificate, if not actually delivered, will be
deemed delivered if (A) (i) the transferor advises the Company and the Trustee
in writing that the relevant offer and sale were made in accordance with the
provisions of Rule 144A (or, in the case of a transfer of a Physical Security,
the transferor checks the box provided on the Physical Security to that effect)
and (ii) the transferee advises the Company and the Trustee in writing that (x)
it and, if applicable, each account for which it is acting in connection with
the relevant transfer, is a qualified institutional buyer within the meaning of
Rule 144A, (y) it is aware that the transfer
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of Securities to it is being made in reliance on the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A, and (z)
prior to the proposed date of transfer it has been given the opportunity to
obtain from the Company the information referred to in Rule 144A(d)(4), and has
either declined such opportunity or has received such information (or, in the
case of a transfer of a Physical Security, the transferee signs the
certification provided on the Physical Security to that effect); or (B) the
transferor holds the U.S. Global Security and is transferring to a transferee
that will take delivery in the form of the U.S. Global Security.
(d) Procedures and Requirements.
1. If the proposed transfer occurs prior to the Offshore Security
Exchange Date, and the proposed transferor holds:
(A) a U.S. Physical Security which is surrendered to the Security
Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Security, then the Security Registrar shall (x) register such
transfer in the name of such transferee and record the date thereof
in its books and records, (y) cancel such surrendered U.S. Physical
Security and (z) deliver a new U.S. Physical Security to such
transferee duly registered in the name of such transferee in
principal amount equal to the principal amount being transferred of
such surrendered U.S. Physical Security;
(ii) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the U.S.
Global Security, then the Security Registrar shall (x) cancel such
surrendered U.S. Physical Security, (y) record an increase in the
principal amount of the U.S. Global Security equal to the principal
amount being transferred of such surrendered U.S. Physical Security
and (z) notify the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the
Offshore Global Security, then the Security
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Registrar shall (x) cancel such surrendered U.S. Physical Security,
(y) record an increase in the principal amount of the Offshore
Global Security equal to the principal amount being transferred of
such surrendered U.S. Physical Security and (z) notify the
Depositary in accordance with the procedures of the Depositary that
it approves of such transfer.
In any of the cases described in this Section 312(d)(1)(A), the
Security Registrar shall deliver to the transferor a new U.S. Physical
Security in principal amount equal to the principal amount not being
transferred of such surrendered U.S. Physical Security, as applicable.
(B) the U.S. Global Security, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Security, then the Security Registrar shall (w) register such
transfer in the name of such transferee and record the date thereof
in its books and records, (x) record a decrease in the principal
amount of the U.S. Global Security in an amount equal to the
beneficial interest therein being transferred, (y) deliver a new
U.S. Physical Security to such transferee duly registered in the
name of such transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the U.S.
Global Security, then the transfer shall be effected in accordance
with the procedures of the Depositary therefor; or
(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the
Offshore Global Security, then the Security Registrar shall (w)
register such transfer in the name of such transferee and record the
date thereof in its books and records, (x) record a decrease in the
principal amount of the U.S. Global Security in an amount equal to
the beneficial interest therein being transferred, (y) record an
increase in the
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principal amount of the Offshore Global Security equal to the amount
of such decrease and (z) notify the Depositary in accordance with
the procedures of the Depositary that it approves of such transfer.
(C) the Offshore Global Security, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Security, then the Security Registrar shall (w) register such
transfer in the name of such transferee and record the date thereof
in its books and records, (x) record a decrease in the principal
amount of the Offshore Global Security in an amount equal to the
beneficial interest therein being transferred, (y) deliver a new
U.S. Physical Security to such transferee duly registered in the
name of such transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the U.S.
Global Security, then the Security Registrar shall (x) record a
decrease in the principal amount of the Offshore Global Security in
an amount equal to the beneficial interest therein being
transferred, (y) record an increase in the principal amount of the
U.S. Global Security equal to the amount of such decrease and (z)
notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the
Offshore Global Security, then the transfer shall be effected in
accordance with the procedures of the Depositary therefor; provided,
however, that until the Offshore Security Exchange Date occurs,
beneficial interests in the Offshore Global Security may be held
only in or through accounts maintained at the Depositary by
Euroclear or Cedel (or by Agent Members acting for the account
thereof), and no person shall be entitled to effect any transfer or
exchange that would result in any such interest being held otherwise
than in or through such an account.
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2. If the proposed transfer occurs on or after the Offshore Security
Exchange Date and the proposed transferor holds:
(A) a U.S. Physical Security which is surrendered to the Security
Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Security, then the procedures set forth in Section 312(d)(1)(A)(i)
shall apply;
(ii) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the U.S.
Global Security, then the procedures set forth in Section
312(d)(1)(A)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the Security
Registrar shall cancel such surrendered U.S. Physical Security and
at the direction of the transferee, either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and records
and deliver a new Offshore Physical Security to such
transferee in principal amount equal to the principal amount
being transferred of such surrendered U.S. Physical Security,
or
(y) if the proposed transferee is or is acting through
an Agent Member, record an increase in the principal amount of
the Offshore Global Security equal to the principal amount
being transferred of such surrendered U.S. Physical Security
and notify the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer.
In any of the cases described in this Section 312(d)(2)(A), the
Security Registrar shall deliver to the transferor a new U.S. Physical
Security in principal amount equal to the principal amount not being
transferred of such surrendered U.S. Physical Security, as applicable.
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(B) the U.S. Global Security, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Security, then the procedures set forth in Section 312(d)(1)(B)(i)
shall apply; or
(ii) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests that
the proposed transferee receive a beneficial interest in the U.S.
Global Security, then the procedures set forth in Section
312(c)(1)(B)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the Security
Registrar shall (x) record a decrease in the principal amount of the
U.S. Global Security in an amount equal to the beneficial interest
therein being transferred, (y) notify the Depositary in accordance
with the procedures of the Depositary that it approves of such
transfer and (z) at the direction of the transferee, either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and records
and deliver a new Offshore Physical Security to such
transferee in principal amount equal to the amount of such
decrease, or
(y) if the proposed transferee is or is acting through
an Agent Member, record an increase in the principal amount of
the Offshore Global Security equal to the amount of such
decrease.
(C) an Offshore Physical Security which is surrendered to the
Security Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
delivery in the form of the U.S. Global Security, then the Security
Registrar shall (x) cancel such surrendered Offshore Physical
Security, (y) record an increase in the principal amount of the U.S.
Global Security equal to the principal amount being transferred of
such surrendered
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Offshore Physical Security and (z) notify the Depositary in
accordance with the procedures of the Depositary that it approves of
such transfer;
(ii) requests that the proposed transferee receive a
beneficial interest in the Offshore Global Security and the proposed
transferee is or is acting through an Agent Member, then the
Security Registrar shall (x) cancel such surrendered Offshore
Physical Security, (y) record an increase in the principal amount of
the Offshore Global Security equal to the principal amount being
transferred of such surrendered Offshore Physical Security and (z)
notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer; or
(iii) does not make a request covered by Section
312(d)(2)(C)(i) or Section 312(d)(2)(C)(ii), then the Security
Registrar shall (x) register such transfer in the name of such
transferee and record the date thereof in its books and records, (y)
cancel such surrendered Offshore Physical Security and (z) deliver a
new Offshore Physical Security to such transferee duly registered in
the name of such transferee in principal amount equal to the
principal amount being transferred of such surrendered Offshore
Physical Security.
In any of the cases described in this Section 312(d)(2)(C), the
Security Registrar shall deliver to the transferor a new Offshore Physical
Security in principal amount equal to the principal amount not being
transferred of such surrendered Offshore Physical Security, as applicable.
(D) the Offshore Global Security, and the proposed transferee or
transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
delivery in the form of the U.S. Global Security, then the Security
Registrar shall (x) record a decrease in the principal amount of the
Offshore Global Security in an amount equal to the beneficial
interest therein being transferred, (y) record an increase in the
principal amount of the U.S. Global Security equal to the amount of
such decrease and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer;
(ii) requests that the proposed transferee receive a
beneficial interest in the Offshore Global Security and the proposed
transferee is or is acting through
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an Agent Member, then the transfer shall be effected in accordance
with the procedures of the Depositary therefor; or
(iii) does not make a request covered by Section
312(d)(2)(D)(i) or Section 312(d)(2)(D)(ii), then the Security
Registrar shall (w) register such transfer in the name of such
transferee and record the date thereof in its books and records, (x)
record a decrease in the principal amount of the Offshore Global
Security in an amount equal to the beneficial interest therein being
transferred, (y) deliver a new Offshore Physical Security to such
transferee duly registered in the name of such transferee in
principal amount equal to the amount of such decrease and (z) notify
the Depositary in accordance with the procedures of the Depositary
that it approves of such transfer.
(e) Execution, Authentication and Delivery of Physical Security. In
any case in which the Security Registrar is required to deliver a Physical
Security to a transferee or transferor, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, such Physical
Security.
(f) Certain Additional Terms Applicable to Physical Securities. Any
transferee entitled to receive a Physical Security may request that the
principal amount thereof be evidenced by one or more Physical Securities in any
authorized denomination or denominations and the Security Registrar shall comply
with such request if all other transfer restrictions are satisfied.
(g) Transfers Not Covered by Section 312(d). The Security Registrar
shall effect and record, upon receipt of a written request from the Company so
to do, a transfer not otherwise permitted by Section 312(d), such recording to
be done in accordance with the otherwise applicable provisions of Section
312(d), upon the furnishing by the proposed transferor or transferee of a
Non-Registration Opinion and Supporting Evidence.
(h) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such Security acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in the Indenture. The Security Registrar shall not register a transfer of any
Security unless such transfer complies with the restrictions with respect
thereto set forth in this Indenture. The Security Registrar shall not be
required to determine (but may rely upon a determination made by the Company)
the sufficiency of any such certifications, legal opinions or other information.
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(i) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the Security
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Security Registrar shall deliver only Securities
that bear the Private Placement Legend unless (i) the circumstances exist
contemplated by the fifth paragraph of Section 201 and the first paragraph of
Section 203 (with respect to an Offshore Physical Security or Offshore Global
Security) or the requested transfer, exchange or replacement is made on or after
the Resale Restriction Termination Date (with respect to any Security), (ii)
there is delivered to the Security Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Securities are exchanged for Exchange Securities pursuant to the Exchange Offer.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture. This Indenture
shall upon Company Request cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
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(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose money in an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal and any premium and interest
to the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the case
may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 607, the obligations
of the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money. Subject to the provisions
of the last paragraph of Section 1003, all money deposited with the Trustee
pursuant to Section 401 shall be held in trust and applied by it, in accordance
with the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal and any premium and interest for whose payment such money has been
deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default," wherever used
herein with respect to Securities of either series, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be
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effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default
for a period of 30 days; or
(2) default in the payment of the principal of or any premium on any
Security of that series at its Maturity; or
(3) failure to offer to repurchase or to repurchase the Securities
of that series in the event of a Change of Control in accordance in all
material respects with the provisions of Section 1012 or to perform or to
comply with any provision of Section 801; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company or any Restricted
Subsidiary (including a default with respect to Securities other than of
that series) having an aggregate principal amount outstanding of at least
$20,000,000, or under any mortgage, indenture or instrument (including
this Indenture) under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or
any Restricted Subsidiary having an aggregate principal amount outstanding
of at least $20,000,000, whether such indebtedness now exists or shall
hereafter be created, which default (A) shall constitute a failure to pay
any portion of the principal of such indebtedness when due and payable
after the expiration of any applicable grace period with respect thereto
or (B) shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become
due and payable, without, in the case of Clause (A), such indebtedness
having been discharged or without, in the case of Clause (B), such
indebtedness having been discharged or such acceleration having been
rescinded or annulled, in each such case within a period of 10 days after
there shall have been
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given, by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice
specifying such default and requiring the Company or such Restricted
Subsidiary to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled, as the case may be, and stating
that such notice is a "Notice of Default" hereunder; provided, however,
that, subject to the provisions of Sections 601 and 602, the Trustee shall
not be deemed to have knowledge of such default unless either (A) a
Responsible Officer of the Trustee shall have actual knowledge of such
default or (B) the Trustee shall have received written notice thereof from
the Company, from any Restricted Subsidiary, from any Holder, from the
holder of any such indebtedness or from the trustee under any such
mortgage, indenture or other instrument; or
(6) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company or any Restricted
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or (B) a decree or order adjudging the Company or any Restricted
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Restricted Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Restricted Subsidiary or of any substantial part of its
respective property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company or any Restricted Subsidiary of
a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
the Company or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by
it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator other
similar official of the Company or any Restricted Subsidiary or of any
substantial part of its respective property, or the making by it of an
assignment for the benefit of
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creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company or any Restricted Subsidiary in furtherance of any such
action; or
(8) any Note Guarantee ceases to be in full force and effect or any
Note Guarantor denies in writing that it has any liability under its Note
Guarantee (other than by reason of the termination of the Indenture or the
release of any such Note Guarantee in accordance with this Indenture).
SECTION 502. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default (other than an Event of Default specified in Section 501(6)
or 501(7)) with respect to Securities of either series at the time Outstanding
occurs and is continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Securities of that
series may declare the principal amount of all the Securities of that series to
be due and payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), and upon any such declaration such principal
amount (or specified amount) shall become immediately due and payable. If an
Event of Default specified in Section 501(6) or 501(7) with respect to
Securities of either series at the time Outstanding occurs, the principal amount
of all the Securities of that series shall automatically, and without any
declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of either series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or
rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
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(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for
a period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of either series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of any
judicial proceeding relative to the Company or any Note Guarantor (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the
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Trust Indenture Act in order to have claims of the Holders and the Trustee
allowed in any such proceeding. In particular, the Trustee shall be authorized
to collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture, the Securities
or the Note Guarantees may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 506. Application of Money Collected. Any money collected by
the Trustee pursuant to this Article shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal or any premium or interest, upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively.
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SECTION 507. Limitation on Suits. No Holder of any Security of
either series shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and any premium and
(subject to Section 307) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and
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such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of either series shall
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, with respect to the Securities of such series,
provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults. The Holders of at least a
majority in principal amount of the Outstanding Securities of either series may
on behalf of the Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its consequences, except a
default
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(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture, or in any suit against the Trustee
for any action taken, suffered or omitted by it as Trustee, a court may require
any party litigant in such suit to file an undertaking to pay the costs of such
suit, and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; provided that neither this
Section nor the Trust Indenture Act shall be deemed to authorize any court to
require such an undertaking or to make such an assessment in any suit instituted
by the Company.
SECTION 515. Waiver of Usury, Stay or Extension Laws. Each of the
Company and the Note Guarantors covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury, stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and each of the
Company and the Note Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities. The duties and
responsibilities of the Trustee shall be as provided by the Trust Indenture Act.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have
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reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults. If a default occurs hereunder with
respect to Securities of either series, the Trustee shall give the Holders of
Securities of such series notice of such default as and to the extent provided
by the Trust Indenture Act; provided, however, that in the case of any default
of the character specified in Section 501(4) with respect to Securities of such
series, no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee. Subject to the provisions of
Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders
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pursuant to this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein, in the Securities and in the Note Guarantees,
except the Trustee's certificates of authentication, shall be taken as the
statements of the Company and the Note Guarantors, and neither the Trustee nor
any Authenticating Agent assumes any responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture, of the Securities or of the Note Guarantees. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities. The Trustee, any Authenticating
Agent, any Paying Agent, any Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
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SECTION 607. Compensation and Reimbursement. The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
SECTION 608. Conflicting Interests. If the Trustee has or shall
acquire a conflicting interest within the meaning of the Trust Indenture Act,
the Trustee shall either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provisions of, the Trust Indenture
Act and this Indenture. To the extent permitted by such Act, the Trustee shall
not be deemed to have a conflicting interest by virtue of being a trustee under
this Indenture with respect to Securities of each series, or a trustee under the
Senior Indenture, dated as of May 15, 1996, between the Company and the Trustee.
SECTION 609. Corporate Trustee Required; Eligibility. There shall at
all times be one (and only one) Trustee hereunder with respect to the Securities
of each series, which may be Trustee hereunder for Securities of the other
series. Each Trustee shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee with respect to the
Securities of either series shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
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SECTION 610. Resignation and Removal; Appointment of Successor. No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of
either series by giving written notice thereof to the Company. If the instrument
of acceptance by a successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
The Trustee may be removed at any time with respect to the
Securities of either series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the Trustee
and to the Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent Jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of either series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any
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such successor Trustee may be appointed with respect to the Securities of either
or both of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of either series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
611, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of either series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of either series and each
appointment of a successor Trustee with respect to the Securities of either
series to all Holders of Securities of such series in the manner provided in
Section 106. Each notice shall include the name of the successor Trustee with
respect to the Securities of such series and the address of its Corporate Trust
Office.
SECTION 611. Acceptance of Appointment by Successor. In case of the
appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one (but not both) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
either series shall execute and deliver an indenture supplemental hereto wherein
each successor Trustee shall accept such appointment and which
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(1) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
series to which the appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall contain
such provisions as shall be deemed necessary or desirable to confirm that all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that series as to which the retiring Trustee is not retiring
shall continue to be vested in the retiring Trustee, and (3) shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such Trustees co-trustees of the same trust and that
each such Trustee shall be trustee of a trust or trusts hereunder separate and
apart from any trust or trusts hereunder administered by any other such Trustee;
and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that series to which the appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in the first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee
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may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities.
SECTION 613. Preferential Collection of Claims Against Company. If
and when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).
SECTION 614. Appointment of Authenticating Agent. The Trustee may
appoint an Authenticating Agent or Agents with respect to either series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue and upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 306, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
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An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to either series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
By
------------------------------------
As Authenticating Agent
By
------------------------------------
Authorized Officer
Dated:
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than June 30 and December 31 in each
year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders of Securities of each series as of the
preceding June 15 or December 15, as the case may be, and
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar. The Trustee may
destroy any list furnished to it as provided in Section 701 upon receipt of a
new list so furnished.
The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee. The Trustee shall transmit to
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
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A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Company. The Company shall file with the
Trustee and the Commission, and transmit to Holders, such information, documents
and other reports, and such summaries thereof, as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant to such
Act; provided that any such information, documents or reports required to be
filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within 15 days after the same is so required to
be filed with the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person (a "successor Person"), and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a corporation,
partnership or trust or other entity organized and validly existing under
the laws of the United States of America, any State thereof or the
District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal
of and any premium and interest on all the Securities and the performance
or observance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or any
Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary
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at the time of such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by Section 1008, the Company or
such successor Person, as the case may be, shall take such steps as shall
be necessary effectively to secure the Securities equally and ratably with
(or prior to) all indebtedness secured thereby;
(4) if such transaction occurs prior to an Investment Grade Rating
Date, the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first sentence of Section 1010, on a pro forma basis after
giving effect to such transaction;
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with; and
(6) each Note Guarantor shall have by supplemental indenture
confirmed that its Note Guarantee will apply to any such successor
Person's obligations under this Indenture and under the Securities of each
series unless such Note Guarantor shall have been released and discharged
from all of its obligations under its Note Guarantee in accordance with
this Indenture.
Upon an Investment Grade Rating Date, clause (4) of this Section 801
will cease to be effective with respect to any subsequent transaction governed
by this Section 801.
SECTION 802. Successor Substituted. Upon any consolidation of the
Company with, or merger of the Company into, any other Person or any conveyance,
transfer or lease of the properties and assets of the Company substantially as
an entirety in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company and the Note Guarantors, when
authorized by their respective Board Resolutions, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company or a
Note Guarantor, and the assumption by any such successor of the covenants
of the Company or such Note Guarantor herein and in the Securities and/or
any Note Guarantee, as the case may be; or
(2) to add to the covenants of the Company or any Note Guarantor for
the benefit of the Holders of all Securities, or to surrender any right or
power herein conferred upon the Company or any Note Guarantor, as
applicable, herein, in the Securities or in any Note Guarantee, as the
case may be; or
(3) to add any additional Events of Default for the benefit of the
Holders of all Securities; or
(4) to provide for additional Note Guarantees or other guarantees of
the Securities or to secure the Securities or any Note Guarantee or other
guarantee of the Securities; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
both series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant
to the requirements of Section 611; or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action pursuant
to this Clause (6) shall not adversely affect the interests of the Holders
of Securities of either series in any material respect.
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SECTION 902. Supplemental Indentures With Consent of Holders. With
the consent of the Holders of at least a majority in principal amount of the
Outstanding Securities of each series affected by such supplemental indenture,
by Act of said Holders delivered to the Company and the Trustee, the Company and
the Note Guarantors, when authorized by their respective Board Resolutions, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders of Securities of such series under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal
of any Security which would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502, or change
any Place of Payment where, or the coin or currency in which, any Security
or any premium or interest 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, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of either series, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or of certain defaults hereunder and their consequences,
provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1015, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section and
Section 1015 or the deletion of this proviso, in accordance with the
requirements of Sections 611 and 901(5), or
(4) amend or modify any of the provisions of Article Thirteen or any
Note Guarantee in any manner adverse to the Holders of Securities of
either series.
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A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one particular series of Securities, or which modifies the rights of
the Holders of Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities of the other series.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 905. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of either series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of either series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
SECTION 907. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by
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the Holder and every subsequent Holder of that Security or portion of that
Security that evidences the same debt as the consenting Holder's Security,
whether or not notation of the consent is made upon any Security. Subject to the
following paragraph and Section 104, any such Holder or subsequent Holder may
revoke the consent as to such Holder's Security or portion of such Security by
notice to the Trustee or the Company received by the Trustee or the Company, as
the case may be, before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, set any day as a
record date for the purpose of determining the Holders of Outstanding Securities
of either series entitled to consent to any amendment, supplement or waiver, as
further provided in Section 104. If a record date is set pursuant hereto, then,
notwithstanding the last sentence of the immediately preceding paragraph, the
Holders of Outstanding Securities of the relevant series on such record date (or
their duly designated proxies), and no other Holders, shall be entitled to
consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons remain Holders after such record
date. No such consent shall be valid or effective for more than 180 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder of Securities, unless it makes a change described in any of
clauses (1) through (3) of the first paragraph of Section 902. In that case, the
amendment, supplement or waiver shall bind each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest. The
Company covenants and agrees for the benefit of each series of Securities that
it will duly and punctually pay the principal of and any premium and interest on
the Securities of that series in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York an office or agency
where Securities of either series may be presented or surrendered for payment
(the "Place of Payment"), where Securities of either series may be surrendered
for registration of transfer or
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exchange, where Securities may be surrendered for conversion and where notices
and demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee. The Company hereby designates the
Corporate Trust Office as the Place of Payment, and the Company hereby appoints
the Trustee as its agent to receive all such presentations, surrenders, notices
and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of either series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in accordance with the requirements set forth above for Securities for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust. If
the Company shall at any time act as its own Paying Agent with respect to either
series of Securities, it will, on or before each due date of the principal of or
any premium or interest on any of the Securities of that series, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for either
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for either series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will (1) comply with the
provisions of the Trust Indenture Act applicable to it as a Paying Agent and (2)
during the continuance of any default by the Company (or any other obligor upon
the Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee
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all sums held in trust by such Paying Agent for payment in respect of the
Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of or any premium
or interest on any Security of either series and remaining unclaimed for two
years after such principal, premium or interest has become due and payable shall
be paid to the Company on Company Request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 1004. Statement by Officers as to Default. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company ending after the date hereof, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company or any Note
Guarantor is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company or any
Note Guarantor shall be in default, specifying all such defaults and the nature
and status thereof of which they may have knowledge.
SECTION 1005. Existence. Subject to Article Eight, the Company will
do or cause to be done all things necessary to preserve and keep in full force
and effect its and each Note Guarantor's existence, rights (charter and
statutory) and franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise if the Board of
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Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company or such Note Guarantor and that
the loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Payment of Taxes and Other Claims. The Company will
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 1008. Limitation on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, create, incur, issue, assume or
guarantee any indebtedness of the Company or any Subsidiary secured by a Lien
upon any Principal Property, or upon shares of capital stock or evidences of
indebtedness issued by any Restricted Subsidiary and owned by the Company or any
Restricted Subsidiary, now owned or hereafter owned by the Company, without
making effective provision to secure all of the Securities of each series then
outstanding by such Lien, equally and ratably with any and all other
indebtedness thereby secured, so long as such indebtedness shall be so secured.
The foregoing restrictions shall not apply, however, to (1) Liens on
any property existing at the time of the acquisition thereof; (2) Liens on
property of a corporation existing at the time such corporation is merged into
or consolidated with the Company or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of such corporation (or a
division thereof) as an entirety or substantially as an entirety to the
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Company or a Restricted Subsidiary, provided that such Lien as a result of such
merger, consolidation, sale, lease or other disposition is not extended to
property owned by the Company or such Restricted Subsidiary immediately prior
thereto; (3) Liens on property of a corporation existing at the time such
corporation becomes a Restricted Subsidiary; (4) Liens securing indebtedness of
a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (5)
Liens to secure all or part of the cost of acquisition, construction,
development or improvement of the underlying property, or to secure indebtedness
incurred to provide funds for any such purpose, provided that the commitment of
the creditor to extend the credit secured by any such Lien shall have been
obtained not later than twenty-four months after the later of (a) the completion
of the acquisition, construction, development or improvement of such property or
(b) the placing in operation of such property or of such property as so
constructed, developed or improved; (6) Liens on any property created, assumed
or otherwise brought into existence in contemplation of the sale or other
disposition of the underlying property, whether directly or indirectly, by way
of share disposition or otherwise; provided that the Company must have disposed
of such property within 180 days from the creation of such Liens and any
indebtedness secured by such Liens shall be without recourse to the Company or
any Subsidiary; (7) Liens in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political subdivision
thereof, to secure partial, progress, advance or other payments; (8) Liens to
secure indebtedness of joint ventures in which the Company or a Restricted
Subsidiary has an interest, to the extent such Liens are on property or assets
of, or equity interests in, such joint ventures; (9) Liens on Equipment Held for
Resale; and (10) any indebtedness secured by Liens existing on the date of this
Indenture or any extension, renewal or replacement or refunding of any Lien
existing on the date of this Indenture or referred to in clauses (1) to (3) or
(5); provided, however, that the aggregate principal amount of indebtedness
secured thereby and not otherwise authorized by clauses (1) to (3) or (5), shall
not exceed the aggregate principal amount of indebtedness, plus any premium or
fee payable in connection with any such extension, renewal, replacement, or
refunding, so secured at the time of such extension, renewal, replacement or
refunding.
Notwithstanding the restrictions described above, the Company and
its Restricted Subsidiaries may incur, issue, assume or guarantee debt secured
by Liens without equally and ratably securing the Securities of each series then
outstanding, provided, that at the time of such incurrence, issuance, assumption
or guarantee, after giving effect thereto and to the retirement of any
indebtedness which is concurrently being retired, the aggregate amount of all
outstanding indebtedness secured by Liens so incurred, other than any
indebtedness secured by Liens permitted as described in clauses (1) through (10)
above, and together with all outstanding Attributable Value of all sale and
leaseback transactions permitted as described in Section 1009 hereof does not
exceed 15% of the Consolidated Net Tangible Assets of the Company.
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SECTION 1009. Limitation on Sale and Leaseback Transactions. Sale
and leaseback transactions by the Company or any Restricted Subsidiary involving
any Principal Property are prohibited unless either (1) the Company or its
Restricted Subsidiaries would be entitled pursuant to the provisions described
in clauses (1) through (10) of the second paragraph of Section 1008 hereof to
issue, assume or guarantee indebtedness secured by a Lien on such Principal
Property without equally and ratably securing the Securities of each series than
outstanding or (2) the Company or such Restricted Subsidiary shall apply, or
cause to be applied to the retirement of its secured debt within 120 days after
the effective date of the sale and leaseback transaction, an amount not less
than the greater of (i) the net proceeds (net of all legal, title and recording
tax expenses, commissions and other fees and expenses incurred and all federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such sale) of the sale of the
Principal Property leased pursuant to such arrangement or (ii) the fair market
value of the Principal Property so leased. This restriction will not apply to a
sale and leaseback transaction between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries or involving the taking back of a lease for a
period of less than three years.
Notwithstanding the restrictions described above, the Company or any
Restricted Subsidiary may enter into a sale and leaseback transaction provided,
that at the time of such transaction, after giving effect thereto, the
Attributable Value thereof, together with all indebtedness secured by Liens
permitted pursuant to Section 1008 hereto other than all indebtedness secured by
Liens permitted as described in clauses (1) through (10) of the second paragraph
of Section 1008 hereof and other than the Attributable Value of such sale and
leaseback transactions permitted by the preceding paragraph, does not exceed 15%
of Consolidated Net Tangible Assets of the Company.
SECTION 1010. Limitation on Incurrence of Indebtedness. The Company
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or directly or indirectly enter into any Guarantee of, or in any other
manner become directly or indirectly liable for ("incur"), any Indebtedness
(including Acquired Debt), except that the Company may incur Indebtedness if, at
the time of, and immediately after giving pro forma effect to, such incurrence
of Indebtedness, the Consolidated Coverage Ratio of the Company for the most
recently ended four fiscal quarters for which financial statements are available
would be at least 2.0 to 1. The foregoing limitations will not apply to the
incurrence by the Company or any Restricted Subsidiary, as the case may be, of
any Permitted Indebtedness of such Person.
Upon an Investment Grade Rating Date, this Section 1010 will cease
to be effective.
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SECTION 1011. Limitation on Restricted Payments. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
make any Restricted Payment, unless at the time of and immediately after giving
effect to the proposed Restricted Payment (with the value of any such Restricted
Payment, if other than cash, to be as determined in good faith by the Board of
Directors of the Company, which determination shall be conclusive), (i) no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof, (ii) the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first sentence of Section 1010 and (iii)
the aggregate amount of all Restricted Payments made after the Issue Date shall
not exceed the Restricted Payment Amount.
The foregoing provisions will not prohibit the following actions
(collectively, "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under the Indenture and such payment shall be deemed to
have been paid on such date of declaration for purposes of clause (iii) of
the preceding paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or any Indebtedness of the Company that is subordinated
in right of payment to the Securities in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary) of Capital Stock of the Company (other than any Disqualified
Stock);
(iii) the defeasance, redemption, repurchase, retirement or other
acquisition of any Indebtedness of the Company that is subordinated in
right of payment to the Securities in exchange for, or out of the proceeds
of, the substantially concurrent sale of Refinancing Indebtedness that is
(x) at least as subordinated in right of payment to the Securities as the
Indebtedness being refinanced and (y) permitted to be incurred pursuant to
Section 1010;
(iv) the redemption, repurchase, retirement or other acquisition of
any Indebtedness of the Company that is subordinated in right of payment
to the Securities upon a Change of Control to the extent required by the
agreement governing such Indebtedness but only if the Company shall have
complied with Section 1012 and purchased all Securities tendered pursuant
to the offer to repurchase all of the Securities required thereby, prior
to purchasing or repaying such Indebtedness;
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(v) payments by the Company to purchase or otherwise acquire Capital
Stock of the Company (including options, warrants or other rights to
acquire such Capital Stock) from departing or deceased directors, officers
or employees of the Company or its Subsidiaries, whether pursuant to the
terms of an employee benefit plan or employment agreement or otherwise;
provided that the aggregate amount of all such repurchases shall not
exceed $2 million in any fiscal year; and
(vi) the payment by the Company of dividends on the common stock of
the Company in an amount not to exceed $25 million in any fiscal year;
provided that, in the case of clauses (v) and (vi), no Default or Event of
Default shall have occurred or be continuing at the time of such Permitted
Payment after giving effect thereto.
For purposes of clause (iii) of the first paragraph of this Section
1011, Permitted Payments made pursuant to clauses (i), (v) and (vi) of the
immediately preceding paragraph shall be included (with respect to clause (i),
as of the date of declaration) as Restricted Payments made since the Issue Date.
Upon an Investment Grade Rating Date, this Section 1011 will cease
to be effective.
SECTION 1012. Change of Control. Upon the occurrence of a Change of
Control Triggering Event, each holder of the Securities of either series shall
have the right to require that the Company repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such holder's Securities at a
repurchase price in cash equal to 100% of the aggregate principal amount thereof
plus accrued interest, if any, to the date of such repurchase.
Within 30 days following any such Change of Control Triggering
Event, the Company will be required to mail a notice to each holder of a
Security (with a copy to the Trustee) stating (1) that a Change of Control
Triggering Event has occurred and that such holder has the right to require the
Company to repurchase such holder's Securities at a repurchase price in cash
equal to 100% of the aggregate principal amount thereof plus accrued interest,
if any, to the date of repurchase (the "Change of Control Offer"); (2) the
repurchase date, which shall be a Business Day and be not earlier than 20
Business Days or later than 60 Business Days from the date such notice is mailed
(the "Repurchase Date"); (3) that interest on any Security tendered will
continue to accrue; (4) that interest on any Security accepted for payment
pursuant to the Change of Control Offer shall cease to accrue after the
repurchase of any Security on the Repurchase Date; (5) that holders electing to
have a Security purchased pursuant to the Change of Control Offer will be
required to surrender such Security, with the
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form entitled "Option to Elect Purchase" on the reverse of the Security
completed, to the Trustee at the address specified in the notice prior to the
close of business on the Business Day prior to the Repurchase Date; (6) that
holders of Securities will be entitled to withdraw their election on the terms
and conditions set forth in such notice; and (7) that holders of Securities that
elect to have their Securities purchased only in part will be issued new
Securities in a principal amount equal to the then unpurchased portion of the
Securities surrendered.
For so long as the Securities are in the form of Global Securities,
upon any such Change of Control Triggering Event, the Company will be required
to deliver to the Depositary, within the time periods specified above, for
re-transmittal to its participants, a notice substantially to the effect
specified in clauses (1) through (4) and (6) of the previous paragraph. Such
notice shall also specify the required procedures (furnished by the Depositary)
for holders of interests in the Global Security to tender and receive payment of
the purchase price for interests in accordance with the Depositary's rules,
regulations and practices (including the Depositary's "Repayment Option
Procedures" to the extent applicable).
On the Repurchase Date, the Company shall (i) accept for payment
such surrendered Securities or portions thereof tendered pursuant to the Change
of Control Offer; (ii) deposit with the Trustee money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Securities so accepted with an
officers' certificate identifying the Securities or portions thereof so
tendered. The Company will publicly announce the result of the Change of Control
Offer as soon as practicable after the Repurchase Date.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act in connection
with a Change of Control Offer.
SECTION 1013. Future Note Guarantors. The Company will cause each
Restricted Subsidiary that Guarantees any Bank Indebtedness promptly to execute
and deliver to the Trustee a supplemental indenture substantially in the form
set forth in Exhibit B to this Indenture pursuant to which such Restricted
Subsidiary will guarantee the Company's obligations under the Indenture and the
Securities of each series, in accordance with and as further provided in Section
1302.
SECTION 1014. Provision of Financial Statements and Reports. Whether
or not the Company is then subject to Section 13(a) or 15(d) of the Exchange
Act, the Company will file with the Commission (unless such filing is not
permitted under the Exchange Act), so long as the Securities of either series
are outstanding, the annual reports, quarterly reports and
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other periodic reports that the Company would have been required to file with
the Commission pursuant to such Section 13(a) or 15(d) if the Company were so
subject, and such documents shall be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (i) within 15 days of each Re quired Filing Date,
(a) transmit or cause to be transmitted by mail to all Holders of Securities, as
their names and addresses appear in the Security Register, without cost to such
Holders, and (b) file with the Trustee copies of the annual reports, quarterly
reports and other periodic reports which the Company would have been required to
file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
if the Company were subject to such Sections and (ii) if filing such documents
by the Company with the Commission is prohibited under the Exchange Act,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder at the
Company's cost.
SECTION 1015. Waiver of Certain Covenants. The Company may, with
respect to the Securities of either series, omit in any particular instance to
comply with any term, provision or condition set forth in any covenant provided
pursuant to 901(2) for the benefit of the Holders of such series or in Sections
1008 through 1014, inclusive, if before the time for such compliance the Holders
of at least a majority in principal amount of the Outstanding Securities of such
series shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption. The Securities of each series
will be redeemable, in whole or in part, at the option of the Company at any
time at a redemption price equal to the greater of (i) 100% of the principal
amount of such Securities or (ii) as determined by an Independent Investment
Banker, the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the date
of redemption. Redemption of Securities as permitted by this Section 1101 shall
be made in accordance with this Article.
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SECTION 1102. Election to Redeem; Notice to Trustee. The election of
the Company to redeem any Securities shall be evidenced by a Board Resolution.
In case of any redemption at the election of the Company of less than all the
Securities of either series (including any such redemption affecting only a
single Security), the Company shall, at least 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If
less than all the Securities of either series are to be redeemed (unless all the
Securities of such series and of a specified tenor are to be redeemed or unless
such redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security of such series, provided that the
unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities
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redeemed or to be redeemed only in part, to the portion of the principal amount
of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption. Notice of redemption shall be
given by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed, at his address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of either series
consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such
Securities, the principal amounts) of the particular Securities to be
redeemed and, if less than all the Outstanding Securities of either series
consisting of a single Security are to be redeemed, the principal amount
of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable,
that interest thereon will cease to accrue on and after said date, and
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 1105. Deposit of Redemption Price. Prior to any Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that date.
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SECTION 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date will be payable to the Holders of
such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 1107. Securities Redeemed in Part. Any Security which is to
be redeemed only in part shall be surrendered at a Place of Payment therefor
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities of the same series and of like tenor, of any authorized denomination
as requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or Covenant
Defeasance. The Company may elect, at its option at any time, to have Section
1202 or Section 1203 applied to any Securities or either series of Securities,
upon compliance with the conditions set forth below in this Article. Any such
election shall be evidenced by a Board Resolution.
SECTION 1202. Defeasance and Discharge. Upon the Company's exercise
of its option (if any) to have this Section applied to any Securities or either
series of Securities, as the case may be, the Company shall be deemed to have
been discharged from its obligations with respect to such Securities as provided
in this Section on and after the date the conditions
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set forth in Section 1204 are satisfied (hereinafter called "Defeasance"). For
this purpose, such Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1204 and as more fully
set forth in such Section, payments in respect of the principal of and any
premium and interest on such Securities when payments are due, (2) the Company's
obligations with respect to such Securities under Sections 304, 305, 306, 1002
and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (4) this Article. Subject to compliance with this Article, the
Company may exercise its option (if any) to have this Section applied to any
Securities notwithstanding the prior exercise of its option (if any) to have
Section 1203 applied to such Securities.
SECTION 1203. Covenant Defeasance. Upon the Company's exercise of
its option (if any) to have this Section applied to any Securities or either
series of Securities, as the case may be, (1) the Company shall be released from
its obligations under Section 801(3), Sections 1006 through 1011, inclusive, and
any covenants provided pursuant to Section 901(2) for the benefit of the Holders
of such Securities and (2) the occurrence of any event specified in Section
501(4) (with respect to any of Section 801(3), Sections 1006 through 1011,
inclusive, and any such covenants provided pursuant to Section 901(2)) and
Section 501(5) shall be deemed not to be or result in an Event of Default, in
each case with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 1204 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(4)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to the application of Section 1202 or Section
1203 to any Securities or either series of Securities, as the case may be:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically
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pledged as security for, and dedicated solely to, the benefits of the
Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of and any premium
and interest on such Securities on the respective Stated Maturities, in
accordance with the terms of this Indenture and such Securities. As used
herein, "U.S. Government Obligation" means (x) any security which is (i) a
direct obligation of the United States of America for the payment of which
the full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America the payment
of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i) or
(ii), is not callable or redeemable at the option of the issuer thereof,
and (y) any depositary receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation which is specified in Clause (x) above and held by
such bank for the account of the holder of such depositary receipt, or
with respect to any specific payment of principal of or interest on any
U.S. Government Obligation which is so specified and held, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
(2) In the event of an election to have Section 1202 apply to any
Securities or either series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
instrument, there has been a change in the applicable Federal income tax
law, in either case (A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the Holders of such Securities will not
recognize gain or loss for Federal income tax purposes as a result of the
deposit, Defeasance and discharge to be effected with respect to such
Securities and will be subject to Federal income tax on the same amount,
in the same manner and at the same times as would be the case if such
deposit, Defeasance and discharge were not to occur.
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(3) In the event of an election to have Section 1203 apply to any
Securities or either series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit and Covenant
Defeasance to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner and
at the same times as would be the case if such deposit and Covenant
Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that neither such Securities nor any other
Securities of the same series, if then listed on any securities exchange,
will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to such Securities or any
other Securities shall have occurred and be continuing at the time of such
deposit or, with regard to any such event specified in Sections 501(6) and
(7), at any time on or prior to the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until after such 91st day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the meaning
of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act unless such trust shall be
registered under such Act or exempt from registration thereunder.
(9) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions. Subject to the provisions of the last
paragraph of Section 1003, all money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee or other qualifying trustee
(solely for purposes of this Section and
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Section 1206, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1204 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 with respect to any Securities which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect the
Defeasance or Covenant Defeasance, as the case may be, with respect to such
Securities.
SECTION 1206. Reinstatement. If the Trustee or the Paying Agent is
unable to apply any money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations under this Indenture and such Securities from which the Company
has been discharged or released pursuant to Section 1202 or 1203 shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article with respect to such Securities, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
1205 with respect to such Securities in accordance with this Article; provided,
however, that if the Company makes any payment of principal of or any premium or
interest on any such Security following such reinstatement of its obligations,
the Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust.
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ARTICLE THIRTEEN
GUARANTEE OF SECURITIES
SECTION 1301. Unconditional Guarantee. (a) Each Note Guarantor
hereby jointly and severally and fully and unconditionally guarantees to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns that: (1) the principal of, and premium,
if any, and interest on, the Securities of each series will be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on the overdue principal and (to the extent permitted by
law) interest, if any, on the Securities of each series and all other
obligations of the Company or the Note Guarantors to the Holders or the Trustee
hereunder or thereunder (including fees, expenses or other) and all other
Indenture Obligations will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (2) in case of any extension
of time of payment or renewal of any Securities of either series or any of such
other Indenture Obligations with respect to the Securities of either series, the
same will be promptly paid in full when due in accordance with the terms of the
extension or renewal, whether at Stated Maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaran teed, or failing performance of
any other obligation of the Company to the Holders of Securities of either
series, for whatever reason, each Note Guarantor will be obligated to pay or
cause the payment of, or to perform or cause the performance of, the same
immediately. An Event of Default under this Indenture or the Securities of
either series shall constitute an event of default under this Note Guarantee,
and shall entitle the Holders of Securities of such series to accelerate the
obligations of the Note Guarantor hereunder in the same manner and to the same
extent as the obligations of the Company.
Each Note Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of this Indenture, the Securities of either series or the
obligations of the Company or any other Note Guarantor to the Holders or the
Trustee hereunder or thereunder, the absence of any action to enforce the same,
any waiver or consent by any Holder of Securities with respect to any provisions
hereof or thereof, any release of any other Note Guarantor, the recovery of any
judgment against the Company, any action to enforce the same, whether or not a
Note Guarantee is affixed to any particular Security, or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
Each Note Guarantor hereby waives the benefit of diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that (except as otherwise provided in Section 1303) its
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Note Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and this Note Guarantee.
This Note Guarantee is a guarantee of payment and not of collection. Each Note
Guarantor further agrees that, as between it, on the one hand, and the Holders
of Securities and the Trustee, on the other hand, (1) subject to this Article
Thirteen, the maturity of the obligations guaranteed hereby may be accelerated
as and to the extent provided in Article Five hereof for the purposes of this
Note Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (2) in the event of any acceleration of such obligations as provided in
Article Five hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by such Note Guarantor for the purpose of this
Note Guarantee. Neither the Trustee nor any other Person shall have any
obligation to enforce or exhaust any rights or remedies or to take any other
steps under any security for the Indenture Obligations or against the Company or
any other Person or any property of the Company or any other Person before the
Trustee is entitled to demand payment and performance by any or all Note
Guarantors of their liabilities and obligations under their respective Note
Guarantees or under this Indenture.
Until terminated in accordance with Section 1303, this Note
Guarantee shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Company for liquidation or
reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Company's assets, and shall, to the fullest extent
permitted by law, continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Securities of either series are,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on such Securities, whether as a "voidable
preference," "fraudulent transfer" or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Securities of the
relevant series shall, to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
(b) Each Note Guarantor that makes a payment or distribution under
this Note Guarantee shall have the right to seek contribution from any
non-paying Note Guarantor so long as the exercise of such right does not impair
the rights of the Holders under this Note Guarantee.
(c) Notwithstanding any of the foregoing, each Note Guarantor's
liability under this Note Guarantee shall be limited to the maximum amount that
would not result in this Note Guarantee constituting a fraudulent conveyance or
fraudulent transfer under applicable law.
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(d) Each Note Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Indenture
and that its Note Guarantee, and the waiver set forth in Section 1304, is
knowingly made in contemplation of such benefits.
SECTION 1302. Additional Note Guarantors. Each Restricted Subsidiary
that is required to become a Note Guarantor pursuant to Section 1013 shall
promptly execute and deliver to the Trustee a supplemental indenture
substantially in the form set forth in Exhibit B to this Indenture, evidencing
its Note Guarantee on substantially the terms set forth in this Article
Thirteen. Concurrently therewith, the Company shall deliver to the Trustee an
Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
to the effect that such supplemental indenture has been duly authorized,
executed and delivered by such Restricted Subsidiary and that, subject to the
applicable bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, moratorium and other laws now or hereafter in effect affecting
creditors' rights or remedies generally and the general principles of equity,
such supplemental indenture is a valid and binding agreement of such Restricted
Subsidiary, enforceable against such Restricted Subsidiary in accordance with
its terms.
SECTION 1303. Release of a Note Guarantee. (a) Any Note Guarantor
shall be automatically and unconditionally released and discharged from all of
its obligations under its Note Guarantee, and such Note Guarantee shall
terminate, at any such time that such Note Guarantor is released and discharged
from all of its obligations under all of its Guarantees in respect of Bank
Indebtedness, unless such release results from payment under such Guarantee.
Upon the delivery by the Company to the Trustee of an Officers' Certificate and,
if requested by the Trustee, an Opinion of Counsel to the effect that the
transaction giving rise to such release of such Note Guarantee was made by the
Company in accordance with the provisions of this Indenture and the Securities,
the Trustee shall execute any documents reasonably required in order to evidence
such release and discharge of such Note Guarantor from its obligations under and
termination of its Note Guarantee.
(b) Upon the sale, exchange or transfer to any Person not an
Affiliate of the Company of all of the Capital Stock held by the Company and its
Subsidiaries in, or all or substantially all the assets of, a Note Guarantor
(which sale, exchange or transfer is not prohibited by this Indenture), such
Note Guarantor shall be automatically and unconditionally released and
discharged from all its obligations under its Note Guarantee, and such Note
Guarantee shall terminate. Upon such occurrence, the Trustee shall execute any
documents reasonably required in order to evidence such release, discharge and
termination in respect of such Note Guarantee.
99
<PAGE> 111
(c) Upon the release of any Note Guarantor from its Note Guarantee
pursuant to the provisions of the Indenture, each other Note Guarantor not so
released shall remain liable for the full amount of principal of, and premium,
if any, and interest on, the Securities as and to the extent provided in this
Article Thirteen.
(d) Each Note Guarantee shall terminate and cease to be of further
effect upon (i) defeasance of the Company's obligations in accordance with
Section 1202 hereof and (ii) satisfaction and discharge of this Indenture in
accordance with Section 401.
SECTION 1304. Waiver of Subrogation. Each Note Guarantor hereby
irrevocably waives any claim or other rights which it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of the Company's obligations under the Securities of either
series and this Indenture or such Note Guarantor's obligations under its Note
Guarantee and this Indenture, including, without limitation, any right of
subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any Holder of Securities of either series
against the Company, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, until this Indenture is
discharged and all of the Securities of both series are discharged and paid in
full. If any amount shall be paid to any Note Guarantor in violation of the
preceding sentence and the Securities of the relevant series shall not have been
paid in full, such amount shall have been deemed to have been paid to such Note
Guarantor for the benefit of, and held in trust for the benefit of, the Holders
of the Securities of such series, and shall forthwith be paid to the Trustee for
the benefit of such Holders to be credited and applied upon such Securities,
whether matured or unmatured, in accordance with the terms of this Indenture.
SECTION 1305. Reliance on Judicial Order or Certificate of
Liquidating Agent Regarding Dissolution, etc. Upon any payment or distribution
of assets of any Note Guarantor referred to in this Article Thirteen, the
Trustee, subject to the provisions of Section 601, and the Holders of Securities
of either series shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding-up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Trustee or to such Holders, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of other
Indebtedness of such Note Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Thirteen; provided that the foregoing shall apply
only if such court has been fully apprised of the provisions of this Article
Thirteen.
100
<PAGE> 112
SECTION 1306. Article Thirteen Applicable to Paying Agents. In case
at any time any Paying Agent other than the Trustee shall have been appointed by
the Company and be then acting hereunder, the term "Trustee" as used in this
Article Thirteen shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article Thirteen in addition to or in place of the Trustee.
SECTION 1307. No Suspension of Remedies. Nothing contained in this
Article Thirteen shall limit the right of the Trustee or the Holders of
Securities of either series to take any action to accelerate the maturity of
such Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
------------------------
101
<PAGE> 113
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
102
<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
BECKMAN INSTRUMENTS, INC.
By D. K. WILSON
-------------------------------------
Attest:
WILLIAM H. MAY
- ------------------------
COULTER CORPORATION
By WILLIAM H. MAY
-------------------------------------
Attest:
JOHN A. WEISS
- ------------------------
BECKMAN INSTRUMENTS (NAGUABO), INC.
By WILLIAM H. MAY
-------------------------------------
Attest:
JOHN A. WEISS
- ------------------------
HYBRITECH INCORPORATED
By WILLIAM H. MAY
-------------------------------------
103
<PAGE> 115
Attest:
JOHN A. WEISS
- ------------------------
104
<PAGE> 116
SMITHKLINE DIAGNOSTICS, INC.
By D. K. WILSON
-------------------------------------
Attest:
JOHN A. WEISS
- ------------------------
COULTER LEASING CORPORATION
By WILLIAM H. MAY
-------------------------------------
Attest:
JOHN A. WEISS
- ------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By JOHN R. PRENDIVILLE
-------------------------------------
Attest:
LELAND HANSEN
- ------------------------
105
<PAGE> 117
EXHIBIT A
(FACE OF SECURITY)
BECKMAN INSTRUMENTS, INC.
[7.10][7.45]% [Series B]* Senior Note due [2003][2008]
CUSIP No._________
No. _________ $ ________
Beckman Instruments, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co.,____________________, or
registered assigns, the principal sum of ___________________________________
Dollars on March 4, [2003][2008], and to pay interest thereon from March 4, 1998
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for [on this Security or on the Initial Security surrendered in
exchange therefor]*, semi-annually on March 4 and September 4 in each year,
commencing September 4, 1998, at the rate of [7.10][7.45]% per annum[(subject to
adjustment as provided below)]**[, except that interest accrued on this Security
for periods prior to the date on which the Initial Security was surrendered in
exchange for this Security will accrue at the rate or rates borne by the
Securities from time to time during such periods]*, until the principal hereof
is paid or made available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be February 19 or August 19
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor
- --------
* Include only for Exchange Security.
** Include only for Initial Security.
A-1
<PAGE> 118
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated March 4, 1998, among the Company and the
Initial Purchasers named therein. In the event that either (i) the Exchange
Offer Registration Statement is not filed with the Securities and Exchange
Commission on or prior to the 45th calendar day following the Issue Date, (ii)
the Exchange Offer Registration Statement has not been declared effective on or
prior to the 120th calendar day following the Issue Date, (iii) the Exchange
Offer is not consummated or the Shelf Registration Statement is not declared
effective, in either case, on or prior to the 150th calendar day following the
Issue Date or (iv) the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or usable (each such event
referred to in clauses (i) through (iv) above, a "Registration Default"), the
interest rate borne by this Security shall be increased by one-quarter of one
percent per annum (0.25%) upon the occurrence of each Registration Default,
which rate will increase by one-quarter of one percent (0.25%) each 90-day
period that such additional interest continues to accrue under any such
circumstance, with an aggregate maximum increase in the interest rate equal to
one-half of one percent (0.50%) per annum until such Registration Default has
been cured. Upon (w) the filing of the Exchange Offer Registration Statement
after the 45-day period described in clause (i) above, (x) the effectiveness of
the Exchange Offer Registration Statement after the 120-day period described in
clause (ii) above, (y) the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, after the
150-day period described in clause (iii) above, or (z) the cure of any
Registration Default described in clause (iv) above, the interest rate borne by
this Security from the date of such filing, effectiveness, consummation or cure,
as the case may be, will be reduced to the original interest rate if the Company
is otherwise in compliance with this paragraph; provided, however, that if,
after any such reduction in interest rate, a different event specified in clause
(i), (ii), (iii) or (iv) above occurs, the interest rate will again be increased
pursuant to the foregoing provisions.]*
Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in The Borough of Manhattan, The City of New York, in such coin or
currency of the United States
- --------
* Include only for Initial Security.
A-2
<PAGE> 119
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
BECKMAN INSTRUMENTS, INC.
By
-------------------------------------
Name:
Title:
[SEAL]
Attest:
- --------------------------
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
A-3
<PAGE> 120
By
-------------------------------------
Authorized Officer
Dated:
A-4
<PAGE> 121
(REVERSE OF SECURITY)
This Security is one of the duly authorized issue of [7.10][7.45]%
[Series B]* Senior Notes due [2003][2008] of the Company (herein called the
"Securities"), issued under an Indenture, dated as of March 4, 1998 (herein
called the "Indenture," which term shall have the meaning assigned to it in such
instrument), between the Company, as issuer, the Note Guarantors, as guarantors,
and The First National Bank of Chicago, as Trustee (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), and reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to [$160,000,000][$240,000,000].
This Security is entitled to the benefits of the certain senior Note
Guarantees of the Note Guarantors and may thereafter be entitled to certain
other senior Note Guarantees made for the benefit of the Holders. Reference is
made to Article Thirteen of the Indenture and to the Note Guarantees for terms
relating to such Note Guarantees.
The Securities are subject to redemption upon not less than 30 days'
notice by mail, at any time, as a whole or in part, at the election of the
Company, at a Redemption Price equal to the greater of (i) 100% of the principal
amount of such Securities or (ii) as determined by an Independent Investment
Banker, the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Securities will not be entitled to the benefit of a sinking
fund.
- --------
* Include only for Exchange Security.
A-5
<PAGE> 122
The Indenture provides that, upon the occurrence of a Change of
Control Triggering Event, each Holder will have the right to require that the
Company repurchase all or any part of such Holder's Securities at a repurchase
price in cash equal to 100% of the aggregate principal amount thereof plus
accrued interest, if any, to the date of such repurchase.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and
certain Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of this series
may be declared due and payable in the manner and with the effect provided in
the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of at least a majority in principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall
A-6
<PAGE> 123
not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons
in denominations of $1,000.00 and any integral multiple thereof. As provided in
the Indenture and subject to certain limitations therein set forth, Securities
are exchangeable for a like aggregate principal amount of Securities of like
tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
THE INDENTURE, THIS SECURITY AND THE NOTE GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN
ANY MANDATING THE APPLICATION OF SUCH LAWS).
A-7
<PAGE> 124
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
A-8
<PAGE> 125
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned holder hereby sell(s) assign(s)
and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or March 4, 2000, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the
Indenture.
A-9
<PAGE> 126
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to registered this Security in the name of any
Person other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 312 of the Indenture
shall have been satisfied.]*
Date:
-------------------------
--------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
-------------------------------------
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Security Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
[TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
- --------
* Include only for Initial Security, except Offshore Physical Security in
accordance with the Indenture.
A-10
<PAGE> 127
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
--------------------- ----------------------------------------
NOTICE: To be executed by an
executive officer]**
- ----------
** Include only for Initial Security, except Offshore Physical Security in
accordance with the Indenture.
A-11
<PAGE> 128
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant
to Section 1012 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1012 of the Indenture, state the amount (in original
principal amount) below:
$
---------------------------
Date:
------------------------------------
Your Signature:
------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
------------------------------
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Security Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-12
<PAGE> 129
EXHIBIT B
Form of Supplemental Indenture in Respect of Note Guarantee
This Supplemental Indenture, dated as of [_________] (this
"Supplemental Indenture"), among [name of Note Guarantor] (the "Note
Guarantor"), [Company] (together with its successors and assigns, the
"Company"), each other then existing Subsidiary Guarantor under the Indenture
referred to below, and [Trustee], as Trustee under the Indenture referred to
below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore become parties
to an Indenture, dated as of March 4, 1998, as amended (as amended,
supplemented, waived or otherwise modified, the "Indenture"), providing for the
issuance of an aggregate principal amount of $160,000,000 of 7.10% Senior Notes
due 2003 and 7.10% Series B Senior Notes due 2003 of the Company (collectively,
the "2003 Notes") and an aggregate principal amount of $240,000,000 of 7.45%
Senior Notes due 2008 and 7.45% Series B Senior Notes due 2008 of the Company
(collectively, the "2008 Notes" and, together with the 2003 Notes, the
"Securities");
WHEREAS, Sections 1013 and 1302 of the Indenture provide that under
certain circumstances the Company is required to cause the Note Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the Note Guarantor shall guarantee the Company's obligations under the
Securities pursuant to a Note Guarantee on the terms and conditions set forth
herein and in Article Thirteen of the Indenture; and
WHEREAS, pursuant to Section 901 of the Indenture, the parties
hereto are authorized to execute and deliver this Supplemental Indenture to
amend the Indenture, without the consent of any Holder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Note Guarantor, the Company, the other Note Guarantors and the Trustee mutually
covenant and agree for the benefit of the Holders of the Securities as follows:
1. Defined Terms. As used in this Supplemental Indenture, terms
defined in the Indenture or in the preamble or recital hereto are used herein as
therein defined. The words "herein," "hereof" and "hereby" and other words of
similar import used in this Supplemental Indenture refer to this Supplemental
Indenture as a whole and not to any particular section hereof.
B-1
<PAGE> 130
2. Agreement to Guarantee. The Note Guarantor hereby agrees, jointly
and severally with all other Note Guarantors and fully and unconditionally, to
guarantee the Company's obligations under the Indenture and the Securities of
each series on the terms and subject to the conditions set forth in Article
Thirteen of the Indenture and to be bound by all other applicable provisions of
the Indenture as a Note Guarantor.
3. Termination, Release and Discharge. The Note Guarantor's Note
Guarantee shall terminate and be of no further force or effect, and the Note
Guarantor shall be released and discharged from all obligations in respect of
such Note Guarantee, as and when provided in Section 1303 of the Indenture.
4. Parties. Nothing in this Supplemental Indenture is intended or
shall be construed to give any Person, other than the Holders and the Trustee,
any legal or equitable right, remedy or claim under or in respect of the Note
Guarantor's Note Guarantee or any provision contained herein or in Article
Thirteen of the Indenture.
5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY
MANDATING THE APPLICATION OF SUCH LAWS).
6. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby. The
Trustee makes no representation or warranty as to the validity or sufficiency of
this Supplemental Indenture.
7. Counterparts. The parties hereto may sign one or more copies of
this Supplemental Indenture in counterparts, all of which together shall
constitute one and the same agreement.
8. Headings. The section headings herein are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR],
B-2
<PAGE> 131
By:
-------------------------------------
Name:
Title:
Address:
[COMPANY]
By:
-------------------------------------
Name:
Title:
[Add signature block for any other
existing Note Guarantor]
[TRUSTEE]
By:
-------------------------------------
Name:
Title:
B-3
<PAGE> 132
EXHIBIT C
Form of Certificate to Be Delivered upon Termination of Restricted Period
On or after April 14, 1998
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: Beckman Instruments, Inc. (the "Company")
[7.10][7.45]% Senior Notes due [2003][2008] (the "Securities")
Ladies and Gentlemen:
This letter relates to $___________ principal amount of Securities
represented by the offshore global security certificate (the "Offshore Global
Security"). Pursuant to Section 203 of the Indenture dated as of March 4, 1998
relating to the Securities (the "Indenture"), we hereby certify that (1) we are
the beneficial owner of such principal amount of Securities represented by the
Offshore Global Security and (2) we are a Non-U.S. Person to whom the Securities
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the Securities Act of 1933, as amended ("Regulation S"). Accordingly, you
are hereby requested to issue an Offshore Physical Security representing the
undersigned's interest in the principal amount of Securities represented by the
Offshore Global Security, all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-------------------------------------
C-1
<PAGE> 133
EXHIBIT C
Authorized Signature
C-2
<PAGE> 134
EXHIBIT D
Form of Accredited Investor Certificate
Transferee Letter of Representation
The First National Bank of Chicago, as Trustee
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Ladies and Gentlemen:
In connection with our proposed purchase of $________ aggregate
principal amount of the [7.10][7.45]% Senior Notes due 200[3][8] (the
"Securities") of Beckman Instruments, Inc. (the "Company"), we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act")), purchasing for our own account or for the
account of such an institutional "accredited investor", and we are acquiring the
Securities for investment purposes and not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act or other
applicable securities laws and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment.
2. We understand and acknowledge that the Securities have not been
registered under the Securities Act or any other applicable securities law and
may not be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities law, or pursuant to an exemption therefrom, and in each case in
compliance with the conditions for transfer set forth below. We agree on our own
behalf and on behalf of any investor account for which we are purchasing
Securities to offer, sell or otherwise transfer such Securities prior to the
date which is two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner of
such Securities (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) for so
long as the
D-1
<PAGE> 135
Securities are eligible for resale pursuant to Rule 144A under the Securities
Act ("Rule 144A"), to a person we reasonably believe is a "Qualified
Institutional Buyer" within the meaning of Rule 144A (a "QIB") that purchases
for its own account or for the account of a QIB and to whom notice is given that
the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales to non-U.S. persons that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring the Securities for its
own account or for the account of such an institutional "accredited investor"
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act or (f)
pursuant to any other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any requirement of
law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and to
compliance with any applicable state securities laws. The foregoing restrictions
on resale will not apply subsequent to the Resale Restriction Termination Date.
If any resale or other transfer of the Securities is proposed to be made
pursuant to clause (e) above prior to the Resale Restriction Termination Date,
the transferor shall deliver to the trustee (the "Trustee") under the Indenture
pursuant to which the Securities are issued a letter from the transferee
substantially in the form of this letter to the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act. We
acknowledge that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer of the Securities pursuant to clauses (d), (e) and
(f) above prior to the Resale Restriction Termination Date to require the
delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Trustee.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereto to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS).
Very truly yours,
D-2
<PAGE> 136
(Name of Purchaser)
By:
------------------------------------
Date:
------------------------------------
Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:
By:
---------------------------------
Date:
---------------------------------
Taxpayer ID number:
-------------------
D-3
<PAGE> 137
EXHIBIT E
Form of Regulation S Certificate
Regulation S Certificate
To: The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: Beckman Instruments Inc. (the "Company")
[7.10][7.45]% Senior Notes due [2003][2008] (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $_____ aggregate principal
amount of Securities, we confirm that such sale has been effected pursuant to
and in accordance with Regulation S ("Regulation S") under the Securities Act of
1933, as amended (the "Securities Act"), and accordingly, we hereby certify as
follows:
1. The offer of the Securities was not made to a person in the
United States (unless such person or the account held by it for which it
is acting is excluded from the definition of "U.S. person" pursuant to
Rule 902(o) of Regulation S under the circumstances described in Rule
902(i)(3) of Regulation S) or specifically targeted at an identifiable
group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the buyer
was outside the United States or we and any person acting on our behalf
reasonably believed that the buyer was outside the United States or (b)
the transaction was executed in, on or through the facilities of a
designated offshore securities market, and neither we nor any person
acting on our behalf knows that the transaction was pre-arranged with a
buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on our
or their behalf has made any directed selling efforts in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable.
E-1
<PAGE> 138
4. The proposed transfer of Securities is not part of a plan or
scheme to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling concession or
other fee or remuneration in respect of the Securities, and the proposed
transfer takes place before the Offshore Security Exchange Date referred
to in the Indenture, dated as of March 4, 1998, among the Company, the
Note Guarantors thereunder and the Trustee, or we are an officer or
director of the Company or a distributor, we certify that the proposed
transfer is being made in accordance with the provisions of Rules 903 and
904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate and
are irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[NAME OF SELLER]
By:
-------------------------------------
Name:
Title:
Address:
Date of this Certificate: _______________ __, 199_
E-2
<PAGE> 139
EXHIBIT F
Form of Rule 144A Certificate
Rule 144A Certificate
To: The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: Beckman Instruments, Inc. (the "Company")
[7.10][7.45]% Senior Notes due [2003][2008] (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $______ aggregate principal
amount of Securities, we confirm that such sale has been effected pursuant to
and in accordance with Rule 144A ("Rule 144A") under the Securities Act of 1933,
as amended (the "Securities Act"). We are aware that the transfer of Securities
to us is being made in reliance on the exemption from the provisions of Section
5 of the Securities Act provided by Rule 144A. Prior to the date of this
Certificate we have been given the opportunity to obtain from the Company the
information referred to in Rule 144A(d)(4), and have either declined such
opportunity or have received such information.
You and the Company are entitled to rely upon this Certificate and
are irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:
-------------------------------------
Name:
Title:
F-1
<PAGE> 140
Address:
Date of this Certificate: _________ __, 199_
F-2
<PAGE> 1
Exhibit 4.2
================================================================================
Registration Rights Agreement
Dated As of March 4, 1998
among
Beckman Instruments, Inc.
and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Brothers Inc
Citicorp Securities, Inc.
Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporated
BancAmerica Robertson Stephens
First Chicago Capital Markets, Inc.
and
Goldman, Sachs & Co.
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 4th day of March 1998, among Beckman Instruments, Inc., a
Delaware corporation (the "Company"), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse
First Boston Corporation, Morgan Stanley & Co. Incorporated, BancAmerica
Robertson Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co.
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
February 25, 1998, (the "Purchase Agreement"), among the Company and the Initial
Purchasers, which provides for the sale by the Company to the Initial Purchasers
of an aggregate of $160 million principal amount of the Company's 7.10% Senior
Notes due 2003 (the "2003 Notes") and an aggregate of $240 million principal
amount of the Company's 7.45% Senior Notes due 2008 (the "2008 Notes" and,
together with the 2003 Notes, the "Securities"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide to the Initial Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
<PAGE> 3
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that such
depositary must have an address in the Borough of Manhattan, in the City
of New York.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2.1
hereof.
"Exchange Offer Registration" offer shall mean a registration under
the 1933 Act effected pursuant to Section 2.1 hereof
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, including the Prospectus contained therein, all exhibits
thereto and all documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2.1
hereof
"Exchange Securities" shall mean the 7.10% Senior Notes due 2003,
Series B and the 7.45% Senior Notes due 2008, Series B, issued by the
Company under the Indenture containing terms identical to the Securities
in all material respects (except for references to certain interest rate
provisions, restrictions on transfers and restrictive legends), to be
offered to Holders of Securities in exchange for Registrable Securities
pursuant to the Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable
Securities under the Indenture.
"Indenture" mean the Indenture relating to the Securities, dated as
of March 4, 1998, among the Company, the Note Guarantors parties thereto
and The First National Bank of Chicago, as trustee, as the same may be
amended, supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof.
"Initial Purchaser" or "Initial Purchasers" shall have the meaning
set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Outstanding (as defined in the Indenture)
Registrable Securities; provided that whenever the consent or approval of
Holders of a specified percentage of
2
<PAGE> 4
Registrable Securities is required hereunder, Registrable Securities held
by the Company and other obligors on the Securities or any Affiliate (as
defined in the Indenture) of the Company shall be disregarded in
determining whether such consent or approval was given by the Holders of
such required percentage amount.
"Participating Broker-Dealer" shall mean any of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, Citicorp
Securities, Inc., Credit Suisse First Boston Corporation, Morgan Stanley &
Co. Incorporated, BancAmerica Robertson Stephens, First Chicago Capital
Markets, Inc. and Goldman, Sachs & Co. and any other broker-dealer which
makes a market in the Securities and exchanges Registrable Securities in
the Exchange Offer for Exchange Securities.
"Person" shall mean an individual, partnership (general or limited),
corporation, limited liability company, trust or incorporated
organization, or a government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including any
such prospectus supplement with respect to the terms of the offering of
any portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Registrable Securities" shall mean the Securities of any Holder;
provided, however, that such Securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such
Securities shall have been declared effective under the 1933 Act and such
Securities shall have been disposed of pursuant to such Registration
Statement, (ii) such Securities can be sold to the public pursuant to Rule
144 (or any similar provision then in force, but not Rule 144A) under the
1933 Act, (iii) such Securities shall have ceased to be outstanding or
(iv) the Exchange Offer is consummated (except in the case of Securities
purchased from the Company and continued to be held by the Initial
Purchasers).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees,
including, if applicable, the reasonable
3
<PAGE> 5
fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained by any holder of Registrable
Securities in accordance with the rules and regulations of the NASD, (ii)
all reasonable fees and expenses incurred in connection with compliance
with state securities or blue sky laws and compliance with the rules of
the NASD (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any
of the Exchange Securities or Registrable Securities and any filings with
the NASD), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv)
all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges,
(v) all rating agency fees, (vi) the fees and disbursements of counsel for
the Company and of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, (vii) the fees
and expenses of the Trustee, and any escrow agent or custodian, (viii) the
reasonable fees and expenses of the Initial Purchasers in connection with
the Exchange Offer, including the reasonable fees and expenses of counsel
to the Initial Purchasers in connection therewith, (ix) the reasonable
fees and disbursements of Debevoise & Plimpton, special counsel
representing the Holders of Registrable Securities and (x) any reasonable
fees and disbursements of the underwriters customarily required to be paid
by issuers or sellers of securities and the reasonable fees and expenses
of any special experts retained by the Company in connection with any
Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder, it being understood
that in no event shall the Company be liable for the fees and expenses of
more than one counsel (in addition to any local counsel) in connection
with registration pursuant to either Section 2.1 or 2.2.
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency or government body performing the functions currently
performed by the United States Securities and Exchange Commission.
4
<PAGE> 6
"Shelf Registration" shall mean a registration effected pursuant to
Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2.2 of this
Agreement which covers all of the Registrable Securities on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities
under the Indenture.
2. Registration Under the 1993 Act.
2.1. Exchange Offer. The Company shall (A) prepare and, as soon as
practicable but not later than 45 calendar days following the Closing Date, file
with the SEC an Exchange Offer Registration Statement on an appropriate form
under the 1933 Act with respect to a proposed Exchange Offer and the issuance
and delivery to the Holders, in exchange for the Registrable Securities, a like
principal amount of Exchange Securities, (B) use its best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the 1933
Act within 120 calendar days of the Closing Date, (C) use its best efforts to
keep the Exchange Offer Registration Statement effective until the closing of
the Exchange Offer and (D) use its best efforts to cause the Exchange Offer to
be consummated not later than 150 calendar days following the Closing Date. The
Exchange Securities will be issued under the Indenture. Upon the effectiveness
of the Exchange Offer Registration Statement, the Company shall promptly
commence the Exchange Offer, it being the objective of such Exchange Offer to
enable each Holder eligible and electing to exchange Registrable Securities for
Exchange Securities (assuming that such Holder (a) is not an affiliate of the
Company within the meaning of Rule 405 under the 1933 Act, (b) is not a
broker-dealer tendering Registrable Securities acquired directly from the
Company for its own account, (c) acquired the Exchange Securities in the
ordinary course of such Holder's business and (d) has no arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing the Exchange Securities) to transfer such Exchange
Securities from and after their receipt without any limitations or restrictions
under the 1933 Act and without material restrictions under the securities laws
of a substantial proportion of the several states of the United States.
5
<PAGE> 7
In connection with the Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period of not
less than 30 calendar days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange Offer,
(d) permit Holders to withdraw tendered Registrable Securities at
any time prior to the expiration time of the Exchange Period. (Eastern Standard
Time), on the last business day of the Exchange Period, by sending to the
institution specified in the notice, a telegram, telex, facsimile transmission
or letter setting forth the name of such Holder, the principal, the principal
amount of Registrable Securities delivered for exchange, and a statement that
such Holder is withdrawing his election to have such Securities exchanged;
(e) notify each Holder that any Registrable Security not tendered
will remain outstanding and continue to accrue interest, but will not retain any
rights under this Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange all Registrable Securities duly tendered and
not validly withdrawn pursuant to the Exchange Offer in accordance with
the terms of the Exchange Offer Registration Statement and the letter of
transmittal which shall be an exhibit thereto;
(ii) deliver to the Trustee for cancellation all Registrable
Securities so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Securities to each Holder of Registrable Securities so accepted
for exchange in a principal amount
6
<PAGE> 8
equal to the principal amount of the Registrable Securities of such Holder
so accepted for exchange.
Interest on each Exchange Security will accrue from the most recent
interest payment date to which interest has been paid on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from the date of original issuance. The Exchange
Offer shall not be subject to any conditions, other than (i) that the Exchange
Offer, or the making of any exchange by a Holder, does not violate applicable
law or any applicable interpretation of the staff of the SEC, (ii) the due
tendering of Registrable Securities in accordance with the Exchange Offer, (iii)
that each Holder of Registrable Securities exchanged in the Exchange Offer shall
have represented that all Exchange Securities to be received by it shall be
acquired in the ordinary course of its business and that at the time of the
consummation of the Exchange Offer it shall have no arrangement or understanding
with any person to participate in the distribution (within the meaning of the
1933 Act) of the Exchange Securities and shall have made such other
representations as may be reasonably necessary under applicable SEC rules,
regulations or interpretations to render the use of Form S-4 or other
appropriate form under the 1933 Act available and (iv) that no action or
proceeding shall have been instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer which, in the
Company's judgment, would reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer. The Company shall inform the Initial
Purchasers of the names and addresses of the Holders to whom the Exchange Offer
is made, and the Initial Purchasers shall have the right to contact such Holders
and otherwise facilitate the tender of Registrable Securities in the Exchange
Offer.
2.2. Shelf Registration. (i) If, because of any changes in law, SEC
rules or regulations or applicable interpretations thereof by the staff of the
SEC, the Company is not permitted to effect the Exchange Offer as contemplated
by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer
Registration Statement is not declared effective within 120 calendar days
following the Closing Date or the Exchange Offer is not consummated within 150
calendar days after the Closing Date, (iii) upon the written request of any of
the Initial Purchasers with respect to any Registrable Securities which any of
them acquired directly from the Company or (iv) upon the written request of any
Holder that either (x) is not permitted pursuant to applicable law, SEC rules or
regulations or applicable interpretations thereof by the staff of the SEC to
participate in the Exchange Offer or (y) participates in the Exchange Offer and
does not receive fully tradable Exchange Securities pursuant to the Exchange
Offer, then in case of each of clauses (i) through (iv) the Company shall, at
its cost:
(a) As promptly as practicable, file with the SEC, and thereafter
shall use its best efforts to cause to be declared effective as promptly
as practicable but no later than
7
<PAGE> 9
150 calendar days after the Closing Date, a Shelf Registration Statement
relating to the offer and sale of the Registrable Securities by the
Holders from time to time in accordance with the methods of distribution
elected by the Majority Holders participating in the Shelf Registration
and set forth in such Shelf Registration Statement.
(b) Use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years from the date
the Shelf Registration Statement is declared effective by the SEC, or for
such shorter period that will terminate when all Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or cease to be outstanding or otherwise to be
Registrable Securities.
(c) Notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act and
the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements, in light of the circumstances under which they were
made, not misleading.
The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement, as required by Section 3(b) below, and to furnish
to the Holders of Registrable Securities copies of any such supplement or
amendment promptly as reasonably practicable after its being used or filed with
the SEC.
2.3. Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
2.4. Effectiveness. (a) The Company will be deemed not to have used
its best efforts to cause the Exchange Offer Registration Statement or the Shelf
Registration Statement,
8
<PAGE> 10
as the case may be, to become, or to remain, effective during the requisite
period if the Company voluntarily takes any action that would, or omits to take
any action which omission would, result in any such Registration Statement not
being declared effective or in the holders of Registrable Securities covered
thereby not being able to exchange or offer and sell such Registrable Securities
during that period as and to the extent contemplated hereby, unless such action
is required by applicable law.
(b) An Exchange Offer Registration Statement pursuant to Section 2.1
hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not
be deemed to have become effective unless it has been declared effective by the
SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume.
2.5. Interest. The Indenture executed in connection with the
Securities will provide that in the event that either (a) the Exchange Offer
Registration Statement is not filed with the Commission on or prior to the 45th
calendar day following the Closing Date, (b) the Exchange Offer Registration
Statement has not been declared effective on or prior to the 120th calendar day
following the Closing Date, (c) the Exchange Offer is not consummated or, if
required, a Shelf Registration Statement is not declared effective, in either
case, on or prior to the 150th calendar day following the Closing Date or (d)
the Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable (each such event referred to in clauses (a)
through (d) above, a "Registration Default"), the interest rate borne by the
Securities shall be increased by one-quarter of one percent per annum (0.25%)
upon the occurrence of each Registration Default, which rate will increase by
one-quarter of one percent (0.25%) each 90-day period that such additional
interest continues to accrue under any such circumstance, with an aggregate
maximum increase in the interest rate equal to one-half of one percent (0.50%)
per annum until such Registration Default has been cured. Upon (w) the filing of
the Exchange Offer Registration Statement after the 45-day period described in
clause (i) above, (x) the effectiveness of the Exchange Offer Registration
Statement after the 120-day period described in clause (ii) above, (y) the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, after the 150-day period described in clause
(iii) above, or (z) the cure of any Registration Default described in clause
(iv) above, the interest rate borne by the Securities from the date of such
filing, effectiveness, consummation or cure, as the case may be, will be reduced
to the original interest rate if the Company is otherwise in compliance with
this paragraph; provided, however, that if, after any
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such reduction in interest rate, a different event specified in clause (i),
(ii), (iii) or (iv) above occurs, the interest rate will again be increased
pursuant to the foregoing provisions.
3. Registration Procedures. In connection with the obligations of
the Company with respect to Registration Statements pursuant to Sections 2.1 and
2.2 hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement, within
the relevant time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company, (ii)
shall in the case of a Shelf Registration, be available for the sale of
the Registrable Securities by the selling Holders thereof, (iii) shall
comply as to form in all material respects with the requirements of the
applicable form and include or incorporate by reference all financial
statements required by the SEC to be filed therewith or incorporated by
reference therein, and (iv) shall comply in all respects with the
requirements of Regulation S-T under the Securities Act, and use its best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under
applicable law to keep such Registration Statement effective for the
applicable period; and cause each Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the 1933 Act and comply with the provisions of
the 1933 Act applicable to them with respect to the disposition of all
securities covered by each Registration Statement during the applicable
period in accordance with the intended method or methods of distribution
by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least five business days prior to filing, that
a Shelf Registration Statement with respect to the Registrable Securities
is being filed and advising such Holders that the distribution of
Registrable Securities will be made in accordance with the method selected
by the Majority Holders participating in the Shelf Registration; (ii)
furnish to each Holder of Registrable Securities and to each underwriter
of an underwritten offering of Registrable Securities, if any, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder or underwriter may reasonably request, including
financial statements and schedules and, if the Holder so requests, all
exhibits in order to facilitate the public sale or other disposition of
the Registrable
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<PAGE> 12
Securities; and (iii) hereby consent to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement and each underwriter of an underwritten offering of
Registrable Securities shall reasonably request by the time the applicable
Registration Statement is declared effective by the SEC, and do any and
all other acts and things which may be reasonably necessary or advisable
to enable each such Holder and underwriter to consummate the disposition
in each such jurisdiction of such Registrable Securities owned by such
Holder; provided, however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), or (ii) take any action which would subject it to
general service of process or taxation in any such jurisdiction where it
is not then so subject;
(e) notify promptly each Holder of Registrable Securities under a
Shelf Registration or any Participating Broker-Dealer who has notified the
Company that it is utilizing the Exchange Offer Registration Statement as
provided in paragraph (f) below, and, if requested by such Holder or
Participating Broker-Dealer, confirm such advice in writing promptly (i)
when a Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective, (ii)
of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) in case of a Shelf Registration, if, between the effective
date of a Registration Statement and the closing of any sale of
Registrable Securities covered thereby, the representations and warranties
of the Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects, (v) of the
happening of any event or the discovery of any facts during the period a
Shelf Registration Statement is effective which makes any statement made
in such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein not misleading and (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities or the Exchange
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<PAGE> 13
Securities, as the case may be, for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(f) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution" which section shall include all information that
the Initial Purchasers may reasonably request, and which shall contain a
summary statement of the positions taken or policies made by the staff of
the SEC with respect to the potential "underwriter" status of any
broker-dealer that holds Registrable Securities acquired for its own
account as a result of market-making activities or other trading
activities and that will be the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Securities to be received by such
broker-dealer in the Exchange Offer, whether such positions or policies
have been publicly disseminated by the staff of the SEC or such positions
or policies, in the reasonable judgment of the Initial Purchasers and its
counsel, represent the prevailing views of the staff of the SEC, including
a statement that any such broker-dealer who receives Exchange Securities
for Registrable Securities pursuant to the Exchange Offer may be deemed a
statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such
Exchange Securities, (ii) furnish to each Participating Broker-Dealer who
has delivered to the Company the notice referred to in Section 3(e),
without charge, as many copies of each Prospectus included in the Exchange
Offer Registration Statement, including any preliminary prospectus, and
any amendment or supplement thereto, as such Participating Broker-Dealer
may reasonably request, (iii) hereby consent to the use of the Prospectus
forming part of the Exchange Offer Registration Statement or any amendment
or supplement thereto, by any person subject to the prospectus delivery
requirements of the SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Securities covered by
the Prospectus or any amendment or supplement thereto, and (iv) include in
the transmittal letter or similar documentation to be executed by an
exchange offeree in order to participate in the Exchange Offer (x) the
following provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any
resale of Exchange Securities received in respect of such
Registrable Securities pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange
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<PAGE> 14
of Registrable Securities, the broker-dealer will not be deemed to admit
that it is an underwriter within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver to the Initial Purchasers on behalf of the
Participating Broker-Dealers upon the effectiveness of the Exchange Offer
Registration Statement (i) an opinion of counsel or opinions of counsel
substantially in the form attached hereto as Exhibit A, (ii) an officers'
certificate substantially in the form customarily delivered in a public
offering of debt securities and (iii) a comfort letter or comfort letters
in customary form if permitted by Statement on Auditing Standards No. 72
of the American Institute of Certified Public Accountants (or if such a
comfort letter is not permitted, an agreed upon procedures letter in
customary form) at least as broad in scope and coverage as the comfort
letter or comfort letters delivered to the Initial Purchasers in
connection with the initial sale of the Securities to the Initial
Purchasers;
(g) (i) in the case of an Exchange Offer, furnish counsel for the
Initial Purchasers and (ii) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Securities copies of any comment
letters received from the SEC or any other request by the SEC or any state
securities authority for amendments or supplements to a Registration
Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, and each underwriter, if any, without charge, at
least one conformed copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules (without documents incorporated therein by reference and all
exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
and not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the selling Holders or the
underwriters, if any, may reasonably request at least three business days
prior to the closing of any sale of Registrable Securities;
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<PAGE> 15
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Sections
3(e)(v) and 3(e)(vi) hereof, use its best efforts to prepare a supplement
or post-effective amendment to the Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities or Participating Broker-Dealers, such
Prospectus will not contain at the time of such delivery any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading or will remain so qualified;
(l) in the case of a Shelf Registration, a reasonable time prior to
the filing of any Registration Statement, any Prospectus, any amendment to
a Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus after initial filing of a Registration
Statement, provide copies of such document to the Initial Purchasers on
behalf of such Holders; and make representatives of the Company as shall
be reasonably requested by the Holders of Registrable Securities, or the
Initial Purchasers on behalf of such Holders, available for discussion of
such document;
(m) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates
for the Exchange Securities or the Registrable Securities, as the case may
be, in a form eligible for deposit with the Depositary;
(n) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the registration of
the Exchange Securities or Registrable Securities, as the case may be,
(ii) cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and (iii) execute, and use its best
efforts to cause the Trustee to execute, all documents as may be required
to effect such changes, and all other forms and documents required to be
filed with the SEC to enable the Indenture to be so qualified in a timely
manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration:
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<PAGE> 16
(i) make such representations and warranties to the Holders of such
Registrable Securities and the underwriters, if any, in form, substance
and scope as are customarily made by issuers to underwriters in similar
underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the
holders of a majority in principal amount of the Registrable Securities
being sold) addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested in sales of
securities or underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
underwriters, if any, and use reasonable efforts to have such letter
addressed to the selling Holders of Registrable Securities (to the extent
consistent with Statement on Auditing Standards No. 72 of the American
Institute of Certified Public Accounts), such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with similar underwritten
offerings;
(iv) enter into a securities sales agreement with the Holders and an
agent of the Holders providing for, among other things, the appointment of
such agent for the selling Holders for the purpose of soliciting purchases
of Registrable Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the same to
set forth indemnification provisions and procedures substantially
equivalent to the indemnification provisions and procedures set forth in
Section 4 hereof with respect to the underwriters and all other parties to
be indemnified pursuant to said Section or, at the request of any
underwriters, in the form customarily provided to such underwriters in
similar types of transactions; and
(vi) deliver such documents and certificates as may be reasonably
requested and as are customarily delivered in similar offerings to the
Holders of a majority in principal amount of the Registrable Securities
being sold and the managing underwriters, if any.
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<PAGE> 17
The above shall be done at (i) the effectiveness of such Registration Statement
(and each post-effective amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent required thereunder;
(p) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Securities
and any underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any counsel or accountant retained by such
Holders or underwriters, all financial and other records, pertinent
corporate documents and properties of the Company reasonably requested by
any such persons, and cause the respective officers, directors, employees,
and any other agents of the Company to supply all information reasonably
requested by any such representative, underwriter, special counsel or
accountant in connection with a Registration Statement, and make such
representatives of the Company available for discussion of such documents
as shall be reasonably requested by the Initial Purchasers;
(q) (i) in the case of an Exchange Offer Registration Statement, a
time prior to the filing of any Exchange Offer Registration Statement, any
Prospectus forming a part thereof, any amendment to an Exchange Offer
Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Initial Purchasers and make such
changes in any such document prior to the filing thereof as the Initial
Purchasers may reasonably request and, except as otherwise required by
applicable law, not file any such document in a form to which the Initial
Purchasers on behalf of the Holders of Registrable Securities shall
reasonably object, and make the representatives of the Company available
for discussion of such documents as shall be reasonably requested by the
Initial Purchasers; and
(ii) in the case of a Shelf Registration, a reasonable time prior to
filing any Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement or amendment
or supplement to such Prospectus, provide copies of such document to the
Holders of Registrable Securities, to the Initial Purchasers, to counsel
on behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of Registrable Securities, if any, make such changes
in any such document prior to the filing thereof as the Initial
Purchasers, the counsel to the Holders or the underwriter or underwriters
reasonably request and not file any such document in a form to which the
Majority Holders or the Initial Purchasers on behalf of the Holders of
Registrable Securities or any underwriter may reasonably object and make
the representatives of the Company available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Securities, the Initial Purchasers on behalf of such Holders, or any
underwriter.
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<PAGE> 18
(r) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
at least 12 months which shall satisfy the provisions of Section 11(a) of
the 1933 Act and Rule 158 thereunder;
(s) cooperate and assist in any filings required to be made with the
NASD and, in the case of a Shelf Registration, in the performance of any
due diligence investigation by any underwriter and its counsel (including
any "qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD); and
(t) upon consummation of an Exchange Offer, obtain a customary
opinion of counsel to the Company addressed to the Trustee for the benefit
of all Holders of Registrable Securities participating in the Exchange
Offer, and which includes an opinion that (i) the Company has duly
authorized, executed and delivered the Exchange Securities and the related
indenture, and (ii) each of the Exchange Securities and related indenture
constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its respective terms
(with customary exceptions).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the Proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing for use in connection with any Shelf Registration Statement or
Prospectus included therein, including, without limitation, information
specified in item 507 of Regulation S-K under the 1933 Act. Each Holder as to
which any Shelf Registration is being effected agrees to furnish promptly to the
Company all information required to be disclosed with respect to such Holder in
order to make any information with respect to such Holder previously furnished
to the Company by such Holder not materially misleading.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section 3(e)(v)
hereof, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to a Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
3(k) hereof, and, if so directed by the Company, such Holder will deliver to the
Company (at its expense) all copies in such Holder's possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice to
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<PAGE> 19
suspend the disposition of Registrable Securities pursuant to a Shelf
Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(v) hereof,
the Company shall be deemed to have used its best efforts to keep the Shelf
Registration Statement effective during such period of suspension provided that
the Company shall use its best efforts to file and have declared effective (if
an amendment) as soon as practicable an amendment or supplement to the Shelf
Registration Statement and shall extend the period during which the Shelf
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus necessary to resume
such dispositions.
In the event that the Company fails to effect the Exchange Offer or
file any Shelf Registration Statement and maintain the effectiveness of any
Shelf Registration Statement as provided herein, the Company shall not file any
Registration Statement with respect to any securities (within the meaning of
Section 2(l) of the 1933 Act) of the Company other than Registrable Securities.
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
underwriter or underwriters and manager or managers that will manage such
offering will be selected by the Majority Holders of such Registrable Securities
included in such offering and shall be acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
4. Indemnification, Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers, each Holder, each
Participating Broker-Dealer, each Person who participates as an underwriter (any
such Person being an "Underwriter") and each Person, if any, who controls any
Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement (or any amendment or supplement thereto) pursuant to which
Exchange Securities or Registrable Securities were registered under the
1933 Act, including all documents incorporated therein by reference, or
the
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<PAGE> 20
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
4(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by any indemnified party as
provided herein), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) above; provided, however, that
this indemnity agreement shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by the
Initial Purchasers, such Holder or Underwriter expressly for use in a
Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto).
(b) Each Holder severally, but not jointly, agrees to indemnify and
hold harmless the Company, the Initial Purchasers, each Underwriter and the
other selling Holders, and each of their respective directors and officers, and
each Person, if any, who controls the Company, the Initial Purchasers, any
Underwriter or any other selling Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 4(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf Registration Statement
(or any amendment thereto) or any Prospectus included therein (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company expressly for use in the Shelf Registration
Statement (or any amendment thereto) or such Prospectus (or any
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<PAGE> 21
amendment or supplement thereto); provided, however, that no such Holder shall
be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities pursuant to such
Shelf Registration Statement.
(c) Each indemnified party shall give written notice as promptly as
reasonably practicable to each indemnifying party of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 4(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
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<PAGE> 22
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(e) If the indemnification provided for in this Section 4 is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand, the
Holders on another hand, and the Initial Purchasers on another hand, from the
offering of the Securities, the Exchange Securities and the Registrable
Securities (taken together) included in such offering or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand, the
Holders on another hand and the Initial Purchasers on another hand in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company from the offering of
the Securities, the Exchange Securities and the Registrable Securities (taken
together) included in such offering shall in each case be deemed to include the
proceeds received by the Company in connection with the offering of the
Securities pursuant to the Purchase Agreement. The parties hereto agree that any
underwriting discount or commission or reimbursement of fees paid to the Initial
Purchasers pursuant to the Purchase Agreement shall not be deemed to be a
benefit received by the Initial Purchasers in connection with the offering of
the Exchange Securities or Registrable Securities included in such offering.
The relative fault of the Company on the one hand, the Holders on
another hand, and the Initial Purchasers on another hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, the Holders or the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Holders and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 4. The aggregate amount of losses, liabilities, claims, damages and
21
<PAGE> 23
expenses incurred by an indemnified party and referred to above in this
Section 4 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities sold by it were offered exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser or Holder, and each director of the Company, and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company. The Initial Purchasers' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the principal amount of
Securities set forth opposite their respective names in Schedule A to the
Purchase Agreement and not joint.
5. Miscellaneous.
5.1. Rule 144 and Rule 144A. For so long as the Company is subject
to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company
covenants that it will file the reports required to be filed by it under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will upon the
request of any Holder of Registrable Securities (a) make publicly available such
information as is necessary to permit sales pursuant to Rule 144 under the 1933
Act, (b) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the 1933 Act, and (c) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions
22
<PAGE> 24
provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from
time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended
from time to time, or (iii) any similar rules or regulations hereafter adopted
by the SEC. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
5.2. No Inconsistent Agreements. The Company has not entered into
and the Company will not after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with the rights granted to the holders of the Company's other issued
and outstanding securities under any such agreements.
5.3. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
5.4. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the initial Purchasers; and (b) if to the Company,
initially at the Company's address set forth in the Purchase Agreement, and
thereafter at such other address of which notice is given in accordance with the
provisions of this Section 5.4.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
23
<PAGE> 25
5.5. Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
5.6. Third Party Beneficiaries. The Initial Purchasers (even if the
Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.
5.7. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.8. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof
5.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.10. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other
24
<PAGE> 26
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
25
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
BECKMAN INSTRUMENTS, INC.
By: D. K. WILSON
-------------------------------------
Name: Dennis K. Wilson
Title: Vice President, Finance
and Chief Financial Officer
Confirmed and accepted as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON BROTHERS INC
CITICORP SECURITIES, INC
CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
BANC AMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: MATTHEW YOUNG
-------------------------------------
Name: Matthew Young
Title: Vice President
26
<PAGE> 28
Exhibit A
Form of Opinion of Counsel
We are of the opinion that the Exchange Offer Registration Statement
and the Prospectus (other than the financial statements, notes or schedules
thereto and other financial data and supplemental schedules included or
incorporated by reference therein or omitted therefrom and the Form T-1, as to
which we need express no opinion), comply as to form in all material respects
with the requirements of the 1933 Act and the applicable rules and regulations
promulgated under the 1933 Act.
In addition, we have participated in conferences with officers and
other representatives of the Company and the Note Guarantors, representatives of
the independent public accountants of the Company and the Note Guarantors and
representatives of the Initial Purchasers, at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although we are not passing upon, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus and have not made any independent
check or verification thereof, during the course of such participation, no facts
came to our attention that caused us to believe that the Registration Statement
or any amendment thereto, at the time the Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto, at the time the Prospectus was issued, at the
time any such amended or supplemented Prospectus was issued or at the Closing
Time, included or includes an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; it being understood that we express no belief with respect to the
financial statements and schedules and other financial data included in the
Registration Statement and the Prospectus.
<PAGE> 1
EXHIBIT 5.1
LATHAM & WATKINS
Attorneys at Law
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Telephone (213) 485-1234
Fax (213) 891-8763
April 16, 1998
Beckman Coulter, Inc.
2500 Harbor Boulevard
Fullerton, CA 92834
Re: Beckman Coulter, Inc.
Registration Statement on Form S-4 (File No. 333- )
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-4
(the "Registration Statement") referenced above, which you are filing on the
date hereof with the Securities and Exchange Commission in connection with the
registration under the Securities Act of 1933, as amended, of (i) $160,000,000
principal amount of your 7.10% Senior Notes due 2003 and (ii) $240,000,000
principal amount of your 7.45% Senior Notes due 2008 (together, the "Exchange
Notes"), to be offered and issued by Beckman Coulter, Inc. (the "Company"),
together with guarantees of the Exchange Notes (the "Guarantees") by Beckman
Instruments (Naguabo) Inc., a California corporation, Hybritech Incorporated, a
California corporation, SmithKline Diagnostics, Inc., a Delaware corporation and
Coulter Corporation, a Delaware corporation (collectively, the "Guarantors")
pursuant to an Indenture dated March 4, 1998 (the "Indenture") among the
Company, the Guarantors and The First National Bank of Chicago, as trustee.
As such counsel, we have made such legal and factual examinations and
inquiries as we have deemed necessary or appropriate for purposes of this
opinion. 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. As to facts material to the opinions, statements and assumptions
expressed herein, we have, with your consent, relied upon oral or written
statements and representations of officers and other representatives of the
Company, the Guarantors and others. In addition, we have obtained and relied
upon such certificates and assurances from public officials as we have deemed
necessary.
We are opining herein as to the effect on the subject transaction only of
the internal laws of the State of New York and the California Corporations Code
and the General Corporation Law of the State of Delaware, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of any
other laws.
Based upon the foregoing, we are of the opinion that, upon issuance thereof
in the manner described in the Registration Statement, the Exchange Notes will
be legally valid and binding obligations of the Company and the Guarantees will
be legally valid and binding obligations of the respective Guarantors.
The opinion rendered above is subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and 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 concerning the enforceability of the waiver of rights or
defenses contained in Section 515 of the Indenture.
<PAGE> 2
Beckman Coulter, Inc.
April 16, 1998
Page 2
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to, or relied upon by
any other person, firm or corporation for any purpose, without our prior written
consent.
We consent to your filing this opinion as an exhibit to the Registration
Statement.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
Exhibit 8.1
LATHAM & WATKINS
Attorneys at Law
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Telephone (213) 485-1234
Fax (213) 891-8763
April 16, 1998
Beckman Coulter, Inc.
2500 Harbor Boulevard
Fullerton, CA 92834
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
In connection with the registration by Beckman Coulter, Inc., a
Delaware corporation (the "Company"), of $160,000,000 aggregate principal amount
of its 7.10% Senior Notes due 2003 (the "2003 Notes") and $240,000,000 aggregate
principal amount of its 7.45% Senior Notes due 2008 (the "2008 Notes" and,
together with the 2003 Notes, the "Notes") under the Securities Act of 1933, as
amended (the "Act"), on Form S-4 filed with the Securities and Exchange
Commission (the "Commission") on April 17, 1998 (File No. 333-_____) (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below. The Notes will be issued pursuant to an indenture (the
"Indenture"), dated as of March 4, 1998, between the Company, The First National
Bank of Chicago, as trustee, Beckman Instruments (Naguabo) Inc., Hybritech
Incorporated, SmithKline Diagnostics, Inc., Coulter Corporation and Coulter
Leasing Corporation.
In our capacity as your special counsel, we have made such legal
and factual examinations and inquiries as we have deemed necessary or
appropriate for purposes of this opinion. 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. In addition, we have obtained and relied
upon such certificates and assurances from public officials as we have deemed
necessary.
<PAGE> 2
Beckman Instruments, Inc.
April 16, 1998
Page 2
Subject to the foregoing and the other matters set forth herein,
it our opinion that, as of the date hereof:
Based on the facts set forth in the Registration Statement, it is
our opinion that the statements in the prospectus under the heading "Certain
United States Federal Tax Considerations," in so far as they describe provisions
of United States federal income tax law, are accurate in all material respects.
This opinion is based on various statutory provisions, regulations promulgated
thereunder and interpretations thereof by the Internal Revenue Service and
courts having jurisdiction over such matters, all of which are subject to change
either prospectively or retroactively. Any variation or difference in the facts
as incorporated herein might affect the conclusions stated herein.
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 "Certain United States Federal Tax Considerations" therein.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 12.1
BECKMAN COULTER, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
PRO-FORMA YEAR ENDED DECEMBER 31,
YEAR ENDED ---------------------------------------
DECEMBER 31, 1997 1997 1996 1995 1994 1993
----------------- ------ ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
(Loss) earnings before income taxes 28.9 (251.9) 111.5 72.4 74.9 (53.9)
Add:
Interest expense 91.3 29.4 18.1 13.4 13.2 12.7
Portion of rents representative of interest factor 14.9 10.6 9.9 9.7 8.2 10.4
----- ------ ----- ---- ---- -----
(Loss) earnings as adjusted 135.1 (211.9) 139.5 95.5 96.3 (30.9)
Fixed charges:
Interest expense 91.3 29.4 18.1 13.4 13.2 12.7
Portion of rents representative of interest factor 14.9 10.6 9.9 9.7 8.2 10.4
----- ------ ----- ---- ---- -----
Total fixed charges 106.2 40.0 28.0 23.1 21.4 23.1
----- ------ ----- ---- ---- -----
Ratio of earnings to fixed charges 1.3 --* 5.0 4.1 4.5 --*
===== ====== ===== ==== ==== =====
</TABLE>
* Earnings were inadequate to cover fixed charges for the years ended December
31, 1997 and 1993. The coverage deficiencies were approximately $251.9 and
$53.9, respectively.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Stockholders and Board of Directors
Beckman Coulter, Inc.:
We consent to the inclusion of our report dated January 23, 1998, except as to
note 16 which is as of March 4, 1998, with respect to the consolidated balance
sheets of Beckman Coulter, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, and to the reference to our firm under the heading
"Independent Public Accountants" in the prospectus.
KPMG Peat Marwick LLP
Orange County, California
April 17, 1998
<PAGE> 1
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our report and to all references to our Firm included in this S-4 Registration
Statement of Beckman Instruments, Inc.
ARTHUR ANDERSEN LLP
Miami, Florida,
April 14, 1998
<PAGE> 1
EXHIBIT 23.3
The Stockholders and the Board of Directors
Beckman Coulter, Inc.:
We consent to the inclusion of our report dated December 12, 1997, except as to
note R which is as of March 4, 1998, with respect to the consolidated statements
of operations, stockholders' equity, and cash flows for the seven months ended
October 31, 1997 of Coulter Corporation and subsidiaries, which report appears
in the Form S-4 of Beckman Coulter, Inc. dated April 17, 1998, and to the
reference to our firm under the heading "Independent Certified Public
Accountants" in the prospectus.
KPMG Peat Marwick LLP
Miami, Florida,
April 17, 1998
<PAGE> 1
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)
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-------------------------
BECKMAN COULTER, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1040600
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2500 HARBOR BOULEVARD
FULLERTON, CALIFORNIA 92834
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEBT SECURITIES
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
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 Currency, 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 THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the trustee to
commence business.*
3. A copy of the authorization of the trustee to exercise
corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by Section 321(b) of
the Act.
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.
2
<PAGE> 3
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, 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 Chicago
and the State of Illinois, on this 19th day of March, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
March 19, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between Beckman
Instruments, Inc. and The First National Bank of Chicago, the undersigned, in
accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended,
hereby consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission upon its
request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 5
EXHIBIT 7
<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31,1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN C400
THOUSANDS RCFD BIL MIL THOU
----------------- ------ ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).......... 0081 4,267,336 1.a.
b. Interest-bearing balances(2)................................... 0071 6,893,837 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)... 1773 5,691,722 2.b.
3. Federal funds sold and securities purchased under agreements to
resell 1350 6,339,940 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)..................................................... RCFD 2122 25,202,984 4.a.
b. LESS: Allowance for loan and lease losses.............. RCFD 3123 419,121 4.b.
c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)................... 2125 24,783,863 4.d.
5. Trading assets (from Schedule RD-D)....................... 3545 6,703,332 5.
6. Premises and fixed assets (including capitalized leases).. 2145 743,426 6.
7. Other real estate owned (from Schedule RC-M)..... 2150 7,727 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................ 2130 134,959 8.
9. Customers' liability to this bank on acceptances outstanding 2155 644,340 9.
10. Intangible assets (from Schedule RC-M).................... 2143 268,501 10.
11. Other assets (from Schedule RC-F)......................... 2160 2,004,432 11.
12. Total assets (sum of items 1 through 11).................. 2170 58,483,415 12.
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits. (2)
Includes time certificates of deposit not held for trading.
5
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date:09/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................... RCON 2200 21,756,846 13.a
(1) Noninterest-bearing(1).................... RCON 6631 9,197,227 13.a.1
(2) Interest-bearing.......................... RCON 6636 559,619 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)... RCFN 2200 14,811,410 13.b.
(1) Noninterest bearing....................... RCFN 6631 332,801 13.b.1
(2) Interest-bearing.......................... RCFN 6636 14,478,609 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: RCFD 2800 4,535,422 14
15. a. Demand notes issued to the U.S. Treasury RCON 2840 43,763 15.a
b. Trading Liabilities(from Schedule RC-D)..............................................RCFD 3548 6,523,239 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less RCFD 2332 1,360,165 16.a
b. With a remaining maturity of than one year through three years. A547 576,492 16.b
. c. With a remaining maturity of more than three years ................................ A548 703,981 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding RCFD 2920 644,341 18
19. Subordinated notes and debentures (2)... RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G)........... RCFD 2930 1,322,077 20
21. Total liabilities (sum of items 13 through 20)... RCFD 2948 53,987,736 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.... RCFD 3838 0 23
24. Common stock..................................... RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,999,001 25
26. a. Undivided profits and capital reserves........ RCFD 3632 1,273,239 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.................................... RCFD 8434 24,096 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (1,515) 27
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,495,679 28
29. Total liabilities and equity capital (sum of items 21 and 28)...... RCFD 3300 58,483,415 29
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A.. . ....RCFD 6724 . M.1
1 = Independent audit of the bank conducted in accordance 4. = Directors'
examination of the bank performed by other with generally accepted auditing
standards by a certified external auditors (may be required by state
chartering public accounting firm which submits a report on the
bankauthority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required
by state chartering authority)
</TABLE>
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
6
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
7.10% SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003
AND
7.45% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008
OF
BECKMAN COULTER, INC.
PURSUANT TO THE PROSPECTUS, DATED APRIL , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1998 UNLESS EXTENDED.
To: The First National Bank of Chicago, The Exchange Agent
By Registered or Certified Mail:
The First National Bank of Chicago
One North State Street
9th Floor
Chicago, Illinois 60602
By Overnight Delivery:
The First National Bank of Chicago
One North State Street
9th Floor
Chicago, Illinois 60602
By Hand Delivery:
The First National Bank of Chicago
One North State Street
9th Floor
Chicago, Illinois 60602
By Facsimile:
(312) 407-4656
Confirm by Telephone:
(312) 407-2068
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN TO THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt of the Prospectus dated April
, 1998 (the "Prospectus") of Beckman Coulter, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitute the Company's offer (the "Exchange
Offer") to exchange (i) its outstanding 7.10% Senior Notes due 2003 (the
"Initial 2003 Notes"), of which an aggregate of $160,000,000 in principal amount
is outstanding, for an equal principal amount of newly issued 7.10% Senior Notes
due 2003 (the "Exchange 2003 Notes"), and (ii) its outstanding 7.45% Senior
Notes due 2008 (the "Initial 2008 Notes" and together with the Initial 2003
Notes, the "Initial Notes"), of which an aggregate of $240,000,000 in principal
amount is outstanding, for an equal principal amount of newly issued 7.45%
Senior Notes due 2008 (the "Exchange 2008 Notes" and together with the Exchange
2003 Notes, the "Exchange Notes"), which Exchange Notes have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which the Prospectus is a part. Capitalized terms
used but not defined herein have the meanings ascribed to them in the
Prospectus.
This Letter of Transmittal is to be completed by a Holder of Initial Notes
if (i) certificates representing the Initial Notes are to be forwarded herewith
or (ii) delivery of Initial Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company
("DTC"). Holders whose Initial Notes are not immediately available, or who
cannot deliver their Initial Notes or who
<PAGE> 2
are unable to complete the procedure for book-entry transfer of their Initial
Notes on a timely basis (a "Book-Entry Confirmation") must tender their Initial
Notes and this Letter of Transmittal in accordance with the guaranteed delivery
procedures set forth under the heading "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Initial Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Initial Notes must
complete this Letter of Transmittal in its entirety.
2
<PAGE> 3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
- --------------------------------------------------------------------------------
BOX 1
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF HOLDER(S) OF PRINCIPAL AMOUNT TENDERED** (MUST
INITIAL NOTES CERTIFICATE REPRESENTED BY BE IN INTEGRAL
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S)* MULTIPLE OF $1,000)
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF INITIAL 2003 NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF INITIAL 2008 NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer (see below).
** Unless otherwise indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Initial Notes
will be deemed to have tendered the entire aggregate principal amount set forth in the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate
numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal. The
minimum permitted tender is $1,000 in principal amount of Initial Notes. All other tenders must be in integral
multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS DEFINED
HEREIN) ONLY):
Name of Tendering Institution
Account Number ________________________ Transaction Code Number
[ ] CHECK HERE IF TENDERED INITIAL 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 Holders
Date of Execution of Notice of Guaranteed Delivery
Window Ticket Number (if available)
Name of Institution which Guaranteed Delivery
Account Number (if delivered by book-entry transfer)
3
<PAGE> 4
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer
described in the Prospectus and this Letter of Transmittal, the undersigned
hereby tenders to the Company the principal amount of Initial Notes indicated in
Box 1 above. Subject to, and effective upon, the acceptance for exchange of the
tendered Initial Notes, the undersigned hereby exchanges, assigns, and transfers
to, or upon the order of the Company, all right, title, and interest in, to and
under the tendered Initial Notes. Each DTC participant transmitting by means of
DTC a computer-generated message forming part of a Book-Entry Confirmation, on
behalf of itself and the beneficial owner of the Initial Notes tendered thereby,
acknowledges receipt of the Prospectus and this Letter of Transmittal and agrees
to be bound by the terms and conditions of the Exchange Offer as set forth in
the Prospectus and this Letter of Transmittal.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the tendered
Initial Notes and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances, and
adverse claims when the tendered Initial Notes are acquired by the Company as
contemplated herein. The undersigned and each beneficial owner of Initial Notes
tendered by the undersigned will, upon request, execute and deliver any
additional documents reasonably requested by the Company as necessary or
desirable to complete and give effect to the transactions contemplated hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the tendered Initial Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the tendered Initial Notes to the Company or cause
ownership of the tendered Initial Notes to be transferred to, or upon the order
of, the Company, and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of the tendered
Initial Notes pursuant to the Exchange Offer, and (ii) receive all benefits and
otherwise exercise all rights of beneficial ownership of the tendered Initial
Notes, all in accordance with the terms of the Exchange Offer.
The undersigned also acknowledges that this Exchange Offer is being made by
the Company in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "Commission"), as set forth in certain no-action
letters to third parties, that the Exchange Notes issued in exchange for the
tendered Initial Notes pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by Holders thereof (other than a broker-dealer,
as set forth below, or any such Holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
Holder's business and such Holders have no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
such Exchange Notes. By tendering, each Holder of Initial Notes represents to
the Company that (i) any Exchange Notes acquired in exchange for Initial Notes
tendered hereby will have been acquired in the ordinary course of business of
the undersigned or such other beneficial owner(s) ("Beneficial Owner(s)")
receiving such Exchange Notes; (ii) neither the undersigned nor any Beneficial
Owner has an arrangement with any person to participate in the distribution of
such Exchange Notes; (iii) the undersigned and each Beneficial Owner acknowledge
and agree that any person who is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended (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 the
Securities Act in connection with a secondary resale transaction of the Exchange
Notes or interests therein 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
4
<PAGE> 5
clause (iii) above and any resales of Exchange Notes or interests therein
obtained by such Holder in exchange for Initial Notes or interests therein
originally acquired by such Holder directly from the Company should be covered
by an effective registration statement containing the selling security Holder
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 in Rule 405 under the Securities Act, of the Company. By
tendering, each Holder of Initial Notes that is a broker-dealer (whether or not
it is also an "affiliate") that will receive Exchange Notes for its own account
pursuant to the Exchange Offer, represents that the Initial Notes to be
exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities, and acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the Holder will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that tenders of Initial Notes pursuant to the
procedures described under the captions "The Exchange Offer--Procedures for
Tendering" in the Prospectus 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, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders." All authority herein conferred or agreed
to be conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon the heirs, representatives, successors,
and assigns of the undersigned and such Beneficial Owner(s).
If any tendered Initial Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Initial
Notes will be returned, without expense, to the undersigned at the address shown
below or at such different address as may be indicated herein under "Special
Issuance Instructions" as promptly as practicable after the Expiration Date.
Unless otherwise indicated under "Special Issuance Instructions," the
Company will issue the certificates representing the Exchange Notes issued in
exchange for the Initial Notes accepted for exchange and return any Initial
Notes not tendered or not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions," the
Company will send the certificates representing the Exchange Notes issued in
exchange for the Initial Notes accepted for exchange and any certificates for
Initial Notes not tendered or not 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, the Company will issue the
certificates representing the Exchange Notes issued in exchange for the Initial
Notes accepted for exchange in the name(s) of, and return any Initial Notes not
tendered or not exchanged, and send said certificates 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 Initial Notes from the name of the registered
Holder(s) hereof if the Company does not accept for exchange any of the tendered
Initial Notes.
Holders of Initial Notes who wish to tender their Initial Notes and (i)
whose Initial Notes are not immediately available, or (ii) who cannot deliver
their Initial Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date (or who cannot comply
with the book-entry transfer procedure on a timely basis) may tender their
Initial Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the heading "The Exchange Offer--Guaranteed Delivery
Procedures."
IN ORDER TO VALIDLY TENDER INITIAL NOTES FOR EXCHANGE, A HOLDER OF INITIAL
NOTES MUST COMPLETE, EXECUTE AND DELIVER THIS LETTER OF TRANSMITTAL.
5
<PAGE> 6
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
BOX 2
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
- -------------------------------------------------------------------------------------------------------------------
X SIGNATURE GUARANTEE
(Signature(s) of Registered Holder(s) or (If required by Instruction 5)
Authorized Signatory) X
Date: (Authorized Signature)
X
(Signature(s) of Registered Holder(s) or (Name)
Authorized Signatory)
Date: (Title)
The above lines must be signed by the registered
Holder(s) of Initial Notes exactly as their name(s) (Name of Firm)
appear(s) on the Initial Notes or by person(s) Date:
authorized to become registered Holder(s) by a
properly completed bond power from the registered
Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Initial Notes to which
this Letter of Transmittal relate are held of record
by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is
by a trustee, executor, administrator, guardian,
attorney-in-fact, officer, or other person acting in
a fiduciary or representative capacity, such person
must (i) set forth his or her full title below and
(ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's
authority so to act. See Instruction 5.
Name(s):
Capacity:
Street Address:
(include zip code)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
Please Complete Substitute Form W-9
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
BOX 3
(SEE INSTRUCTIONS 5 AND 6)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY (i) if To be completed ONLY if certificates
certificates for Initial Notes in a for Initial Notes in a principal amount
principal amount not accepted are to be not accepted issued in the name of the
issued in the name of someone other person whose signature appears on the
than the person whose signature appears face of this Letter of Transmittal are
on the face of this Letter of to be sent to someone other than such
Transmittal or (ii) if Initial Notes person or to such person at an address
tendered by book-entry transfer which other than that shown in Box 1 entitled
are not accepted are to be returned by "Description of Initial Notes."
credit to an account maintained at DTC.
Name Name
- --------------------------------------- ---------------------------------------
(Please Print) (Please Print)
Address Address
======================================= =======================================
(Include Zip Code) (Include Zip Code)
- --------------------------------------- ---------------------------------------
(Tax Identification or Social Security (Tax Identification or Social Security
No.) No.)
Credit unaccepted Initial Notes
tendered by book entry transfer to the
DTC account set forth below:
- ---------------------------------------
(DTC Account Number)
</TABLE>
7
<PAGE> 8
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THE INITIAL NOTES AND THIS LETTER OF TRANSMITTAL. This
Letter of Transmittal is to be completed by a Holder of Initial Notes if (i)
certificates representing the Initial Notes are to be forwarded herewith or (ii)
delivery of Initial Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at DTC pursuant to the procedures set forth
under the heading "The Exchange Offer--Book-Entry Transfer" in the Prospectus.
Certificates for any physically tendered Initial Notes, or any Book-Entry
Confirmation, as applicable, as well as a properly completed and duly executed
copy of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the cover of this Letter of Transmittal prior to
5:00 p.m., New York City time, on the Expiration Date. The method of delivery of
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the Holder, and the delivery will be deemed
made only when actually received by the Exchange Agent. If delivery is by mail,
it is recommended that the Holder use properly insured, registered mail with
return receipt requested. Instead of delivery by mail, it is recommended that
the Holder use an overnight or hand delivery service. In all cases sufficient
time should be allowed to assure timely delivery. NO LETTER OF TRANSMITTAL OR
INITIAL NOTES SHOULD BE SENT TO THE COMPANY.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Initial Notes and (i) whose Initial Notes are not immediately available or (ii)
who cannot deliver their Initial Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Initial Notes according to the guaranteed
delivery procedures set forth below (if this Letter of Transmittal is being
delivered). Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., or is a commercial bank
or trust company having an office or correspondent in the United States, or is
otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act (an "Eligible Institution"), and the Notice of Guaranteed
Delivery must be signed by the Holder; (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Holder and the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of Initial Notes, the certificate number or numbers of the Initial Notes,
and, in each case, the principal amount of the Initial Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five New
York Stock Exchange ("NYSE") trading days after the Expiration Date, either a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), together with the certificate(s) representing the Initial Notes in
proper form for transfer or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and (iii) such properly
executed Letter of Transmittal (or facsimile thereof), as well as the
certificate(s) representing all tendered Initial Notes in proper form for
transfer and all other documents required by the Letter of Transmittal are
received by the Exchange Agent within five NYSE trading days after the
Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Initial Notes
according to the guaranteed delivery procedures set forth above.
3. TENDER BY HOLDER. Only a Holder in whose name Initial Notes are
registered on the books of the registrar (or the legal representative or
attorney-in-fact of such registered Holder) may tender such Initial Notes in the
Exchange Offer. Any beneficial owner of Initial Notes who is not the registered
Holder should arrange with the registered Holder to execute and deliver this
Letter of Transmittal on his or her behalf or must, prior to completing and
executing this Letter of Transmittal and delivering the Initial Notes, either
make appropriate arrangements to register ownership of the Initial Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder.
8
<PAGE> 9
4. PARTIAL TENDERS. Tenders of Initial Notes will be accepted only in
integral multiples of $1,000 principal amount. If less than the entire number of
Initial Notes are tendered, the tendering Holder should fill in the number of
Initial Notes tendered in the column labeled "Principal Amount of Initial Notes
Tendered" of Box 1 above. The entire number of Initial Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire number of all Initial Notes indicated in Box 1 above is not
tendered, Initial Notes in a principal amount equal to Initial Notes not
tendered as well as Exchange Notes exchanged for any Initial Notes tendered will
be delivered to the address or account, as applicable, indicated in Box 1,
unless a different address or account, as applicable, is provided in Box 3 of
this Letter of Transmittal.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; ENDORSEMENTS; GUARANTEE OF
SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered Holder(s) of the Initial Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the Initial Notes
without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of Initial Notes tendered and the certificate(s) for
Exchange Notes issued in exchange therefor is to be issued (or any untendered
principal amount of Initial Notes is to be reissued) to the registered Holder,
said Holder need not and should not endorse any certificates representing the
tendered Initial Notes, nor provide a separate bond power. In any other case,
such Holder must either properly endorse certificates representing the Initial
Notes tendered or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder(s) of any Initial Notes listed, this Letter of
Transmittal must be accompanied by appropriate bond powers signed as the name of
the registered Holder(s) appear(s) on the face of the Initial Notes without
alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) or any certificates
representing the Initial Notes or bond power are 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 Letter
of Transmittal.
Signatures on bond powers required by this Instruction 5 must be guaranteed
by an Eligible Institution. Except as otherwise provided below, all signatures
on this Letter of Transmittal must be guaranteed by an Eligible Institution that
is a member of a recognized signature guarantee medallion program (an "Eligible
Program"). Signatures on this Letter of Transmittal need not be guaranteed if
(a) this Letter of Transmittal is signed by the registered Holder(s) of the
Initial Notes tendered herewith and such Holder(s) has not completed the box set
forth herein entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" or (ii) if such Initial Notes are tendered for
the account of an Eligible Institution. IN ALL OTHER CASES, ALL SIGNATURES MUST
BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders of
Initial Notes should indicate, in the applicable box or boxes, the name and
address to which Exchange Notes and/or substitute Initial Notes for principal
amounts not tendered or not accepted for exchange are to be issued or sent, if
different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Initial Notes to it or its order pursuant
to the Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Initial Notes to the Company or its order
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other person) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering Holder.
9
<PAGE> 10
8. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Initial
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Initial Notes not validly tendered or any Initial Notes the
Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of
Initial Notes as to any ineligibility of any Holder who seeks to tender Initial
Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Initial Notes must
be cured within such time as the Company shall determine. The Company will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of Initial Notes, but shall not incur any liability for
failure to give such notification.
9. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions of the Exchange Offer as enumerated
in the Prospectus in the case of any tendered Initial Notes.
10. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Initial Notes or transmittal of this Letter of Transmittal
will be accepted.
11. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES. Any tendering
Holder whose Initial Notes have been mutilated, lost, stolen, or destroyed
should contact the Exchange Agent at the address indicated on the cover of this
Letter of Transmittal for further instruction.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address on the cover of this Letter of
Transmittal. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
13. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH A BOOK-ENTRY
CONFIRMATION AND ANY OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY, AS APPLICABLE) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON OR PRIOR TO THE EXPIRATION DATE.
10
<PAGE> 11
IMPORTANT TAX INFORMATION
Under current federal income tax law, a Holder whose tendered Initial Notes
are accepted for exchange may be subject to backup withholding unless the Holder
provides 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 of
Initial Notes is awaiting a TIN) and that (A) the Holder of Initial Notes 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 interest or dividends or
(B) the Internal Revenue Service has notified the Holder of Initial Notes 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 a
$50 penalty imposed by the Internal Revenue Service. In addition, delivery to
such Holder of the Exchange Notes may be subject to backup withholding.
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 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.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the social security
number or employer identification number of the record owner of the Initial
Notes. If the Initial Notes are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
11
<PAGE> 12
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
PAYER'S NAME: THE FIRST NATIONAL BANK OF CHICAGO
- ---------------------------------------------------------------------------------------------
Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX
SUBSTITUTE AT RIGHT AND CERTIFY BY SIGNING AND DATING
FORM W-9 BELOW
-----------------------------------------------------
- -----------------------------------------------------------------------------------------
TIN
Social Security Number or
Employer Identification Number
-----------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE Name
(Please Print)
PAYOR'S REQUEST FOR TAXPAYER --------------------------------------------------------
IDENTIFICATION NUMBER (TIN) Address
AND CERTIFICATION --------------------------------------------------------
City State Zip
Code
- --------------------------------------------------------------------------------------------------------
Part 2 --
Awaiting TIN [ ]
Please see below.
- --------------------------------------------------------------------------------------------------------
Part 3 -- CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct taxpayer identification number (or a TIN
has not been issued to me but I have mailed or delivered an application to receive a
TIN or intend to do so in the near future),
(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 a failure to report all interest or dividends or the IRS has notified me
that I am no longer subject to backup withholding, and
(3) all other information provided on this form is true, correct and complete.
Signature Date __________________
- --------------------------------------------------------------------------------------------------------
</TABLE>
Certificate Instructions -- You must cross out item (2) in Part 3 above if you
have been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS stating that
you are no longer subject to backup withholding, do not cross out item (2) in
Part 3 above.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
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, 20% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------
Signature Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 20% 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> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payor.
<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 of
(joint account) the account or, if
combined funds, the
first individual on
the account1
3. Custodian account of a minor The minor2
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee1
trust account (grantor is
also trustee)
b. So-called trust account that The actual owner1
is not a legal or valid
trust under State law
5. Sole proprietorship account The owner3
<CAPTION>
- ---------------------------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ---------------------------------------------------------------------------------
<S> <C>
6. A valid trust, estate The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the legal
entity itself is not
designated in the account
title)4
7. Corporate account The corporation
8. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
9. Partnership account The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the The public entity
Department of 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.
4 List first and circle the name of the valid 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> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number 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 exempt from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under 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 dealer in securities or commodities required to register 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).
- - A trust exempt from tax under Section 644 or described in Section 4947.
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A foreign central bank of issue.
- - Payments made to a middleman known in the investment community as a nominee
or listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include 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 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 exempt interest dividends under
Section 852).
- - Payments described in Section 6049(b)(5) to nonresident aliens.
- - Payments of tax-free covenant bonds under Section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see 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 the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 20% of certain
taxable 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 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) FAILURE TO REPORT CERTAIN PAYMENTS. -- If you fail to include properly on
your tax return certain items reported to the IRS such failure will be treated
as being due to negligence and will be subject to a penalty of 5% on any portion
of an under payment of tax attributable to that failure unless there is clear
and convincing evidence to the contrary.
(3) CIVIL 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.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 15
NOTICE OF GUARANTEED DELIVERY
OF
7.10% SENIOR NOTES DUE 2003
AND
7.45% SENIOR NOTES DUE 2008
BECKMAN COULTER, INC.
PURSUANT TO THE PROSPECTUS DATED APRIL , 1998
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY HOLDER OF
7.10% SENIOR NOTES DUE 2003 (THE "INITIAL 2003 NOTES") AND ANY HOLDER OF 7.45%
SENIOR NOTES DUE 2008 (THE "INITIAL 2008 NOTES" AND TOGETHER WITH THE INITIAL
2003 NOTES, THE "INITIAL NOTES") OF BECKMAN COULTER, INC., A DELAWARE
CORPORATION (THE "COMPANY"), WHO WISHES TO TENDER HIS OR HER INITIAL NOTES
PURSUANT TO THE COMPANY'S EXCHANGE OFFER, AS DEFINED IN THE PROSPECTUS (THE
"PROSPECTUS"), DATED APRIL , 1998 AND (i) WHOSE CERTIFICATES REPRESENTING
INITIAL NOTES ARE NOT IMMEDIATELY AVAILABLE, (ii) WHO CANNOT DELIVER HIS OR HER
CERTIFICATES OR ANY OTHER DOCUMENT REQUIRED BY THE LETTER OF TRANSMITTAL ON OR
BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE (AS DEFINED IN THE
PROSPECTUS) OR (iii) WHO CANNOT COMPLETE THE PROCEDURE FOR BOOK-ENTRY TRANSFER
ON A TIMELY BASIS. SUCH FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR
HAND DELIVERY TO THE EXCHANGE AGENT, SEE "THE EXCHANGE OFFER--GUARANTEED
DELIVERY PROCEDURES" IN THE PROSPECTUS.
To: The First National Bank of Chicago, The Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
The First National Bank of Chicago The First National Bank of Chicago
One North State Street One North State Street
9th Floor 9th Floor
Chicago, Illinois 60602 Chicago, Illinois 60602
By Overnight Delivery: By Facsimile:
(312) 407-4656
The First National Bank of Chicago
One North State Street Confirm by Telephone:
9th Floor
Chicago, Illinois 60602 (312) 407-2068
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN TO ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON
THE LETTER OF TRANSMITTAL.
<PAGE> 16
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions of the Exchange Offer as set forth in the Prospectus and the
related Letter of Transmittal, receipt of which is hereby acknowledged, the
principal amount of Initial 2003 Notes and Initial 2008 Notes specified below
pursuant to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The
undersigned hereby tenders the Initial Notes listed below:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
INITIAL 2003 NOTES CERTIFICATE NUMBERS
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INITIAL 2008 NOTES CERTIFICATE NUMBERS
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
If Initial Notes will be tendered by SIGN HERE
book-entry transfer: --------------------------------------------
Signature(s)
Name of Tendering Institution: --------------------------------------------
- -------------------------------------------- Name(s) (Please Print)
--------------------------------------------
Account No. --------------------------------------------
at The Depository Trust Company Address
--------------------------------------------
Zip Code
--------------------------------------------
Area Code and Telephone No.
Date:
- ---------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 17
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby (a) represents that the above named person(s) "own(s)"
the Initial Notes tendered hereby within the meaning of Rule 14e-4 under the
Exchange Act, (b) represents that such tender of Initial Notes complies with
Rule 14e-4 under the Exchange Act and (c) guarantees that delivery to the
Exchange Agent of the certificate(s) representing the Initial Notes in proper
form for transfer or a Book-Entry Confirmation, pursuant to the procedures for
book-entry transfer set forth in the Prospectus, and delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other documents required by the
Letter of Transmittal, will be received by the Exchange Agent by 5:00 p.m., New
York City time, on the third New York Stock Exchange trading day after the
Expiration Date.
SIGN HERE
------------------------------------
Name of Firm
------------------------------------
Authorized Signature
------------------------------------
Name (please print)
------------------------------------
Title
------------------------------------
Address
------------------------------------
Zip Code
------------------------------------
Area Code and Telephone No.
Date:
DO NOT SEND INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF INITIAL NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE> 18
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 its address 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, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, it is recommended that
the Holder use properly insured, registered mail with return receipt requested.
Instead of delivery by mail, it is recommended that the Holder use an overnight
or hand delivery service. In all cases sufficient time should be allowed to
assure timely delivery. For a full description of the guaranteed delivery
procedures, see the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures." 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 registered
Holder(s) of the Initial Notes referred to herein, the signature must correspond
with the name(s) as written on the face of the Initial Notes without alteration,
enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered Holder(s) of any Initial Notes listed, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers signed as the name of
the registered Holder(s) appear(s) on the face of the Initial 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 and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 19
OFFER TO EXCHANGE
7.10% SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003
AND
7.45% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008
OF
BECKMAN COULTER, INC.
To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing herewith the materials listed below relating to the offer
(the "Exchange Offer") by Beckman Coulter, Inc. (the "Company") to exchange (i)
its outstanding 7.10% Senior Notes due 2003 (the "Initial 2003 Notes"), of which
an aggregate of $160,000,000 in principal amount is outstanding, for an equal
principal amount of newly issued 7.10% Senior Notes due 2003 (the "Exchange 2003
Notes"), and (ii) its outstanding 7.45% Senior Notes due 2008 (the "Initial 2008
Notes" and together with the Initial 2003 Notes, the "Initial Notes"), of which
an aggregate of $240,000,000 in principal amount is outstanding, for an equal
principal amount of newly issued 7.45% Senior Notes due 2008 (the "Exchange 2008
Notes" and together with the Exchange 2003 Notes, the "Exchange Notes"), which
Exchange Notes have been registered under the Securities Act of 1933, as
amended, upon the terms and subject to the conditions set forth in the
Prospectus, dated April , 1998 (the "Prospectus"), and the related Letter of
Transmittal (the "Letter of Transmittal"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you hold
Initial Notes registered in your name or in the name of your nominee,
with space provided for obtaining such client's instruction with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE
OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS
EXTENDED (THE "EXPIRATION DATE").
To tender Initial Notes, certificates for Initial Notes or a Book-Entry
Confirmation, a duly executed and properly completed Letter of Transmittal or a
facsimile thereof and any other required documents must be received by the
Exchange Agent as provided in the Prospectus and the Letter of Transmittal.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Initial Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Initial Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from The First
National Bank of Chicago, One North State Street, 9th Floor, Chicago, Illinois
60602, (312) 407-2068.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
AS THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE> 20
OFFER TO EXCHANGE
7.10% SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003
AND
7.45% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008
OF
BECKMAN COULTER, INC.
To Our Clients:
We are enclosing herewith a Prospectus, dated April , 1998 (the
"Prospectus") and a related Letter of Transmittal (the "Letter of Transmittal")
relating to the offer (the "Exchange Offer") by Beckman Coulter, Inc. (the
"Company") to exchange (i) its outstanding 7.10% Senior Notes due 2003 (the
"Initial 2003 Notes"), of which an aggregate of $160,000,000 in principal amount
is outstanding, for an equal principal amount of newly issued 7.10% Senior Notes
due 2003 (the "Exchange 2003 Notes"), and (ii) its outstanding 7.45% Senior
Notes due 2008 (the "Initial 2008 Notes" and together with the Initial 2003
Notes, the "Initial Notes"), of which an aggregate of $240,000,000 in principal
amount is outstanding, for an equal principal amount of newly issued 7.45%
Senior Notes due 2008 (the "Exchange 2008 Notes" and together with the Exchange
2003 Notes, the "Exchange Notes"), which Exchange Notes have been registered
under the Securities Act of 1933, as amended, upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
These materials are being forwarded to you as the beneficial owner of
Initial Notes carried by us for your account or benefit but not registered in
your name. A tender of any Initial Notes may be made only by us as the
registered Holder and pursuant to your instructions. Therefore, the Company
urges beneficial owners of Initial 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 Initial Notes in the Exchange
Offer.
Accordingly, we request instructions as to whether you wish us to tender
any or all Initial 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
Initial Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN
ORDER TO PERMIT US TO TENDER INITIAL 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 , 1998, UNLESS EXTENDED.
If you wish to have us tender any or all of your Initial 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 Initial Notes held by us and registered in our name for
your account or benefit.
<PAGE> 21
INSTRUCTIONS
The undersigned hereby acknowledges receipt of your letter and enclosed
materials referred to therein relating to the Exchange Offer of Beckman
Instruments, Inc.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF INITIAL 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.
[ ] Please TENDER my Initial Notes held by you for the account or benefit of
the undersigned. I have identified on a signed schedule attached hereto
the principal amount of Initial Notes to be tendered if I wish to tender
less than all of my Initial Notes.
[ ] Please DO NOT TENDER any Initial Notes held by you for the account of the
undersigned.
<TABLE>
<S> <C>
Date:
-----------------------------------------------------
Signature(s):
-----------------------------------------------------
-----------------------------------------------------
Name(s) (please print)
</TABLE>
Unless a specific contrary instruction is given in a signed Schedule
attached hereto, your signature(s) hereon shall constitute an instruction to us
to tender all of your Initial Notes.
