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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1998
or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-1052
MILLIPORE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2170233
(State or Other Jurisdiction (I.R.S. Employer
of Identification No.)
Incorporation or Organization)
80 Ashby Road, Bedford, MA 01730
(Address of principal (Zip Code)
executive offices)
(781) 533-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which
Common Stock, $1.00 Par Value registered
New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of Form 10-K or any amendment
to this Form 10-K. [_]
As of February 26, 1999, the aggregate market value of the registrant's
voting stock held by non-affiliates of the registrant was approximately
$1,048,190,000 based on the closing price on that date on the New York Stock
Exchange.
As of February 26, 1999, 44,074,626 shares of the registrant's Common Stock
were outstanding.
Documents Incorporated by Reference
Document Incorporated into Form 10-K
Definitive Proxy Statement, Part III
dated March 19, 1999
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PART I
Item 1. Business.
The Company
Millipore Corporation was incorporated under the laws of Massachusetts on
May 3, 1954. Millipore is a market leader in the field of separations
technology and develops, manufactures and sells products which are used
primarily for the analysis, identification, monitoring and purification of
liquids and gasses. In addition, Millipore sells products to control critical
aspects of the manufacturing process for integrated circuits (semiconductors).
Millipore's separations products are based on a variety of membrane and other
technologies that effect separations through physical and chemical methods and
are applied primarily to biological and environmental laboratory research and
testing, to pharmaceutical and food and beverage research, manufacturing and
quality control and to the purification and control of process liquids and
gasses for integrated circuit ("IC") manufacturing operations. Millipore's IC
process control products use electro-mechanical, pressure differential and
related technologies to permit IC manufacturers to monitor and control the
flow and condition of process gasses used in the IC fabrication process.
Millipore is an integrated multinational manufacturer of these products.
Millipore's role as a market leader has been recognized by independent surveys
of filtration markets. Unless the context otherwise requires, the terms
"Millipore" or the "Company" mean Millipore Corporation and its subsidiaries.
Information About Operating Segments
Millipore operates in two business segments: Biopharmaceutical & Research
and Microelectronics. Millipore has traditionally organized its business and
management structures around the markets and customers which it serves. The
Biopharmaceutical & Research segment includes products and services sold to
pharmaceutical companies, biotechnology companies, food and beverage
companies, university and government laboratories and research institutes; the
Microelectronics segment includes products and services sold to semiconductor
fabrication companies as well as OEM and material suppliers to those
companies. While there is some overlap in the products sold to each business
segment, the economic environments in which these two segments operate are
distinct. The Biopharmaceutical and Research business segment is characterized
by customer needs for reliability and consistency of standardized products
used in validated production processes and for assured continuity and
comparability of analytical results; this segment has demonstrated relatively
stable patterns of revenue growth and profitability. While technical
innovation is important to the Biopharmaceutical and Research business
segment, the adoption of new technologies and products often requires that a
lengthy validation process be completed prior to adoption. On the other hand,
the Microelectronics business segment is characterized by rapid technological
change and economic cycles with dramatic shifts in revenue growth and decline
with corresponding impacts on profitability. During 1998 approximately 74% of
Millipore's net sales were made to customers in the Biopharmaceutical &
Research segment and approximately 26% to customers in the Microelectronics
segment. In addition, approximately 60% of Millipore's net sales were made to
customers outside the United States. Industry and geographic segment
information is discussed in Note Q to the Millipore Corporation Consolidated
Financial Statements (the "Financial Statements") included in Item 8 below,
which Note is hereby incorporated herein by reference.
Products, Technologies and Applications
Millipore sells more than 10,000 products. Most of the Company's products
are listed in its catalogs and are sold as standard items, systems or devices.
For special applications, the Company assembles custom products, usually based
upon standard modules and components. In certain instances, the Company also
designs and engineers process filtration systems and process chromatography
systems to meet specific needs of the customer. The Company's products also
include, in some cases, proprietary software designed to operate and/or
integrate certain of its other products or systems (particularly membrane
ultrafiltration and chromatography systems and gas monitoring equipment).
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Biopharmaceutical & Research Business Segment. The products that the Company
sells to customers in the Biopharmaceutical & Research business segment
include disc filters, OEM membranes, filter devices and ancillary equipment
and supplies, filter-based test kits, laboratory water purification systems,
cartridge filters and housings of various sizes and configurations, process
liquid chromatography systems and process filtration systems.
The principal separation technologies utilized by products sold to
Biopharmaceutical & Research segment customers are based on membrane filters
and on certain chemistries and resins as well as liquid chromatography.
Membranes are used to filter either the wanted or the unwanted particulate,
bacterial, molecular or viral entities from fluids. Some of the Company's
newer membrane materials also use affinity, ion-exchange or electrical charge
mechanisms to effect the desired separation. Membranes are incorporated into
both microfiltration and ultrafiltration devices, cartridges and modules of
different configurations to address a variety of customer fluid separation
needs. The Company's laboratory water purification products combine membrane,
resin and other separations technologies to provide ultrapure water for
critical applications.
Customers use the Company's products in the Biopharmaceutical & Research
segment to gain knowledge about a molecule, compound or micro-organism by
detecting, identifying and quantifying the relevant components of a fluid
sample. In addition Millipore products are used for the purification of small
and large volumes of critical fluids. The Company's products are also used by
pharmaceutical manufacturing and research operations to isolate and purify
specific components of fluid streams for analysis and to concentrate
identified compounds for further processing. The Company's laboratory water
purification products are used by customers to provide ultrapure water for
critical laboratory analysis and for clinical testing.
Microelectronics Business Segment. The products sold to customers in the
Microelectronics business segment include polymeric cartridge filters and
housings of various sizes, materials and configurations, metal filters,
precision liquid dispense filtration pumps, resin based gas purifiers and gas
monitors as well as mass flow controllers and pressure and vacuum control
products.
Membrane products sold to customers in the Microelectronics business segment
are based on essentially the same the membrane technologies described above
but with membranes and housings made from distinct polymers as required by the
nature of the liquids being purified. Gas purification and monitoring products
rely on resin based chemistries which react with process gasses to either
remove contaminants or to monitor the purity of the process gas. In addition,
the Company's IC process control products use thermal-dynamic, pressure
differential and electromechanical technologies to create pressurized or
vacuum environments to precisely measure and control the flow of IC process
gases.
The Company's separations products are used by Microelectronics customers in
manufacturing operations to remove contaminants in a process liquid stream and
to purify and precisely dispense process liquids during critical IC
fabrication operations. The Company's products are also used in process gas
applications to precisely monitor and control the purity of and rate at which
process gases are introduced into the IC process chamber, the conditions in
the chamber during processing and the rate at which the gas is evacuated from
the IC process chamber.
Customers and Markets
Within each customer group served by Millipore, the Company focuses its
sales efforts upon those segments where customers have specific requirements
which can be satisfied by the Company's products.
Biopharmaceutical & Research Business Segment. Major customer groups served
by this business segment include pharmaceutical/biotechnology and food and
beverage companies and government, university and private research and testing
analytical laboratories. The Company's products are used by the
pharmaceutical/biotechnology industry in sterilization, including virus
reduction, and sterility testing of products such as antibiotics, vaccines,
vitamins and protein solutions; concentration and fractionation of biological
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molecules such as vaccines and blood protein products; cell harvesting;
isolation and purification of compounds from complex mixtures and the
purification of water for laboratory use. The Company's membrane products also
play an important role in the development of new drugs by offering customers a
continuum of products capable of being scaled-up to match customer needs at
different stages during the development process from laboratory research
through full scale drug production. In addition, Millipore has developed and
is developing products for biopharmaceutical applications in order to meet the
purification requirements of the biotechnology industry. The Company also
sells its analytical products, filter cartridges and laboratory water
purification systems to chemical manufacturers and processors.
The Food and Beverage Industry uses the Company's products for quality
control and process applications principally to monitor for microbiological
contamination; and to prevent spoilage by removal of bacteria and yeast from
products such as wine, beer and bottled juices and water.
Universities, governments and private and corporate research and testing
laboratories, environmental science laboratories and regulatory agencies
purchase a wide range of the Company's products. Typical applications include:
purification of proteins; cell culture, and cell structure studies and
interactions; concentration of biological molecules; fractionation of complex
molecular mixtures; and collection of microorganisms. The Company's water
purification products are used extensively by these organizations to prepare
high purity water for sensitive assays and the preparation of tissue culture
media.
Sales to the Biopharmaceutical & Research Business Segment accounted for
approximately 74% of Millipore's 1998 consolidated sales and 65% of 1997
consolidated sales.
Microelectronics Business Segment. Major customer groups served by this
business segment include IC manufacturers and OEM manufacturers that sell a
variety of equipment used in the manufacture of ICs to IC manufacturers. IC
manufacturers use the Company's products to purify (by removing particles and
unwanted contaminating molecules), deliver, control and monitor the liquids
and gases used in the manufacturing processes of semiconductors and other
microelectronics components. The Company's mass flow and pressure control
products and precision liquid dispense filtration products are sold to OEM
capital equipment suppliers to semiconductor manufacturers as well as directly
to manufacturers of ICs. Sales to the Microelectronics business segment
accounted for approximately 26% of Millipore's 1998 consolidated sales as
contrasted with 35% of 1997 consolidated sales. As noted above, this business
segment has experienced historic volatility, and the effect of such volatility
has, in the past, affected Millipore's sales growth.
While no single customer is material to the Company taken as a whole, the
Microelectronics business segment does rely on a relatively narrow group of
customers, some of whom purchase significant quantities of the Company's
products.
Sales and Marketing
The Company sells its products to both business segments within the United
States primarily to end users through its own direct sales force and, in the
case of analytical products, to a limited extent through an independent
distributor. The Company sells its products to both business segments in
international markets through the sales forces of its subsidiaries and
branches located in more than 30 major industrialized and developing countries
as well as through independent distributors in other parts of the world. As of
December 31, 1998, the Company's marketing, sales and service forces consisted
of approximately 915 employees worldwide of which 819 were employed in the
Biopharmaceutical and Research Business Segment and 96 were employed in the
Microelectronics Business Segment.
The Company's marketing efforts focus on application development for
existing products and on new and differentiated products for other existing,
newly-identified and proposed customer uses. The Company seeks to educate
customers as to the variety of analytical, purification and process control
problems which may be
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addressed by its products and to adapt its products and technologies to
separations and process control problems identified by its customers.
The Company believes that its technical support services are important to
its marketing efforts. These services include assisting in defining the
customer's needs, evaluating alternative solutions, designing a specific
system to perform the desired separation; training users, and assisting
customers in compliance with relevant government regulations. In addition, the
Company maintains a network of service centers located in the United States
and in key international markets to support its process gas
measurement/control products as well as its laboratory water products.
Research and Development
In its role as a pioneer of membrane separations, Millipore has
traditionally placed heavy emphasis on research and development. This emphasis
has permitted Millipore to be the first company to introduce a number of major
new enabling separations membranes and membrane devices (examples include:
nitrocellulose microfiltration membrane in 1954, compact high purity
laboratory water systems in 1972, membrane based syringe filter devices in
1973, membrane based filters for intravenous drug therapy in 1975, tangential
flow filtration cassette devices in 1975, polyvinylidene fluoride membrane in
1978, continuous electro-deionization water purification systems in 1988,
composite ultrafiltration membranes in 1989, composite microfiltration
membranes for the removal of viruses from solution in 1991, melt-cast PFA
membranes in 1990, ultra-high weight polythylene membrane in 1993, high flow
high efficiency metal membrane for gas filtration in 1996 and non-dewetting
PTFE membrane in 1997). Research and development activities include the
extension and enhancement of existing separations technologies to respond to
new applications, the development of new membranes, and the upgrading of
membrane based systems to afford the user greater purification capabilities.
Research and development efforts also identify new separations applications to
which disposable separations devices would be responsive, and develop new
configurations into which membrane and ion exchange separations media can be
fabricated to efficiently respond to the applications identified. Instruments,
hardware, and accessories are also developed to incorporate membranes, modules
and devices into total separations systems. Research and development
activities related to the Company's IC process control products focuses upon
developments which will address the evolving needs of IC manufacturers and
development of enabling technologies which will anticipate those needs.
Introduction of new applications frequently requires considerable market
development prior to the generation of revenues. Millipore performs most of
its own research and development and does not provide material amounts of
research services for others. Millipore's aggregate research and development
expenses in 1998 and 1997 were $53,578,000 and $55,899,000, respectively. In
1996 Millipore's aggregate research and development expenses were $38,429,000,
(excluding pre-acquisition amounts spent by Amicon and Tylan). For a
discussion of research and development write-offs relating to the Amicon and
Tylan acquisitions, see Note E to the Financial Statements, which Note is
hereby incorporated herein by reference.
In addition, the Company has followed a practice of supplementing its
internal research and development efforts by licensing newly developed
technology from unaffiliated third parties and/or acquired distribution rights
with respect thereto, when it believes it is in its long term interests to do
so.
Millipore has been granted a number of patents and licenses and has other
patent applications pending both in the United States and abroad. While these
patents and licenses are viewed as valuable assets, Millipore's patent
position is not of material importance to its operations. Millipore also owns
a number of trademarks, the most significant being "Millipore."
Competition
The Company faces intense competition in all of its markets. The Company
believes that its principal competitors in the Biopharmaceutical & Research
business segment include Pall Corporation, Barnstead Thermolyne Corporation
and Sartorius GmbH, and United States Filter Corporation. The principal
competitors
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in the Microelectronics business segment are Pall Corporation, United States
Filter Corporation, Aera and MKS Instruments. Certain of the Company's
competitors are larger and have greater resources than the Company. However,
the Company believes that, within the markets it serves, it offers a broader
line of products, making use of a wider range of separations and IC process
control technologies and addressing a broader range of applications than any
single competitor.
While price is an important factor, the Company competes primarily on the
basis of technical expertise, product quality and responsiveness to customer
needs, including service and technical support.
Environmental Matters
The Company is subject to numerous federal, state and foreign laws and
regulations that impose strict requirements for the control and abatement of
air, water and soil pollutants and the manufacturing, storage, handling and
disposal of hazardous substances and waste. The federal laws and regulations
include the Comprehensive Environmental Response, Compensation, and Liability
Act, the Clean Air Act, the Clean Water Act and the Resource Conservation and
Recovery Act. The Company is in substantial compliance with applicable
environmental requirements. Because regulatory standards under environmental
laws and regulations are becoming increasingly stringent, however, there can
be no assurance that future developments will not cause the Company to incur
material environmental liabilities or costs.
Under the Clean Air Act Amendments of 1990 ("CAA"), the U.S. Environmental
Protection Agency has been directed, among other things, to develop standards
and permit procedures with respect to certain air pollutants. Because many of
the implementing regulations have not yet been promulgated, the Company cannot
make a final assessment of the impact of the CAA. Based upon its preliminary
review of the CAA, however, the Company currently believes that compliance
with the CAA will not have a material adverse impact on the operations or
financial condition of the Company.
Other Information
Since April of 1988, the Company has had in place a shareholder rights plan
(the "Rights Plan") pursuant to which Millipore declared a dividend to its
shareholders of the right to purchase (a "Right"), for each share of Millipore
Common Stock owned, one additional share of Millipore Common Stock at a price
of $80 for each share (giving effect to the 1995 two for one stock split). In
April of 1998, the Rights Plan was amended and restated to, among other
things, extend the expiration date until April 30, 2008, to increase the
purchase price on the exercise of a Right to $200, to permit the Directors to
exchange certain of the Rights for shares of Company Common Stock (on a 1 for
1 basis) under certain circumstances and to make certain other updating
changes. The Rights Plan, as amended and restated, is designed to protect
Millipore's shareholders from attempts by others to acquire Millipore on terms
or by using tactics that could deny all shareholders the opportunity to
realize the full value of their investment. The Rights will be exercisable
only if a person or group of affiliated or associated persons acquires
beneficial ownership of 20% or more of the outstanding shares of the Company
Common Stock or commences a tender or exchange offer that would result in a
person or group owning 20% or more of the outstanding Common Stock. In such
event, or in the event that Millipore is subsequently acquired in a merger or
other business combination, each Right will entitle its holder to purchase, at
the then current exercise price, shares of the common stock of the surviving
company having a value equal to twice the exercise price.
Millipore's products are made from a wide variety of raw materials which are
generally available in quantity from alternate sources of supply; as a result,
Millipore is not substantially dependent upon any single supplier.
As of December 31, 1998, Millipore employed 4,289 persons worldwide, of whom
2,027 were employed in the United States and 2,173 were employed overseas.
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Executive Officers of Millipore
The following is a list, as of March 1, 1999, of the Executive Officers of
Millipore. All of the following individuals were elected to serve until the
Directors Meeting next following the 1999 Annual Stockholders Meeting.
<TABLE>
<CAPTION>
First Elected
---------------------------
An To Present
Name Age Office Officer Office
---- --- ------ ------- ----------
<S> <C> <C> <C> <C>
C. William Zadel........ 55 Chairman of the Board, President and 1996 1996
Chief Executive Officer of the
Corporation
Michael P. Carroll...... 48 Vice President of the Corporation and 1992 1997
President of Millipore Asia, Ltd. (As President of
Millipore Asia Ltd.)
Douglas B. Jacoby....... 52 Vice President of the Corporation 1989 1989
John E. Lary............ 52 Vice President of the Corporation 1994 1994
Francis J. Lunger....... 53 Vice President, Treasurer and Chief 1997 1997
Financial Officer of the Corporation
Joanna Nikka............ 47 Vice President of the Corporation 1996 1996
Jeffrey Rudin........... 47 Vice President of the Corporation and 1996 1996
General Counsel
Hideo Takahashi......... 58 Vice President of the Corporation and 1996 1979
President of Nihon Millipore (As President
of Nihon Millipore)
</TABLE>
Mr. Zadel was elected President, Chief Executive Officer and Chairman on
February 20, 1996. Mr. Zadel had been, since 1986, President and Chief
Executive Officer of Ciba Corning Diagnostics Corp., a company that develops,
manufactures and sells medical diagnostic products. Prior to that he was
Senior Vice President of Corning Glass Works' (now Corning Inc.) Americas
Operations (1985) and Vice President of business development (1983). Mr. Zadel
currently serves on the Boards of Directors of Kulicke and Soffa Industries,
Inc. and Matritech, Inc. Mr. Zadel is Chairman of the Board of Directors of
the Massachusetts High Technology Council (February 1999). He has also served
as the Chairman of the Health Industry Manufacturers Association (1994-1995).
Mr. Carroll joined Millipore in 1986 as Vice President/Finance for the
Membrane Products Division following a ten-year career in the general practice
audit division of Coopers and Lybrand. In 1988, Mr. Carroll assumed the
position of Vice President of Information Systems (worldwide) and in December
of 1990, he became the Vice President of Finance for the Company's Waters
Chromatography Division. Mr. Carroll was elected to Corporate Vice President,
Chief Financial Officer and Treasurer in February, 1992. In 1997 Mr. Carroll
was elected President of Millipore Asia Ltd.; he remains a Corporate Vice
President.
Mr. Jacoby joined Millipore in 1975. After serving in various sales and
marketing capacities, Mr. Jacoby became Director of Marketing for the
Millipore Membrane Products Division in 1983 and in 1985 he assumed the
position of General Manager of the Membrane Pharmaceutical Division. In 1987,
Mr. Jacoby assumed responsibility for the Company's process membrane business
and in 1994 assumed responsibility for the sales, marketing and R&D for all of
the Company's worldwide business. Mr. Jacoby was elected a Corporate officer
in December, 1989.
Mr. Lary was elected a Corporate Vice President in November 1994, and is
responsible for the worldwide operations of the Company. From May of 1993
until his election as a Corporate Vice President, Mr. Lary served
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as Senior Vice President and General Manager of the Americas Operation. For
the ten years prior to that time, he served as Senior Vice President of the
Membrane Operations Division of Millipore.
Mr. Lunger was elected Vice President, Chief Financial Officer and Treasurer
of Millipore upon joining the Company in June 1997. Mr. Lunger had been, since
1995, Senior Vice President and Chief Financial Officer of Oak Industries,
Inc., a developer, manufacturer and supplier of components to the
telecommunications industry. From 1994 until 1995, Mr. Lunger had been acting
Chief Executive Officer and Chief Administrative Officer of Nashua
Corporation, a conglomerate with diverse businesses ranging from office
supplies to photo finishing. During the period 1983-1994, Mr. Lunger served in
various business operations and financial management positions with Raychem
Corporation, an international material science company serving the
telecommunication, automotive, energy and defense markets, including Vice
President and Group General Manager (1992-1994); Vice President and Assistant
Sector General Manager (1991-1992) and Vice President, Finance (1988-1991).
Ms. Nikka was elected Corporate Vice President for Human Resources in
November 1996. Ms. Nikka was Vice President at Fidelity Investments from 1991
to November 1996. Prior to joining Fidelity in 1991, Ms. Nikka was Vice
President of Human Resources at Symbolics, Inc.
Mr. Rudin was elected Corporate Vice President and General Counsel in
December 1996. Prior to joining Millipore, Mr. Rudin served Ciba Corning
Diagnostics Corporation as Senior Vice President and General Counsel (since
1993) and as Vice President and General Counsel (1988-1993). Prior to that,
Mr. Rudin was Assistant Division Counsel for the Pharmaceutical Division of
Ciba-Geigy Corporation.
Mr. Takahashi joined Millipore in 1979 as President and Chief Executive
Officer of its Japanese subsidiary, Nihon Millipore Ltd. Mr. Takahashi was
elected as a Vice President of the Company on February 8, 1996.
Item 2. Properties.
Millipore operates 19 manufacturing sites located in the United States,
France, Japan, Ireland, United Kingdom, Brazil and China. The following table
identifies the major production sites which are owned by Millipore and
describes the purpose, floor space and land area of each.
<TABLE>
<CAPTION>
Business
Floor Space Land Area Segment
Location Facility Sq. Ft. Acres Served
-------- -------- ----------- --------- --------
<S> <C> <C> <C> <C>
Bedford, MA............. Executive Offices, research, 352,000 31 B&R; Micro.
membrane manufacturing &
warehouse
Danvers, MA............. Manufacturing and office 65,000 16 B&R
Jaffrey, NH............. Manufacturing, warehouse and 177,000 31 B&R; Micro.
office
Cidra, Puerto Rico...... Manufacturing, warehouse and 125,000 29 B&R
office
Molsheim, France........ Manufacturing, warehouse and 148,000 20 B&R
office
Cork, Ireland........... Manufacturing 98,000 20 B&R
Yonezawa, Japan......... Manufacturing and warehouse 169,000 7 B&R; Micro.
</TABLE>
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B&R= Biopharmaceutical & Research Business Segment.
Micro. = Microelectronics Business Segment.
Millipore owns a total of approximately 1.25 million square feet of
facilities worldwide which are used for office, research and development,
manufacturing (including the manufacturing facilities listed above) and
warehouse purposes. All of these facilities are owned in fee and are not
subject to any material encumbrances.
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In addition to its owned properties, Millipore currently leases various
manufacturing, sales, warehouse, and administrative facilities throughout the
world. Such leases expire at different times through 2008. The aggregate area
of rented space is approximately 960,000 square feet and cost was
approximately $12,033,000 in 1998. The following leased facilities are the
most significant:
1. A lease of a 198,000 square foot building located on 13 acres in
Allen, Texas (Dallas-Fort Worth vicinity). This lease expires in 2008 and
provides for two 5 year extension options. This facility is used to support
the Microelectronics business segment.
2. A lease for premises abutting the Company's Bedford headquarters; this
lease makes 75,000 square feet of building available to Millipore, provides
for a term expiring in 2005 and contains rights of first refusal and
options with respect to the purchase of the premises by Millipore and the
sale of the premises to Millipore. This building supports both business
segments.
3. A lease of a 134,000 square foot building which is adjacent to the
leased property referred to in preceding paragraph for a term ending in
2006, with renewal options for an aggregate of 20 years, as well as a
purchase option. This building is used primarily to serve the
Biopharmaceutical & Research business segment.
4. A lease of a building of 130,000 square feet located in Burlington,
Massachusetts, approximately 5 miles from Millipore's Bedford headquarters.
This lease was amended during 1997 to, among other things, extend the
initial term until February 2002 and to provide for a single 3-year
extension option. This building supports both business segments.
With the exception of the Allen lease described above, in the opinion of
Millipore, no single lease is material to the Company's operations.
Except for the facilities located in Allen, Texas, Cidra, Puerto Rico and
Yonezawa, Japan, which currently operate at approximately 50%, 75% and 70%,
respectively, of capacity, none of the above listed owned and leased major
facilities are materially underutilized.
Millipore is of the opinion that all the facilities owned or leased by it
are well maintained, appropriately insured, in good operating condition and
suitable for their present uses.
Item 3. Legal Proceedings.
The Company currently is not a party to any material legal proceeding and
the Company knows of no material legal proceeding contemplated by any
governmental authority. However, as has been previously disclosed, Millipore
has, in the past, been named as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA" or "Superfund") by the U.S. Environmental Protection Agency ("EPA")
with respect to a "release" (as defined in Section 101 of CERCLA), at twelve
sites to which chemical wastes generated by the manufacturing operations of
Millipore or one of its divisions may have been sent. The Company has settled
its liability pursuant to consent decrees releasing Millipore from further
liability with respect to certain covered matters related to all of the
Superfund sites at which the Company has been named a PRP. However, as is
typical with consent decrees in such Superfund proceedings, EPA and the
relevant state agencies reserved the right to maintain actions against the
settling parties, including the Company, in the event certain actions occur or
do not occur. In addition, during 1998 the Company was named as a PRP in a
Massachusetts proceeding relating to two sites to which chemical wastes from
one of the above Superfund sites were transshipped. The Company believes that
the aggregate of any future remaining potential liabilities should not have a
material adverse effect on the Company's financial condition. This belief is
based on the following factors: (i) the number and size of financially solvent
PRPs participating at each such Superfund site and each of the above state
sites; (ii) the amount and type of wastes which were potentially disposed of
at these sites; (iii) the late stage of the remedy and that a significant
portion of the remedy cost has already been funded
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at each of the above Superfund sites; and (iv) the likely availability of
contribution from other PRPs in the event that the Company were held jointly
and severally liable for further remedial costs at any of these sites.
In 1991 the Company brought suit against The Travelers Indemnity Company,
Hartford Accident and Indemnity Company and Insurance Company of North America
in U.S. District Court for the District of Massachusetts with respect to four
of the Superfund sites and one other site at which the Company had been named
a PRP, seeking recovery of the full costs of defending the actions at such
sites, indemnification for its liability and damages for unfair and deceptive
insurance practices. The case against Hartford Accident and Indemnity Company
has been settled. The case against Insurance Company of North America is
awaiting action on remand by the District Court after a successful appeal by
the Company of a dismissal of the case. The appeal of the dismissal of the
case against The Travelers Indemnity Company was unsuccessful.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is not applicable.
PART II
Item 5. Market for Millipore's Common Stock, and Related Stockholder Matters.
Millipore's Common Stock, $1.00 par value, is listed on the New York Stock
Exchange and is traded under the symbol "MIL". The following table sets forth,
for the indicated fiscal periods, the high and low sales prices of Millipore's
Common Stock (as reported on the New York Stock Exchange Composite Tape) and
the dividends declared (on a per share basis). As of February 26, 1999 there
were approximately 3,230 shareholders of record.
<TABLE>
<CAPTION>
Range of Stock Prices Dividends Declared
--------------------------- -------------------
1998 1997 1998 1997
------------- ------------- --------- ---------
High Low High Low
------ ------ ------ ------ (Per Share)
<S> <C> <C> <C> <C> <C> <C>
First Quarter................ $38.44 $30.00 $45.63 $38.88 $ 0.10 $ 0.09
Second Quarter............... $36.94 $26.82 $44.88 $37.25 $ 0.11 $ 0.10
Third Quarter................ $27.50 $17.50 $51.88 $41.06 $ 0.11 $ 0.10
Fourth Quarter............... $29.88 $17.25 $52.00 $33.50 $ 0.11 $ 0.10
</TABLE>
Item 6. Selected Financial Data.
The following selected consolidated financial data for Millipore are derived
from the Company's Financial Statements and related notes thereto. The
following selected consolidated financial data should be read in connection
with and is qualified in its entirety by Millipore's Financial Statements and
related notes thereto and other financial information included elsewhere in
this Form 10-K report.
9
<PAGE>
Millipore Corporation--Five-year Summary of Operations
<TABLE>
<CAPTION>
1998 1997(2) 1996 1995 1994
-------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales............... $699,307 $758,919 $618,735 $594,466 $497,252
Cost of sales........... 364,467 342,237 249,443 243,849 212,675
-------- -------- -------- -------- --------
Gross profit........... 334,840 416,682 369,292 350,617 284,577
Selling, general and
administrative
expenses............... 236,521 245,585 202,140 195,026 159,591
Research and development
expenses............... 53,578 55,899 38,429 36,515 34,327
Purchased research &
development expense.... -- 114,091 68,311(2) -- --
Settlement of
litigation............. 11,766(1) -- -- -- --
Restructuring charge.... 33,641(1) -- -- -- --
-------- -------- -------- -------- --------
Operating (loss)
income................ (666) 1,107 60,412 119,076 90,659
Gain on sale of equity
securities............. 35,594(1) 8,330 5,329 -- --
Other income (expense),
net.................... -- -- -- -- (10,800)(3)
Interest income......... 3,090 2,937 2,780 1,682 4,091
Interest expense........ (29,474) (30,484) (11,498) (10,623) (7,035)
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes... 8,544 (18,110) 57,023 110,135 76,915
(Benefit) provision for
income taxes........... (1,320) 20,674 13,401 24,781 17,306
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations............ 9,864 (38,784) 43,622 85,354 59,609
Loss on disposal of
discontinued
operations............. 5,847(1) -- -- -- 3,400(4)
-------- -------- -------- -------- --------
Net Income (loss)....... $ 4,017 $(38,784) $ 43,622 $ 85,354 $ 56,209
======== ======== ======== ======== ========
Basic net income (loss)
per share:
Income (loss) from
continuing
operations............ $ 0.22 $ (0.89) $ 1.00 $ 1.90 $ 1.09
Net income (loss) per
share................. $ 0.09 $ (0.89) $ 1.00 $ 1.90 $ 1.03
Diluted net income
(loss) per share:
Income (loss) from
continuing
operations............ $ 0.22 $ (0.89) $ 0.98 $ 1.86 $ 1.07
Net income (loss) per
share................. $ 0.09 $ (0.89) $ 0.98 $ 1.86 $ 1.01
Cash dividends declared
per share.............. $ 0.43 $ 0.39 $ 0.35 $ 0.315 $ 0.295
Weighted average shares
outstanding:
Basic.................. 43,864 43,527 43,602 44,985 54,726
Diluted................ 44,289 43,527 44,457 45,887 55,644
Financial Data
Working capital........ $ 6,071 $ 40,973 $ 95,512 $ 90,337 $100,649
Total assets........... 762,440 772,806 682,892(2) 530,945 536,980
Long-term debt......... 299,110 286,844 224,359(2) 105,272 109,327
Shareholders' equity... $136,908 $148,994 $217,605 $226,475 $221,277
</TABLE>
- --------
(1) See Note C on page F-9 below, Note D on page F-10 below and Note M on
page F-17 below of the Notes to the Financial Statements.
(2) See Note E on page F-11 below of the Notes to the Financial Statements.
(3) The $10,800 reflects a litigation settlement which arose from the
Company's sales of its Process Water Division in 1989.
(4) The $3,400 represents a loss on disposal of discontinued operations
related to the sale of its Waters Chromatography Division and certain
assets of its non-membrane bioscience business.
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in connection with Millipore's
Consolidated Financial Statements and related notes thereto and other
financial information included elsewhere in this Form 10-K report.
ACQUISITIONS
On January 22, 1997, the Company completed its cash tender offer for all of
the outstanding common shares of Tylan General, Inc. ("Tylan") for $16.00 per
share. Tylan became a wholly owned subsidiary of the Company on January 27,
1997. The purchase price was $133.0 million, plus the assumption of Tylan's
outstanding debt, net of cash, totaling $23.6 million. This acquisition was
accounted for as a purchase and resulted in a write-off for purchased research
and development of $114.1 million in the first quarter of 1997.
On December 31, 1996, the Company acquired the net assets of the Amicon
Separation Science Business of W.R. Grace & Co. ("Amicon") for a price of
$129.3 million in cash, including transaction costs. This transaction was
accounted for as a purchase and resulted in a write-off for purchased research
and development of $68.3 million in the fourth quarter of 1996. As this
transaction was completed on the last business day of 1996, the accompanying
1996 consolidated statement of income excludes all 1996 business activity
conducted by Amicon.
RESULTS OF OPERATIONS
The Company reported a profit of $0.09 per share for 1998 compared to a loss
of $0.89 per share for 1997 and a profit of $0.98 for 1996. Excluding
restructuring charges and unusual items, the Company would have reported
diluted earnings per share from continuing operations of $0.60, $1.65 and
$2.06 for 1998, 1997 and 1996, respectively.
Restructuring Charges and Unusual Items
In the second quarter of 1998, the Company announced a restructuring program
to improve the competitive position of the Company by streamlining worldwide
operations and reducing the overall cost structure. The restructuring program
was initiated to bring operating costs in line with lower revenues resulting
from the financial difficulties in Asian economies, the strong U.S. dollar and
the continuation of the semiconductor industry slump.
Key initiatives include:
1. Discontinue non-strategic product lines, rationalize product offerings
and consolidate certain manufacturing operations to eliminate duplicate
manufacturing processes and improve product line focus.
2. Realign European country organizational structure to focus on
operating business units and establish a regional transaction service
center.
3. Reduce administrative and management infrastructure costs in Asia.
4. Renegotiate marketing, research and vendor contractual agreements.
5. Streamline the supply chain management function and consolidate
vendors resulting in cost savings and better customer response.
In the third quarter of 1998, the Company recorded an expense associated
with these activities of $42.8 million ($29.1 million after tax) including a
restructuring charge of $33.6 million and a $9.2 million charge against cost
of sales for inventory and fixed asset write-offs associated with the
rationalization of its product offering and elimination of non-strategic
business lines. The $33.6 million restructuring charge included $18.3 million
of employee severance costs, $9.5 million write-down to fair value of real and
intangible assets associated with discontinued product lines, $3.8 million of
lease cancellation costs and $2.0 million of contract
11
<PAGE>
termination costs. During 1998, approximately $5.6 million of restructuring
costs, consisting primarily of severance, were paid and $18.5 million remains
accrued and will be substantially paid in 1999 and with the remainder in
future years. The major programs continuing into 1999 include the realignment
of European operating units, establishment of the European regional
transactional center, streamlining the supply chain management function,
consolidating certain manufacturing operations and cancellation of leases.
The restructuring initiatives combined with the consolidation of the
Company's Microelectronics plants will result in the elimination of 620
positions worldwide. Notification to employees was completed in 1998, however
a small number of these employees will continue in their existing positions
through 1999 with their related salary costs charged to operations as
incurred. Under the terms of the severance agreements, the Company expects to
pay severance and associated benefits through the early part of 2000.
When fully implemented the combination of the restructuring programs and the
Microelectronics consolidation are expected to yield annual savings of $38.0
million. The savings will result in reduced wages, facility related costs,
depreciation and amortization and will be primarily reflected as reductions in
Cost of Sales. The savings began in 1998 but will not be fully realized until
1999.
The Company also recorded an incremental provision for excess and obsolete
inventory of $6.0 million during the third quarter of 1998 in response to
adverse changes in demand attributable to declining business conditions in
Asia and the slowdown in the semiconductor industry.
See the discussion of Gross Margins, Gain on Sale of Equity Securities, Net
Loss on Disposal of Discontinued Operations and Legal Proceedings below for
additional information related to the other items on the following schedule.
The summary of restructuring charges and unusual items is as follows:
Summary of Restructuring Charges and Unusual Items:
<TABLE>
<CAPTION>
Year Ended December
31,
-----------------------
1998 1997 1996
------ ------- ------
(In millions, except
per share data)
<S> <C> <C> <C>
Cost of sales
Write-off of inventory and manufacturing
equipment...................................... $ 9.2 $ -- $ --
Provision for excess and obsolete inventory..... 6.0 -- --
Purchase accounting adjustment.................. -- 5.0 --
------ ------- ------
Impact on gross margin............................ (15.2) (5.0) --
Operating expenses
Purchased research and development expenses..... -- 114.1 68.3
Restructuring charges........................... 33.6 -- --
Litigation settlements.......................... 11.8 -- --
------ ------- ------
Loss from continuing operations before income
taxes............................................ (60.6) (119.1) (68.3)
Gain on sale of equity securities................. 35.6 8.3 5.3
------ ------- ------
Impact on loss from continuing operations before
income taxes..................................... (25.0) (110.8) (63.0)
Tax impact of restructuring charges and unusual
items............................................ (8.4) 1.2 (14.8)
------ ------- ------
Net loss from continuing operations............... (16.6) (112.0) (48.2)
Net loss on disposal of discontinued operations
($7.5 pre-tax)................................... 5.8 -- --
------ ------- ------
Net loss from restructuring charges and unusual
items............................................ $(22.4) $(112.0) $(48.2)
====== ======= ======
Net loss per share from restructuring charges and
unusual items.................................... $(0.51) $ (2.54) $(1.08)
====== ======= ======
</TABLE>
12
<PAGE>
Local Currency Results
The following discussion of Net Sales, Gross Profit Margins and Operating
Expenses includes reference to revenue, margins and expenses in "local
currencies". For comparability of financial results, the foreign currency
balances, in all periods presented, are translated at Millipore's 1998
budgeted exchange rates which differ from actual rates of exchange. This
provides a clearer presentation of underlying trends in the Company's
business, before the impact of foreign currency translation.
Net Sales
Consolidated net sales, measured in U.S. dollars, decreased 8 percent in
1998, compared to an increase of 23 percent in 1997, and an increase of 4
percent in 1996. The net sales decrease in 1998 compared to 1997 was primarily
due to the continued downturn in the semiconductor industry, the ongoing
economic difficulties in Asian markets and negative currency effects. The
higher sales growth rate in 1997 compared to 1996 was primarily attributable
to the acquisitions of Amicon and Tylan. Without these acquisitions, sales in
1997 declined by 1 percent from 1996 levels. Sales growth in 1997 was
adversely impacted by a cyclical downturn in the semiconductor industry,
unfavorable foreign currency exchange rate comparisons and certain other
factors discussed below.
Sales growth by business segment and geography, measured in local currencies
and U.S. dollars, is summarized in the table below.
<TABLE>
<CAPTION>
Sales Growth in Local Sales Growth in U.S.
Currencies Dollars
----------------------------- ----------------------------
With Without With Without
Acquisitions Acquisitions Acquisitions Acquisitions
-------------- -------------- -------------- -------------
1998 1997 1997 1996 1998 1997 1997 1996
------- ------ ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Biopharmaceutical &
Research............... 7 % 19% 7% 10% 5 % 12% (0)% 6%
Microelectronics........ (28)% 64% 4% 7% (32)% 50% (4)% 0%
------- ----- ------ ------ ------- ----- ------ -----
Consolidated........... (5)% 32% 6% 9% (8)% 23% (1)% 4%
------- ----- ------ ------ ------- ----- ------ -----
Americas................ (9)% 48% 7% 7% (9)% 48% 6 % 7%
Europe.................. 8 % 28% 8% 6% 7 % 15% (3)% 4%
Asia/Pacific............ (13)% 15% 3% 14% (21)% 3% (8)% 2%
------- ----- ------ ------ ------- ----- ------ -----
Consolidated........... (5)% 32% 6% 9% (8)% 23% (1)% 4%
------- ----- ------ ------ ------- ----- ------ -----
</TABLE>
Biopharmaceutical & Research sales, measured in local currencies, increased
7 percent in 1998 compared to 19 percent in 1997. The growth of the
Biopharmaceutical & Research segment in 1998 reflects the combination of
increased demand for consumable products and process equipment used in the
production of sterile drugs and analytical and water filtration devices used
in research laboratories. The growth in the Americas and Europe for this
segment is attributable to an increase in the number of new drugs developed
through synthetic and natural methods ("New Chemical Entities") approved and
in production. This segment was adversely affected in Asia by a decrease in
demand as a result of region-wide recessionary pressures.
Excluding the impact of the Amicon acquisition, sales to the
Biopharmaceutical & Research business segment grew 7 percent in 1997 in local
currencies compared to growth of 10 percent in 1996. Sales of large protein
processing systems in 1997 to biotechnology customers were level with those in
1996. In addition, sales to a beer-manufacturing customer in Japan were lower
in 1997 as compared to 1996. These two factors, which were significant in
boosting the 1996 overall segment growth rate, combined to depress the sales
growth rate in 1997. New product introductions in 1997 and 1996, particularly
for laboratory water and applied microbiology products, and new distribution
alliances launched late in 1996 in the United States have enhanced sales
growth in this market. Sales growth in 1997 was strongest in Europe and the
Americas.
Microelectronics segment sales growth measured in local currency declined 28
percent in 1998 compared to an increase of 64 percent for 1997. Sales growth
for 1997 excluding the acquisition of Tylan was 4 percent.
13
<PAGE>
The decrease in 1998 sales was directly attributable to the continuation of
the semiconductor industry slump, which began in the middle of 1996. The
reduction in Microelectronics segment revenues generated from the sale of
equipment was adversely impacted in Asia and the Americas by a significant
reduction in semiconductor plant construction. Sales of consumable gas and
liquid purification devices declined to a lesser extent, consistent with lower
worldwide semiconductor plant capacity utilization. The moderate segment
growth of 4 percent before acquisitions in 1997 reflects the impact of the
aforementioned semiconductor downturn coupled with the Asian financial
difficulties which began late in that year.
During 1998 and 1997 the U.S. dollar strengthened against most of the
European and Asian currencies in which the Company transacts business. The net
effect of this currency movement in 1998 was to increase the rate of the sales
decline by 3 percentage points. In 1997 the stronger dollar decreased reported
sales growth and sales growth excluding acquisitions by 9 percentage points
and 7 percentage points, respectively. The U.S. dollar increased in value
against the Japanese yen in 1996 with the net result of decreasing the
reported sales growth by 5 percentage points. As a general matter, a stronger
U.S. dollar will adversely affect the sales growth of both business segments
to a similar degree. Price changes have not significantly affected the
comparability of sales during the past three years.
Gross Profit Margins
Gross Profit Margins in local currencies were 48.0 percent in 1998, 53.1
percent in 1997, and 57.1 percent in 1996. Gross profit margins in 1998 were
50.1 percent excluding the effect of the $9.2 million charge for the write-off
of inventory and manufacturing equipment associated with product line
rationalization activities and a provision of $6.0 million for excess and
obsolete inventory. Local currency gross profit margins in 1997 were 53.8
percent excluding the effect of an inventory write-up to net realizable value
of $5.0 million related to acquisition accounting which in turn resulted in
very low margins when this inventory was sold. Gross profit margin
percentages, excluding these charges, were lower in 1998 than those in 1997
reflecting the impact of significantly reduced volumes in the Company's
manufacturing plants serving the Microelectronics segment combined with
duplicative manufacturing costs resulting from concurrent operations at three
existing plants located in California and Texas and operations at the new
manufacturing facility in Allen, Texas. The redundant facilities were closed
in September 1998 and their operations consolidated into the Allen, Texas
facility. The lower gross profit margin in 1997 is primarily a result of the
impact from the acquired companies. The gross margin percentages of the
acquired businesses, particularly Tylan, were less than those of the pre-
existing Company's businesses.
Operating Expenses
Selling, general and administrative ("S,G&A") expenses in local currencies
decreased 1 percent in 1998, and increased 29 percent in 1997. The decrease in
1998 is due to cost containment programs initiated as part of the
restructuring activities. The increase in 1997 is due to incremental expenses
associated with the acquired businesses. Despite the decrease in spending in
1998, the Company continued to invest in sales, service and marketing
resources focused on maintaining or improving customer services, supporting
the launch of new products and development of future sales initiatives aimed
at improving the Company's competitive positions.
Research and development expenses in local currencies decreased 4 percent in
1998, and increased 49 percent in 1997. The decrease in 1998 was primarily due
to the elimination of research and development expenses for non-strategic
product lines in the Microelectronics segment. The significant increase in
1997 was due to the addition of the acquired businesses.
Litigation settlements totaling $11.8 million were recorded in the first
quarter of 1998 and are described in "Legal Proceedings" below.
Gain on Sale of Equity Securities
Gain on sale of equity securities in 1998 primarily reflects the sale of the
Company's holdings in PerSeptive Biosystems common shares. As of December 31,
1997 the Company held 2.2 million shares of PerSeptive
14
<PAGE>
Biosystems common stock and 1,000 shares of PerSeptive Biosystems preferred
stock. On January 22, 1998, PerSeptive merged with The Perkin-Elmer
Corporation. Pursuant to the merger, all of the Company's holdings of common
and preferred shares in PerSeptive were converted into 587,000 shares of
Perkin-Elmer common stock. In the first quarter of 1998, the Company sold all
of its shares of Perkin-Elmer stock for approximately $32.5 million in cash.
The Company also sold all of its common shares of Glyko Biomedical Ltd. in the
first quarter of 1998 and recognized a gain of $3.1 million.
Gain on sale of equity securities in 1997 reflected the sale of a portion of
the Company's holdings in PerSeptive Biosystems common shares.
Gain on sale of equity securities in 1996 reflected the sale of a
significant portion of the Company's stock holdings in a Japanese company. The
Company sold these securities to fund a new headquarters and research and
development facility in Japan. The cost of moving to this new facility was
$2.0 million and was recorded in S,G&A expense.
Net Interest Expense
Net interest expense in 1998 was $1.2 million less than 1997, primarily as a
result of a yen debt swap agreement entered into during December 1997. Net
interest expense in 1997 was significantly higher than net interest expense in
1996 due to increased borrowings, which were used to acquire both Amicon and
Tylan.
Provision for Income Taxes
The effective income tax rate from continuing operations in 1998, including
the restructuring program, was a benefit of 15.4 percent. Excluding the effect
of the restructuring program, the effective income tax rate was 21.0 percent.
The Company's effective income tax rate in 1997, excluding the non-tax
deductible write-off of purchased research and development associated with the
Tylan acquisition, was 21.0 percent compared to 23.5 percent in 1996. The
lower effective tax rate in 1997 as compared to 1996 reflected a higher
proportion of income generated by low tax rate manufacturing sites.
Net Loss on Disposal of Discontinued Operations
Net loss on disposal of discontinued operations in 1998 included an
additional after-tax charge of $5.8 million related to previously discontinued
operations. In 1994 the Company sold it's Waters Chromatography Division and,
in a separate transaction, sold certain assets of its non-membrane bioscience
business. This charge reflects the final determination of the value of the
remaining assets and liabilities associated with these divested operations.
The accounting for these transactions is now complete.
Earnings Per Share
Earnings per share in 1998 were impacted by restructuring charges and
several unusual items. Both 1997 and 1996 earnings per share included
significant write-offs of purchased research and development associated with
the Company's acquisition of Amicon and Tylan. The impact of these items is
reflected in the above schedule of Restructuring Charges and Unusual Items.
Additionally, earnings per share were adversely impacted by the
comparatively stronger U.S. dollar, reducing earnings by $0.33 per share in
1998 as compared to 1997 and $0.26 per share in 1997 as compared to 1996.
MARKET RISK
The Company is exposed to market risks, which include changes in interest
rates and changes in foreign currency exchange rates as measured both against
the U.S. dollar and each other. The Company manages these market risks through
its normal financing and operating activities and, when appropriate, through
the use of derivative financial instruments. The Company does not enter into
derivative financial instruments for speculative purposes.
15
<PAGE>
Foreign Exchange
The Company derives approximately 60 percent of its revenues from customers
outside of the United States. This business is transacted through the
Company's network of international subsidiaries generally in the local
currency. This exposes the Company to risks associated with changes in foreign
currency that can impact revenues, net income and cash flow. Sourcing of
product from international subsidiary plants and active management of cross
border currency flows partially mitigates the impact of changes in foreign
currency. However, the Company has significant exposure to changes in the
Japanese yen that can not be mitigated through normal financing or operating
activities. Accordingly, this risk is managed through the use of derivative
financial instruments. The income and cash flow exposure is managed through
the use of option contracts and the net equity exposure is hedged through the
use of debt swap agreements.
The Company enters into foreign currency option contracts to sell yen on a
continuing basis in amounts and timing consistent with the underlying currency
transactions. The gains on these transactions, if any, partially offset the
realized foreign exchange losses on the underlying exposure. Gains, net of
premium costs, of $2.2 million in 1998, $4.4 million in 1997 and $2.7 million
in 1996 were realized from these contracts and were recorded in cost of sales.
At December 31, 1998 the Company had open option contracts to sell yen
aggregating $47.3 million. All open options expire within 15 months. Premiums
to purchase foreign currency option contracts are amortized over the life of
the contract. Unamortized premiums of $1.4 million were included in other
current assets as of December 31, 1998.
The Company's net equity exposure to the Japanese yen has been effectively
hedged through debt swap agreements covering both principal and interest.
Pursuant to these agreements $110,000 of debt with a weighted average fixed
interest rate of 6.7 percent was swapped for an equivalent value of yen at a
weighted average exchange rate of 114.6 yen to the dollar and a weighted
average fixed interest rate of 3.6 percent. The swap agreements mature in 2003
and 2004.
Although the Company mitigates its foreign currency exchange risk through
the above activities, when the U.S. dollar strengthens against currencies in
which the Company transacts its business, sales and net income will be
adversely impacted.
Credit Risk
The Company is exposed to concentrations of credit risk in cash and cash
equivalents, trade receivables and derivative financial instruments.
Cash and cash equivalents are placed with major financial institutions with
high quality credit ratings. The amount placed with any one institution is
limited by policy.
Trade receivables credit risk exposure is limited due to the large number of
customers and their dispersion across different industries and geographies.
The Company is exposed to credit related risks associated with the potential
nonperformance by counterparties to the debt swap agreements. The
counterparties to these contracts are major financial institutions. The
Company continually monitors its positions and the credit ratings of its
counterparties and limits the amount of contracts it enters into with any one
party.
CAPITAL RESOURCES AND LIQUIDITY
Cash flow provided from operations was $51.5 million in 1998, $54.0 million
in 1997 and $102.2 million in 1996. Reported cash flow from operations was
reduced by $28.1 million in 1998 and $23.3 million in 1997 for costs
associated with the 1998 restructuring activities and the integration of the
Amicon and Tylan acquisitions. Excluding the restructuring and acquisition
related expenditures, cash flow from operations was $79.6 million in 1998 and
$77.3 million in 1997.
16
<PAGE>
The improvement in 1998 cash flow from operations over 1997, excluding the
restructuring and acquisition related expenditures, is the result of a
decrease in working capital offset by a significant decline in operating
income before restructuring charges and unusual items. The favorable working
capital comparisons were a combination of a decrease in accounts receivable
balances, lower inventory levels and a reduction in other current assets. The
improvement in receivables reflects the impact of the lower sales volume and
improved collection experience. The improvement in inventory utilization was
attributable to asset management initiatives launched in 1998 and reserve
actions taken as part of the 1998 restructuring program. The reduction in
other current assets reflects the sale of equity securities in 1998. The
decline in operating income resulted from the downturn in the semiconductor
industry, the financial difficulties in Asia and the strength of the U.S.
dollar.
The decrease in cash flow in 1997, excluding the expenditures related to the
Amicon and Tylan acquisitions, compared to that of 1996 is attributable to
higher levels of working capital and an increase in interest cost. Operating
income before these acquisition related charges in 1997 was slightly less than
that of 1996. The increase in working capital comparisons were a combination
of increases in both accounts receivable balances and inventory levels as a
result of the Tylan acquisition in January 1997 and an increase in other
current assets. The increase in accounts receivable was attributable to
significantly higher revenues in the fourth quarter of 1997 versus the
comparable period of the prior year. The increase in fourth quarter 1997
revenues was principally attributable to the acquisition of Tylan in the first
quarter of 1997. Inventory balances increased in anticipation of future demand
from customers in the semiconductor market which failed to materialize. The
increase in other current assets reflects the pending sale of equity
securities in the first quarter of 1998. These securities had previously been
recorded in other assets. The increase in interest expense in 1997 is directly
related to borrowings used for the acquisition of Amicon and Tylan.
During 1999 the Company expects to spend approximately $17.0 million in cash
for costs accrued in connection with the restructuring program and for costs
to complete the integration of Amicon and Tylan. This will be funded by cash
flow from operating activities.
Cash generated by the Company during 1998 was used to invest in property,
plant and equipment, and to pay dividends. Property, plant and equipment
expenditures for 1998 exceeded 1997 expenditures by $18.7 million primarily
due to $10.0 million spent for the expansion of the Biopharmaceutical membrane
manufacturing facility in Cork, Ireland and $24.4 million spent for the
construction of the new Microelectronics manufacturing facility in Allen,
Texas. The total cost of the Allen facility will be approximately $28.0
million. The Company expects capital expenditures for 1999 to be in the range
of $40.0 to $45.0 million. Depreciation expense in 1999 is expected to be
slightly higher than in 1998 as a result of the increased capital expenditures
in 1998. The Company has no significant commitments for capital expenditures
at December 31, 1998.
In 1997, cash generated from operating activities, along with increased
borrowings, was used for the acquisition of Tylan, the purchase of certain
assets and technology of FAStar Ltd. and FAS Holding Company, and capital
expenditures. In 1996 the Company used $58.4 million of cash from operations
to purchase shares of its outstanding common stock. During 1997 and 1996 the
Company continued to invest in capacity expansions and the upgrade of
manufacturing facilities and in information technology systems and equipment.
The net cash outflow of $2.2 million and $3.5 million in 1998 and 1997,
respectively, for operations discontinued in 1994 were in line with the
Company's expectations. At December 31, 1998, the Company had no significant
remaining obligations related to these discontinued operations.
In May 1998, the Company reduced the maximum funds available under its
unsecured Revolving Credit Agreement, dated January 22, 1997, (the "Credit
Agreement") from $350 million to $250 million.
The Company's financial results for the quarter ended September 30, 1998
made it necessary for the Company to renegotiate certain financial covenants
relating to operating cash flow and interest coverage under the Credit
Agreement, and under the $100 million 6.88 percent note due in 2004 (the "2004
note"). Pursuant to this renegotiation, the lenders involved waived defaults
under those covenants and accepted less restrictive
17
<PAGE>
operating cash flow and interest coverage covenants for 1999 and a portion of
2000. The Company agreed to an additional minimum earnings covenant, the
payment of amendment fees totaling approximately $0.6 million, and to
increases in both the interest rate and the facility fees thereunder. Interest
is payable under the Credit Agreement at a floating U.S. dollar deposit rate,
defined as LIBOR, plus a margin. The Company agreed to an increase in this
margin from a range of 0.18 to 0.65 percent to a range of 0.23 to 1.125
percent. The Company also agreed to an increase in the facility fee under the
Credit Agreement from a rate ranging from 0.10 to 0.25 percent to a rate
ranging from 0.125 to 0.375 percent. The interest rate under the 2004 note
also increased from 6.88 percent to 7.23 percent as of November 2, 1998.
In November 1998 Moody's Investor Services downgraded the Company's debt
rating to Ba2 from Baa3; a rating which Moody's characterizes as below
"investment grade". Standard & Poors Corporation also downgraded the Company's
debt rating from BBB- to BB+. The Company expects that this development may
make it more difficult for the Company to access money markets should it
become necessary to do so.
The use of debt to finance the acquisitions of Amicon and Tylan
substantially increased the Company's debt to equity ratio. In the first
quarter of 1997, the Company successfully completed a public debt offering.
Proceeds from the offering of $197.9 million were used to repay borrowings
outstanding under the Credit Agreement.
At December 31, 1998, the Company had additional borrowing capacity of $80.0
million under its Credit Agreement.
The Company believes that its balances of cash and cash equivalents, funds
available under the Credit Agreement and cash flows expected to be generated
by future operating activities will be sufficient to meet its cash
requirements over the next twelve to twenty-four months. However, given the
Company's current debt ratings, if the Company should need to obtain
additional borrowings, there can be no assurance that such borrowings could be
obtained at favorable rates.
DIVIDENDS
The quarterly dividend was increased in the second quarter of 1998 from
$0.10 to $0.11 per share. Dividends paid in 1998 were $18.4 million.
EURO
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign "legacy"
currencies, and adopted the Euro as their new common legal currency. As of
that date, the Euro began trading on currency exchanges and the legacy
currencies will remain legal tender in the participating countries for a
transition period between January 1, 1999 and January 1, 2002.
The Euro conversion may affect cross-border competition by creating greater
cross-border price transparency. The Company is assessing its
pricing/marketing strategy in order to ensure that it remains competitive in a
broader European market. The Company has assessed its information technology
systems to allow for transactions to take place in both the legacy currencies
and the Euro and the eventual elimination of the legacy currencies, and is
reviewing whether certain existing customer pricing and vendor contracts will
need to be modified. The currency risk and risk management for operations in
participating countries may be reduced as the legacy currencies are converted
to the Euro. Final accounting, tax and governmental legal and regulatory
guidance are not available. The Company is evaluating issues involving
introduction of the Euro. The Company began processing customer orders and
invoicing in Euro during the first week of January 1999. Based on current
information and current assessments, the Company does not expect that the Euro
conversion will have a material adverse effect on its business or financial
condition.
18
<PAGE>
YEAR 2000
The Company is aware of the "Year 2000" issue that will affect certain
products and systems that were not designed to properly handle the transition
between the twentieth and twenty-first centuries. The Company has recognized
the need to ensure that its business operations will not be adversely impacted
by the Year 2000. Accordingly, the Company has authorized an internal team to
assess the Company's Year 2000 readiness and to determine the steps necessary
to address its Year 2000 issues. Among the areas that have been or are being
assessed are the Company's internal information systems, its manufacturing
equipment, its facilities and its products. In addition, the team has begun
the assessment of the Year 2000 readiness of the Company's key suppliers and
financial institutions.
As part of the assessment of its Year 2000 readiness, the Company has
identified and substantially completed testing of its key internal information
systems (which includes order entry, manufacturing and financial systems) as
well as its facilities, manufacturing and other key systems for Year 2000
compliance. The testing to date has identified no significant issues. By mid-
1999, the Company expects to complete implementation of all modifications or
replacements necessary to make all key systems Year 2000 compliant.
The Company has nearly completed its testing of the Year 2000 compliance of
its products. A large majority of the Company's products do not present Year
2000 compliance issues, and for those products that do present issues the
Company has communicated with its customers regarding appropriate solutions.
In addition to testing of the Company's internal systems and its products,
the Company has begun implementing its plan of communication with its
suppliers and financial institutions regarding their Year 2000 readiness and
the Year 2000 compliance of the products and services that they provide to the
Company. As of December 31, 1998 the Company has not identified any important
Year 2000 readiness issues of its key supply-chain partners. The Company
expects to substantially complete its risk analysis and to develop contingency
plans where reasonably possible for dealing with any risks raised by such non-
readiness before July 1999.
The Company currently estimates that the total costs that will be incurred
in its Year 2000 assessment and remediation program will be in the range of
$1.0 million to $3.0 million, of which approximately $0.5 million has been
incurred through December 31, 1998. Incremental spending has not been and is
not expected to be material because most Year 2000 readiness costs will be met
with amounts that are normally budgeted for procurement and maintenance of the
Company's information systems and infrastructure. However, the redirection of
spending to the implementation of its Year 2000 readiness program may in some
instances delay productivity improvements.
The Year 2000 presents a number of risks and uncertainties that could affect
the Company notwithstanding the successful implementation of its Year 2000
readiness program. Those risks and uncertainties include, but are not limited
to, failure of utilities or transportation systems, competition for personnel
skilled in remediation of Year 2000 issues, and the nature of government
responses to the Year 2000.
Though the Company continues to believe that the Year 2000 will not have a
material impact on its business, financial condition or results of operations,
the occurrence of any of the above risks or uncertainties or the failure to
successfully implement the Company's Year 2000 readiness program could result
in such a material impact.
LEGAL PROCEEDINGS
On May 2, 1997, the Environmental Quality Board ("EQB") of Puerto Rico
served an administrative order on Millipore Cidra, Inc., a wholly-owned
subsidiary of the Company. The administrative order ("EQB order") alleged: (i)
that the nitrocellulose filter membrane scrap produced by Millipore Cidra's
manufacturing operations is a hazardous waste as defined in EQB regulations;
(ii) that Millipore Cidra, Inc. failed to manage, transport and
19
<PAGE>
dispose of the nitrocellulose membrane scrap as a hazardous waste; and (iii)
that such failure violated EQB regulations. The EQB order proposed penalties
in the amount of $96.5 million and ordered Millipore Cidra, Inc. to manage the
nitrocellulose membrane scrap as a hazardous waste. The Company recorded a
charge of $5.0 million in the first quarter of 1998 reflecting its costs to
settle this matter.
The Company also recorded a charge of $3.1 million in the first quarter of
1998 reflecting its costs to settle a separate lawsuit with an intervening
party in the EQB administrative case described above.
The Company recorded a charge of $3.7 million in the first quarter of 1998
to settle a patent lawsuit with Mott Metallurgical Corporation. In the
lawsuit, each party claimed infringement of one of its patents by the other.
As part of the settlement, the parties agreed to cross license the two patents
at issue.
The Company and Waters Corporation were engaged in an arbitration proceeding
and a related litigation in the Superior Court, Middlesex, Massachusetts, both
of which commenced in the second quarter of 1995 with respect to the amount of
assets required to be transferred by the Company's Retirement Plan in
connection with the Company's divestiture of its former Chromatography
Division. In the second quarter of 1996, Waters filed a Complaint in the
Federal District Court of Massachusetts alleging that the Company's operation
of its Retirement Plan violated ERISA and certain sections of the Internal
Revenue Code. Judgments in the Company's favor were handed down by both the
Massachusetts Superior Court and the Federal District Court in May 1997 and
July 1997, respectively. Waters appealed the federal court judgment, which was
affirmed by the United States Court of Appeals for the First Circuit by
opinion dated April 3, 1998. On June 2, 1998, the Company transferred $2.4
million (including interest through the date of transfer) from its Retirement
Plan to the Waters Retirement Plan as provided by the amended and restated
Purchase and Sale Agreement. In order to fund the transfer, in the second
quarter of 1998 the Company made a contribution of $2.2 million to its
Retirement Plan in accordance with ERISA funding requirements.
BUSINESS OUTLOOK AND UNCERTAINTIES
The following statements are based on current expectations. These statements
are forward looking and actual results may differ materially.
Sales: The semiconductor industry in which the Microelectronics business
segment participates is highly cyclical. The current downturn began in the
middle of 1996 and is expected to continue into 1999. Independent market
research for the semiconductor industry suggests that a moderate growth cycle
will begin in the second half of 1999 with stronger growth in 2000. However,
capital equipment sales which represents approximately 40 percent of
Microelectronics revenues could lag the industry upturn due to excess capacity
in certain segments of the market.
The Biopharmaceutical & Research segment has demonstrated relatively stable
patterns of revenue growth. Customers in this segment, particularly those
involved in the production of sterile drugs, purchase standardized products
for use in validated production processes. Accordingly, it is important to
participate in the development of new drugs/New Chemical Entities in order to
be designed into the ultimate manufacturing process. Adoption of new
technologies and products requires a lengthy validation process prior to
adoption. The growth of this segment is highly leveraged on the development
and approval of New Chemical Entities. It is difficult to ascertain the number
or timing of such approvals, however, the number of drugs at various stages in
the approval process has increased significantly over the past two years. The
remaining driver of this segment is research and development spending which
has been relatively stable and is expected to continue with growth in the mid
single digits.
Both of the Company's business segments were adversely impacted by the
financial difficulties in the Asian economies, which began in late 1997 and
continued through 1998. The continuation of these conditions would moderate
the growth rate of both segments.
20
<PAGE>
Approximately 60 percent of the Company's sales are to customers outside of
the United States and are generally made in local currency. As previously
noted, 1998 sales and earnings were negatively impacted by a strong US dollar,
particularly against the Japanese yen and the Korean won. Late in 1998, both
of these currencies began to show signs of strengthening. However, in early
1999, European currencies have weakened offsetting the impact of the stronger
Asian currencies. Therefore if foreign exchange rates remain at the March 3,
1999 level, there will be a minimal foreign exchange impact on first quarter
1999 and full-year 1999 reported sales growth as compared to 1998. Any change
in foreign exchange rates will be reflected in the results of operations.
Gross Margins: The Company expects gross margin percentages in 1999 to
improve as compared with those of 1998. Margins will benefit from the impact
of various restructuring programs and the increased volume in the Company's
manufacturing plants to support anticipated sales growth. To the extent that
foreign currency exchange rates relative to the U.S. dollar remain at March 3,
1999 levels, first quarter 1999 and full year margins will not be
significantly impacted from foreign currency exchange rate fluctuations.
Operating Expenses: The Company expects that operating expenses in local
currencies, as a percentage of sales, in 1999 will be consistent with the
percentage achieved in previous years.
Interest Expense: The Company expects net interest expense in 1999 will be
slightly higher than 1998 as a result of the revised terms for the Credit
Agreement and the 2004 note, as previously noted, net of the impact of
anticipated reduced short-term borrowings.
Provision for Income Taxes: The effective tax rate in 1999 is projected to
be in the range of 21 percent; consistent with the effective rate for 1998,
excluding the effect of the restructuring program. The tax rate estimate is
based on the Company's current expectations for 1999 income and current tax
law and, therefore, is subject to change. At December 31, 1998, the Company
had a net deferred tax asset of $108.5 million. Although realization of the
asset is not assured, the Company believes it is more likely than not that
this net deferred tax asset will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced if the near term
estimates of future taxable income are reduced, which could result in the
Company's 1999 effective tax rate increasing above the expected range of 21
percent.
Capital Spending: The Company expects to spend between $40.0 to $45.0
million for fixed asset additions in 1999. The Company does not believe it
needs to significantly expand or add manufacturing capacity in 1999 to handle
its anticipated 1999 sales growth. The Company will continue to invest in
tooling within its manufacturing plants and in information technology.
Accordingly, the Company also expects that 1999 depreciation expense will be
higher than 1998 depreciation expense.
FORWARD-LOOKING STATEMENTS
The matters discussed herein, as well as in future oral and written
statements by management of the Company, that are forward-looking statements,
are based on current management expectations that involve substantial risks
and uncertainties which could cause actual results to differ materially from
the results expressed in, or implied by, these forward-looking statements.
When used herein or in such statements, the words "anticipate", "believe",
"estimate", "expect", "may", "will", "should" or the negative thereof and
similar expressions as they relate to the Company or its management are
intended to identify such forward-looking statements. In addition to the
matters discussed herein, potential risks and uncertainties that could affect
the Company's future operating results include, without limitation, foreign
exchange rates; increased regulatory concerns on the part of the
biopharmaceutical industry; further consolidation of drug manufacturers;
competitive factors such as new membrane technology, and/or a new method of
chip manufacture which relies less heavily on purified chemicals and gases;
availability of component products on a timely basis; inventory risks due to
shifts in market demand; change in product mix; conditions in the economy in
general, including uncertainties in selected Asian economies, and in the
microelectronics manufacturing market in particular; the difficulty in
21
<PAGE>
integrating acquired companies; the failure to realize the savings
contemplated by certain restructuring activities; potential environmental
liabilities; the inability to utilize technology in current or planned
products due to overriding rights by third parties, and the other risk factors
described elsewhere in this Form 10-K Annual Report, and in particular the
matters described in Item 1 above under the heading "Environmental Matters".
Specific reference is also made to the risks and uncertainties described in
the Registration Statement on Form S-3 (Registration 333-23025) filed by the
Company in connection with its offering of $300 million of Debt Securities in
May 1997, and, in particular, to those described under "Factors Which May
Affect Future Results". See also "Legal Proceedings" and "Business Outlook and
Uncertainties" above.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information called for by this item is set forth under the heading
"Market Risk" in Management's Discussion and Analysis contained in Item 7
above which information is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
The information called for by this item is set forth in the Financial
Statements at the end of this report commencing at the pages indicated below:
<TABLE>
<S> <C>
Consolidated Statements of Income
for the three years ended December 31, 1998, 1997 and 1996........... F-2
Consolidated Balance Sheets
for the years ended December 31, 1998 and 1997....................... F-3
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1998, 1997 and 1996........... F-4
Consolidated Statements of Cash Flows
for the three years ended December 31, 1998, 1997 and 1996........... F-5
Notes to Consolidated Financial Statements............................ F-6
Report of Independent Accountants..................................... F-26
Quarterly Results (Unaudited)......................................... F-27
</TABLE>
All of the foregoing Financial Statements are hereby incorporated by
reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of Millipore.
The information called for by this item with respect to registrant's
directors and compliance with Section 16(a) of the Securities Exchange Act of
1934 as amended is set forth under the caption "Management and Election of
Directors--Nominees for Election as Directors" in Millipore's definitive Proxy
Statement for Millipore's Annual Meeting of Stockholders to be held on April
22, 1999, and to be filed with the Securities and Exchange Commission on or
about March 19, 1999, which information is hereby incorporated herein by
reference.
Information called for by this item with respect to registrant's executive
officers is set forth under "Executive Officers of Millipore" in Item 1 of
this report.
Item 11. Executive Compensation.
The information called for by this item is set forth under the caption
"Management and Election of Directors-Executive Compensation" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting
22
<PAGE>
of Stockholders to be held on April 22, 1999, and to be filed with the
Securities and Exchange Commission on or about March 19, 1999, which
information is hereby incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this item is set forth under the caption
"Ownership of Millipore Common Stock" in Millipore's definitive Proxy
Statement for Millipore's Annual Meeting of Stockholders to be held April 22,
1999, and to be filed with the Securities and Exchange Commission on or about
March 19, 1999, which information is hereby incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
This item is not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial Statements.
The following Financial Statements are filed as part of this report (See
index on page F-1):
Consolidated Statements of Income for the three years ended
December 31, 1998, 1997 and 1996
Consolidated Balance Sheets for the years ended December 31,
1998 and 1997
Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants
Quarterly Results (Unaudited)
2. Financial Statement Schedules.
No financial statement schedules have been included because they are not
applicable or not required under Regulation S-X.
3. List of Exhibits.
A. The following exhibits are incorporated by reference:
<TABLE>
<CAPTION>
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
<C> <S> <C>
(3)(i) Restated Articles of Form 10-K Report for year ended December
Organization, as 31, 1996 [Commission File No. 0-1052]
amended May 6, 1996
(ii) By Laws, as amended Form 10-K Report for year ended December
31, 1990 [Commission File No. 0-1052]
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
<C> <S> <C>
(4) Indenture dated as of Registration Statement on Form S-4
May 3, 1995, relating to (No. 33-58117) and an accompanying Form T-1)
the issuance of
$100,000,000 principal
amount of Company's
6.78% Senior Notes due
2004
(4) Indenture dated as of Registration Statement on Form S-3
April 1, 1997, relating (No. 333-23025) and an accompanying Form T-1)
to the issuance of Debt
Securities in Series
(10) Shareholder Rights Form 8-K Report for April, 1998 [Commission
Agreement dated as of File No. 0-1052]
April 15, 1988, as
amended and restated
April 16, 1998 between
Millipore and The First
National Bank of Boston
Distribution Agreement, Form 10-K Report for the year ended
dated as of July 1, December 31, 1996 [Commission File
1996, by and among No. 0-1052]
Company and Fisher
Scientific Company
Revolving Credit Form 10-K Report for the year ended
Agreement, dated as of December 31, 1996 [Commission File
January 22, 1997, among No. 0-1052]
Millipore Corporation
and The First National
Bank of Boston, ABM AMRO
Bank N.V. and certain
other lending
institutions
Long Term Restricted Form 10-K Report for the year ended
Stock (Incentive) Plan December 31, 1984 [Commission File
for Senior Management* No. 0-1052]
1995 Combined Stock Form 10-K Report for the year ended
Option Plan, as amended* December 31, 1997 [Commission File
No. 0-1052]
1985 Combined Stock Form 10-K Report for the year ended
Option Plan* December 31, 1985 [Commission File
No. 0-1052]
Supplemental Savings and Form 10-K Report for the year ended
Retirement Plan for Key December 31, 1984 [Commission File
Salaried Employees of No. 0-1052]
Millipore Corporation*
Executive Termination Form 10-K Report for the year ended
Agreement* December 31, 1984 [Commission File
No. 0-1052]
1995 Employee Stock Form 10-K Report for the year ended
Purchase Plan December 31, 1994 [Commission File
No. 0-1052]
1995 Management Form 10-K Report for the year ended
Incentive Plan* December 31, 1994 [Commission File
No. 0-1052]
(11) Computation of Per Share The computation can be clearly determined
Earnings from the material set forth in Note F to
the Financial Statements contained on page
F-13
</TABLE>
- --------
* A "management contract or compensatory plan"
24
<PAGE>
B. The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
Reg. S-K
Item 601(b)
Reference Document Filed Herewith
----------- -----------------------
<C> <S>
(10) Second Amendment, effective as of September 30, 1998, to
Revolving Credit Agreement, dated as of January 22, 1997, among
Millipore Corporation and The First National Bank of Boston, ABM
AMRO Bank N.V. and certain other lending institutions
Note Purchase and Exchange Agreement, as amended through
November 2, 1998, between Millipore Corporation and Metropolitan
Life Insurance Company
Form of letter agreement with directors relating to the deferral
of directors fees and conversion into phantom stock units (a
"Management Contract or Compensatory Plan")
1989 Stock Option Plan for Non-Employee Directors (a "Management
Contract or Compensatory Plan")
Commercial Lease Agreement between EBP 3, Ltd. and Millipore
Corporation with respect to Premises located in Allen, Texas
(21) Subsidiaries of Millipore
(23) Consent of Independent Accountants relating to the incorporation
of their report on the Consolidated Financial Statements into
Company's Securities Act Registration Nos. 2-72124, 2-85698, 2-
91432, 2-97280, 33-37319, 33-37323, 33-11-790, 33-59005 and 33-
10801 on Form S-8 and Securities Act Registration Nos. 2-84252,
33-9706, 33-22196, 33-47213 and 333-23025 on Form S-3, and 33-
58117 on Form S-4.
(24) Power of Attorney
(27) Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed by Registrant during the last quarter
of the fiscal year ended December 31, 1998.
(c) Exhibits.
The Company hereby files as exhibits to this Annual Report on Form 10-K
those exhibits listed in Item 14(a)(3)(B) above, which are attached hereto.
(d) Financial Statement Schedules.
No financial statement schedules have been included because they are not
applicable or are not required under Regulation S-X.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Dated: March 18, 1999 Millipore Corporation
/s/ Jeffrey Rudin
By __________________________________
Jeffrey Rudin,
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. William Zadel Chairman, President, Chief March 18, 1999
______________________________________ Executive Officer, and
C. William Zadel Director
/s/ Francis J. Lunger Vice President, Chief March 18, 1999
______________________________________ Financial Officer
Francis J. Lunger
/s/ Kathleen B. Allen Corporate Controller March 18, 1999
______________________________________
Kathleen B. Allen
* Director March 18, 1999
______________________________________
Charles D. Baker
* Director March 18, 1999
______________________________________
Samuel C. Butler
* Director March 18, 1999
______________________________________
Robert C. Bishop
* Director March 18, 1999
______________________________________
Robert E. Caldwell
* Director March 18, 1999
______________________________________
Elaine L. Chao
* Director March 18, 1999
______________________________________
Maureen A. Hendricks
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director March 18, 1999
______________________________________
Mark Hoffman
* Director March 18, 1999
______________________________________
Thomas O. Pyle
* Director March 18, 1999
______________________________________
John F. Reno
/s/ Jeffrey Rudin
*By: _________________________________
Jeffrey Rudin, Attorney-in-Fact
</TABLE>
27
<PAGE>
MILLIPORE CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Consolidated Statements of Income
for the three years ended December 31, 1998, 1997 and 1996................ F-2
Consolidated Balance Sheets
for the years ended December 31, 1998 and 1997............................ F-3
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1998, 1997 and 1996................ F-4
Consolidated Statements of Cash Flows
for the three years ended December 31, 1998, 1997 and 1996................ F-5
Notes to Consolidated Financial Statements................................. F-6
Report of Independent Accountants.......................................... F-26
Quarterly Results (Unaudited).............................................. F-27
</TABLE>
F-1
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31
----------------------------
1998 1997 1996
-------- -------- --------
(In thousands except per
share data)
<S> <C> <C> <C>
Net sales....................................... $699,307 $758,919 $618,735
Cost of sales................................... 364,467 342,237 249,443
-------- -------- --------
Gross profit.................................. 334,840 416,682 369,292
Selling, general and administrative expenses.... 236,521 245,585 202,140
Research and development expenses............... 53,578 55,899 38,429
Purchased research and development expense...... -- 114,091 68,311
Restructuring charges........................... 33,641 -- --
Settlement of litigation........................ 11,766 -- --
-------- -------- --------
Operating (loss) income....................... (666) 1,107 60,412
Gain on sale of equity securities............... 35,594 8,330 5,329
Interest income................................. 3,090 2,937 2,780
Interest expense................................ (29,474) (30,484) (11,498)
-------- -------- --------
Income (loss) from continuing operations before
income taxes................................... 8,544 (18,110) 57,023
(Benefit) provision for income taxes............ (1,320) 20,674 13,401
-------- -------- --------
Net income (loss) from continuing operations.... 9,864 (38,784) 43,622
Net loss on disposal of discontinued
operations..................................... 5,847 -- --
-------- -------- --------
Net income (loss)............................... $ 4,017 $(38,784) $ 43,622
======== ======== ========
Basic net income (loss) per share
Income (loss) from continuing operations...... $ 0.22 $ (0.89) $ 1.00
Net income (loss) per share................... $ 0.09 $ (0.89) $ 1.00
Diluted net income (loss) per share
Income (loss) from continuing operations...... $ 0.22 $ (0.89) $ 0.98
Net income (loss) per share................... $ 0.09 $ (0.89) $ 0.98
Weighted average shares outstanding
Basic......................................... 43,864 43,527 43,602
Diluted....................................... 44,289 43,527 44,457
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
--------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 36,022 $ 20,269
Accounts receivable (less allowance for doubtful
accounts of $3,149 in 1998 and $3,010 in 1997)........ 154,258 176,585
Inventories............................................ 107,241 127,192
Other current assets................................... 7,231 28,362
--------- ---------
Total current assets................................. 304,752 352,408
Property, plant and equipment, net....................... 237,414 220,094
Intangible assets (less accumulated amortization of
$17,289 in 1998 and $10,000 in 1997).................... 76,507 77,394
Deferred income taxes.................................... 108,545 88,760
Other assets............................................. 35,222 34,150
--------- ---------
Total assets......................................... $ 762,440 $ 772,806
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable.......................................... $ 171,340 $ 165,576
Accounts payable....................................... 39,729 46,088
Accrued expenses....................................... 75,544 74,856
Dividends payable...................................... 4,847 4,369
Accrued retirement plan contributions.................. 6,931 7,088
Accrued income taxes payable........................... 290 13,458
--------- ---------
Total current liabilities............................ 298,681 311,435
Long-term debt........................................... 299,110 286,844
Other liabilities........................................ 27,741 25,533
Commitments and contingent liabilities................... -- --
Shareholders' equity:
Common stock, par value $1.00 per share, 120,000 shares
authorized;
56,988 shares issued as of December 31, 1998 and
1997.................................................. 56,988 56,988
Additional paid-in capital............................. 11,780 10,927
Retained earnings...................................... 472,746 490,289
Accumulated other comprehensive loss................... (27,668) (21,720)
--------- ---------
513,846 536,484
Less: Treasury stock at cost, 12,921 and 13,291 shares
as of December 31, 1998 and 1997, respectively (376,938) (387,490)
--------- ---------
Total shareholders' equity........................... 136,908 148,994
--------- ---------
Total liabilities and shareholders' equity............... $ 762,440 $ 772,806
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-3
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income (Loss)
----------------------------------
Common Stock Treasury Stock
-------------- Additional Unrealized ------------------ Total
Par Paid-in Retained gain (loss) Translation Shareholders'
Shares Value Capital Earnings on securities Adjustments Total Shares Cost Equity
------ ------- ---------- -------- ------------- ----------- -------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995............ 56,988 $56,988 $ -- $523,633 $ -- $ 375 $ 375 (12,727) $(354,521) $226,475
====== ======= ======= ======== ======= ======== ======== ======= ========= ========
Comprehensive
income:
Net income...... 43,622 43,622
Unrealized
holding gains
arising during
period, net of
tax of $9,075.. 13,613
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$1,252......... (4,077)
-------
Net unrealized
gain on
securities
available for
sale, net of
income tax
expense of
$6,358......... 9,536 9,536 9,536
Translation
adjustments.... (8,655) (8,655) (8,655)
--------
Total
comprehensive
income......... 44,503
Cash dividends
declared, $0.35
per share....... (15,261) (15,261)
Treasury stock
acquired........ (1,462) (58,362) (58,362)
Impact of stock
plans........... (3,396) 523 14,846 11,450
U.S. tax benefit
from stock plan
activity........ 8,800 8,800
------ ------- ------- -------- ------- -------- -------- ------- --------- --------
Balance at
December 31,
1996............ 56,988 $56,988 $ 8,800 $548,598 $ 9,536 $ (8,280) $ 1,256 (13,666) $(398,037) $217,605
====== ======= ======= ======== ======= ======== ======== ======= ========= ========
Comprehensive
loss:
Net loss........ (38,784) (38,784)
Unrealized
holding gains
arising during
period, net of
tax of
$10,107........ 15,160
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$1,749......... (6,581)
-------
Net unrealized
gain on
securities
available for
sale, net of
income tax
expense of
$5,719......... 8,579 8,579 8,579
Translation
adjustments.... (31,555) (31,555) (31,555)
--------
Total
comprehensive
loss........... (61,760)
Cash dividends
declared, $0.39
per share....... (17,028) (17,028)
Impact of stock
plans........... (2,497) 375 10,547 8,050
U.S. tax benefit
from stock plan
activity........ 2,127 2,127
------ ------- ------- -------- ------- -------- -------- ------- --------- --------
Balance at
December 31,
1997............ 56,988 $56,988 $10,927 $490,289 $18,115 $(39,835) $(21,720) (13,291) $(387,490) $148,994
====== ======= ======= ======== ======= ======== ======== ======= ========= ========
Comprehensive
loss:
Net income...... 4,017 4,017
Unrealized
holding gains
arising during
period, net of
tax of $6,564.. 9,846
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$7,475......... (28,119)
-------
Net unrealized
loss on
securities
available for
sale, net of
income tax
benefit of
$(12,182)...... (18,273) (18,273) (18,273)
Translation
adjustments.... 12,325 12,325 12,325
--------
Total
comprehensive
loss........... (1,931)
Cash dividends
declared, $0.43
per share....... (18,905) (18,905)
Impact of stock
plans........... (2,655) 370 10,552 7,897
U.S. tax benefit
from stock plan
activity........ 853 853
------ ------- ------- -------- ------- -------- -------- ------- --------- --------
Balance at
December 31,
1998............ 56,988 $56,988 $11,780 $472,746 $ (158) $(27,510) $(27,668) (12,921) $(376,938) $136,908
====== ======= ======= ======== ======= ======== ======== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
------------------------------
1998 1997 1996
-------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................. $ 4,017 $ (38,784) $ 43,622
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Restructuring charges....................... 42,816 -- --
Net loss on disposal of discontinued
operations................................. 5,847 -- --
Purchased research and development expense.. -- 114,091 68,311
Write-off of acquired inventory step-up..... -- 5,000 --
Gain on sale of securities.................. (35,594) (8,330) (5,329)
Depreciation and amortization............... 44,409 40,661 30,587
Deferred income tax (benefit) provision..... (12,762) 5,835 (8,212)
Change in operating assets and liabilities:
Decrease (increase) in accounts
receivable............................... 32,327 (24,468) 247
Decrease (increase) in inventories........ 21,053 (13,361) (11,612)
Decrease (increase) in other current
assets................................... 3,558 (6,937) 1,661
(Increase) in other assets................ (267) (8,648) (8,747)
(Decrease) in accounts payable and accrued
expenses................................. (37,972) (21,629) (11,087)
(Decrease) increase in accrued retirement
plan contributions....................... (342) 2,557 (36)
(Decrease) increase in accrued income
taxes.................................... (15,545) 1,050 1,723
Other..................................... (10) 6,942 1,058
-------- --------- ---------
Net cash provided by operating activities..... 51,535 53,979 102,186
Cash Flows from Investing Activities:
Additions to property, plant and equipment.... (59,787) (41,063) (30,427)
Additions to intangible assets................ (3,953) (6,135) (1,760)
Acquisitions, net of cash acquired............ -- (159,158) (122,576)
Other investments............................. -- (1,646) (4,010)
Net cash used by discontinued businesses...... (2,255) (3,516) (7,939)
Proceeds from sale of securities.............. 35,594 8,330 5,745
-------- --------- ---------
Net cash used in investing activities......... (30,401) (203,188) (160,967)
Cash Flows from Financing Activities:
Treasury stock acquired....................... -- -- (58,362)
Issuance of treasury stock under stock plans.. 6,274 6,956 11,450
Net change in short-term debt................. 5,821 65,036 20,045
Proceeds from issuance of long-term debt...... -- 197,950 124,397
Payments on long-term debt.................... -- (126,018) --
Dividends paid................................ (18,427) (16,558) (14,899)
-------- --------- ---------
Net cash (used by) provided by financing
activities................................... (6,332) 127,366 82,631
Effect of foreign exchange rates on cash and
cash equivalents............................. 951 (4,758) (738)
-------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 15,753 (26,601) 23,112
Cash and cash equivalents on January 1........ 20,269 46,870 23,758
-------- --------- ---------
Cash and cash equivalents on December 31...... $ 36,022 $ 20,269 $ 46,870
======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
NOTE A-- Summary of Significant Accounting Policies
Nature of Operations
Millipore Corporation and its subsidiaries are engaged primarily in the
development, manufacture and sale of products which are based on separations
technology and which are used for the analysis, identification, monitoring and
purification of liquids and gasses. To a lesser extent, Millipore also
generates revenues from the manufacture and sale of products based on electro-
mechanical and pressure differential technologies to control critical aspects
of the manufacturing process for integrated circuits (semiconductors).
Millipore is an integrated multinational manufacturer and markets its products
throughout the world. The principal customer groups to which the Company's
products are sold include pharmaceutical companies, biotechnology companies,
food and beverage companies, university and government laboratories and
research institutes as well as semiconductor fabrication companies and OEM and
material suppliers to the semiconductor industry.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. Intercompany balances and
transactions have been eliminated.
Translation of Foreign Currencies
For all of the Company's foreign subsidiaries, assets and liabilities are
translated at exchange rates prevailing on the balance sheet date, revenues
and expenses are translated at average exchange rates prevailing during the
period, and elements of shareholders' equity are translated at historical
rates. Any resulting translation gains and losses are reported separately in
shareholders' equity. The aggregate transaction gains and losses included in
the consolidated statements of income are not material.
Cash Equivalents
Cash equivalents consisting primarily of time deposits, are classified as
available for sale and are carried at cost plus accrued interest, which
approximates market value. All cash equivalents have maturities of three
months or less.
Inventories
The Company values its inventories at actual cost on a first-in, first-out
(FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Expenditures for
maintenance and repairs are charged to expense while the costs of significant
improvements which extend the life of the underlying asset are capitalized.
Assets are primarily depreciated using straight-line methods. Upon retirement
or sale, the cost of assets disposed and the related accumulated depreciation
are eliminated and related gains or losses reflected in income.
The estimated useful lives of the Company's depreciable assets are as
follows:
<TABLE>
<S> <C>
Leasehold Improvements................................. Life of the Lease
Buildings and Improvements............................. 10-40 Years
Production and Other Equipment......................... 3-15 Years
</TABLE>
F-6
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Intangible Assets
Intangible assets consist primarily of patents, acquired technology, trade
names, licenses and goodwill. The assets are recorded at cost and amortized on
a straight-line basis over periods ranging from 3 to 20 years. On a periodic
basis the value of the intangible assets is reviewed to determine if
impairment has taken place due to changed business conditions or technological
obsolescence. The amount of such impairment, if any, is computed by comparing
the present value of the future cash flows associated with the underlying
intangible asset to the then current net book value. If an impairment exists,
the net book value of the intangible asset is reduced accordingly.
Marketable Securities
The Company's investments in equity securities are categorized as available-
for-sale as defined by Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
Equity securities are included in both Other current assets and Other assets
in the accompanying consolidated balance sheets and are recorded at fair
value. The cost of each investment is determined primarily on a specific
identification method. Unrealized holding gains and losses are reflected, net
of income tax, as a separate component of accumulated other comprehensive
loss. Marketable securities had a fair value of $2,078 as of December 31, 1998
which approximated cost.
Financial Instruments
The Company has entered into U.S. dollar to Japanese Yen debt swap
agreements and foreign exchange option contracts to manage interest and
foreign currency exchange rate exposures. The Company does not hold or issue
derivative financial instruments for trading purposes.
The cash differential paid or received under the interest rate component of
the debt swap agreements are accrued and recognized as an adjustment to
interest expense. Net amounts receivable or payable to counterparties are
included in Other Current Assets or Accrued Expenses. Cash flows related to
the interest rate swap are classified as part of Operating Activities in the
Consolidated Statement of Cash Flows consistent with the interest payments on
the underlying debt. The U.S. dollar to Japanese yen principal swap is
designated and is effective as a hedge of the Company's net investment
exposure. Unrealized gains and losses are recorded as an adjustment of the
underlying Long-Term Debt and the cumulative Translation Adjustments in
Shareholders' Equity. The ultimate gain or loss realized upon maturity of the
agreements is recognized as a translation adjustment in Shareholders' Equity.
The Company has entered into option contracts to hedge against significant
fluctuations in the value of the U.S. dollar versus the Japanese yen. Gains
realized on the exercise of the option contracts are recorded as an offset to
the loss on the underlying transactions. Contract premiums are recorded in
Other Current Asset and amortized over the term of the contract. The realized
gains and the amortization of the contract premiums are recorded in cost of
sales. Cash flows related to the exercise of the option contracts are included
in Operating Activities in the Consolidated Statement of Cash Flows.
Income Taxes
Deferred tax assets reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes. With respect to the
unremitted earnings of the Company's foreign and Puerto Rican subsidiaries,
deferred taxes are provided only on amounts expected to be repatriated.
F-7
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Treasury Stock
Treasury stock is recorded at its cost on the date acquired and is relieved
at its weighted average cost upon reissuance. The excess of cost over the
proceeds of reissued treasury stock is charged to retained earnings.
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing the net income
(loss) for the period by the weighted average number of shares outstanding for
the period. Diluted net income (loss) per share is calculated by considering
the impact of common stock equivalents (outstanding stock options) as if they
were converted into common stock at the beginning of the period. Common stock
equivalents are not included in periods of net losses as they are anti-
dilutive.
Revenue Recognition
Sales of products and services are recorded principally at the time of
product shipment or performance of services. Certain contract revenues
associated with the Company's process equipment business are recorded on the
percentage of completion method. Revenue is recognized based on the ratio of
hours expended compared to the total estimated hours to complete the
construction of the process equipment. The cumulative impact of any revisions
in estimates of the percent complete is reflected in the period in which the
changes become known.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash and cash
equivalents, accounts receivable and derivative financial instruments.
The Company places its temporary cash and cash equivalents with high credit
qualified financial institutions, and, by policy, limits the amount of credit
exposure to any one financial institution.
Concentrations of credit risk with respect to accounts receivable is limited
due to the large number of customers comprising the Company's customer base,
and their dispersion across different industries and geographies. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to hedging instruments. The counterparties to
these contracts are major financial institutions. The Company continually
monitors its positions and the credit ratings of its counterparties and limits
the amount of contracts it enters into with any one party.
Use of Estimates in the Preparation of Financial Statements
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.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform with the 1998 presentation.
F-8
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
New Accounting Pronouncements
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income".
This statement establishes rules for the reporting of comprehensive income and
its components. Comprehensive income consists of net income or loss,
unrealized gain or loss on securities available for sale and foreign currency
translation adjustments and is presented in the Consolidated Statements of
Shareholders' Equity. The adoption of SFAS 130 had no impact on total
shareholders' equity.
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which specifies revised guidelines for
determining an entity's operating segments and the type and level of financial
information to be disclosed. SFAS 131 establishes a new framework on which to
base segment reporting. Note Q reflects the Company's segment disclosure in
accordance with SFAS 131.
In 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" which establishes new increased
requirements for disclosure of a Company's pensions and other postretirement
benefit obligations. The Company adopted and included the increased disclosure
requirements of SFAS No. 132 in Note P.
In 1998, the Company adopted Statement of Position 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use" ("SOP 98-
1"), which provides guidance on applying generally accepted accounting
principles in addressing whether and under what conditions the costs of
internal-use software should be capitalized. The adoption of SOP 98-1 was not
material to the results of operations for 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective January 1, 2000 for the Company.
SFAS 133 establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company is currently assessing the impact of
this new statement on its consolidated financial position, liquidity and
results of operations.
NOTE B--Subsequent Event
On February 5, 1999, the Company received a letter ("Comment Letter") from
the Securities and Exchange Commission in which the agency inquired, among
other things, about certain charges taken in 1997 and 1996 for Purchased
Research and Development Expenses recorded in connection with the Amicon and
Tylan acquisitions as discussed in Note E. The Company believes its accounting
related to the acquisitions was appropriate and in accordance with generally
accepted accounting principles. The Company is in the process of responding to
the Comment Letter.
NOTE C--Restructuring Charges and Provision for Excess Inventory
In the second quarter of 1998, the Company announced a restructuring program
which was undertaken to improve the competitive position of the Company by
streamlining worldwide operations and reducing the overall cost structure. The
program includes the consolidation of certain manufacturing operations,
realignment of various international subsidiary organizations to focus on
operating business units and discontinuance of non-strategic product lines. In
the third quarter of 1998, the Company recorded an expense associated with
these
F-9
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
activities of $42,816 ($29,115 after tax) including a restructuring charge of
$33,641 and a $9,175 charge against cost of sales for inventory and fixed
asset write-offs associated with the rationalization of its product offering
and elimination of non-strategic business lines. The non-strategic product
lines consisted of high pressure liquid chromotography equipment,
semiconductor fab monitoring and control software and various filtration
devices. The $33,641 restructuring charge included $18,290 of employee
severance costs, $1,788 for the write-down to fair value of fixed assets and
$7,667 for intangible assets associated with the discontinued product lines,
$3,847 of lease cancellation costs and $2,049 of contract termination costs.
As of December 31, 1998, there were no assets that remained in use which had
been written off and held for disposal as part of the restructuring program.
The restructuring initiatives combined with the consolidation of the
Company's microelectronics plants will result in the elimination of 620
positions worldwide (400 positions in manufacturing operations, 160 in
selling, general and administrative positions and 60 in research and
development). Notification to employees was completed in 1998, although a
small number of the employees affected will continue working in their existing
positions through 1999 with their related salary costs charged to operations
as incurred. Under the terms of the severance agreements, the Company expects
to pay severance and associated benefits through the early part of 2000.
Following is a summary of the restructuring charges and related reserve
balances at December 31, 1998:
<TABLE>
<CAPTION>
1998 1998 1998 Balance at
Restructuring Other Cash December 31,
Charge Activity Disbursements 1998
------------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Employee severance
costs................... $18,290 $ -- $5,447 $12,843
Lease cancellation
costs................... 3,847 -- 169 3,678
Contract terminations and
other costs............. 2,049 86 -- 1,963
Write-down of intangible
assets.................. 7,667 7,667 -- --
Write-down of fixed
assets.................. 1,788 1,788 -- --
------- ------ ------ -------
Total.................. $33,641 $9,541 $5,616 $18,484
======= ====== ====== =======
</TABLE>
The Company also recorded an incremental provision for excess and obsolete
inventory of $6,000 during the third quarter of 1998 in response to adverse
changes in demand attributable to recessionary conditions in Asia and the
slowdown in the semiconductor industry.
NOTE D--Discontinued Operations
In August 1994 the Company sold it's Waters Chromatography Division and, in
a separate transaction, sold certain assets of its non-membrane bioscience
business. At that time the Company recorded a $40,000 reserve in connection
with these transactions representing the estimate of costs to abandon
facilities, terminate employees, transfer employee benefit obligations and to
provide ongoing administrative and contract support services.
During the third quarter of 1998 the Company completed its accounting for
these divestitures which resulted in the recording of a $7,542 ($5,847 net of
income taxes) loss on the disposal of discontinued operations. This charge
reflects the final determination of the value of the remaining assets and
liabilities associated with these divested operations.
In partial consideration for the sale of its non-membrane bioscience
instrument division in 1994, the Company received four thousand shares of
preferred stock of PerSeptive Biosystems, Inc ("PerSeptive"). The preferred
stock was redeemable in four equal annual installments of $10,000, commencing
in August 1995, in the equivalent value as of each redemption date in common
stock, $0.01 par value of PerSeptive. Effective
F-10
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
January 22, 1998, PerSeptive completed a merger with The Perkin-Elmer
Corporation ("Perkin-Elmer") pursuant to which PerSeptive became a wholly-
owned subsidiary of Perkin-Elmer. Pursuant to this merger all of the Company's
remaining holdings in PerSeptive, which consisted of 2,213,357 shares of
common stock and the one thousand shares of preferred stock were converted
into 586,541 shares of Perkin-Elmer common stock. The Company sold all 586,541
shares of Perkin-Elmer common stock in the first quarter of 1998 and recorded
a gain on the sale of these securities of $32,500.
At December 31, 1997, the 2,213,357 shares of PerSeptive common stock were
considered available for sale in accordance with SFAS No. 115. These shares of
common stock were recorded at a fair value of $16,766, net of taxes, in Other
Current Assets. The $27,944 of gross unrealized gain related to these shares
was recorded in Shareholder's Equity, net of taxes of $11,178.
NOTE E--Acquisitions
On December 31, 1996, the Company acquired the net assets of the Amicon
Separation Science Business of W.R. Grace & Co. (Amicon) for approximately
$129,265 in cash, including transaction costs. Amicon manufactures protein
purification tools for the research laboratory and for biotechnology
manufacturing. The acquisition was accounted for as a purchase, and
accordingly, the purchase price has been allocated to the identifiable
tangible and intangible assets based on estimated fair market values of those
assets. The Company accrued approximately $27,000 for additional costs
associated with the acquisition. These costs include severance payable to
Amicon employees, abandonment of duplicate Amicon manufacturing and sales
facilities, and termination of certain Amicon contractual obligations. The
purchase included, at estimated fair value, current assets of $30,328,
property, plant and equipment of $15,474, other assets of $596 and the
assumption of liabilities of $9,197. Identifiable intangible assets were
valued at $50,753 and included $25,046 of tradenames and $6,857 of patented
and $18,850 of unpatented completed technology. These intangible assets will
be amortized over their estimated useful lives ranging from five to twenty
years. The value of in-process research and development for which technical
feasibility has not been achieved was $68,311 and was charged to earnings in
the fourth quarter of 1996. The purchase was financed through the Company's
Revolving Credit Agreement as discussed in Notes I and J.
On January 22, 1997, the Company completed a cash tender offer for all of
the outstanding common shares of Tylan General, Inc. (Tylan). Tylan, which
became a wholly-owned subsidiary on January 27, 1997, supplies precision mass
flow controllers, and pressure and vacuum measurement and control equipment to
the semiconductor industry. The aggregate purchase price, including the
assumption of Tylan debt and transaction costs, was $163,371. The acquisition
was accounted for as a purchase, and accordingly, the purchase price has been
allocated to the identifiable tangible and intangible assets based on
estimated fair market values of those assets. The Company accrued
approximately $32,000 for additional integration costs associated with the
acquisition. These costs include severance costs, abandonment and
consolidation of facilities, and termination of certain Tylan contractual
obligations. The final adjusted purchase price included at estimated fair
value, current assets of $42,544, property and equipment of $15,559, other
assets of $16,477 and liabilities of $22,042. Intangible assets were valued at
$28,742 and included $2,717 of tradenames, $5,698 of patented and $7,995 of
unpatented completed technology and $12,332 of goodwill. These intangible
assets are being amortized over their estimated useful lives ranging from five
to twenty years. The value of in-process research and development for which
technical feasibility has not been achieved was $114,091 and was charged to
earnings in the first quarter of 1997. The purchase was financed through the
Company's Revolving Credit Agreement discussed in Notes I and J.
In determining the valuation of in-process research and development projects
for both acquisitions, the discounted cash flow approach was used. A range of
discount rates from 25 percent to 35 percent was applied
F-11
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
depending upon the relative risk of the in-process technology and the market
risks for the related product. Revenue projections reflected the estimated
useful life of the technology and ranged from 5 to 12 years. Cash flows were
reduced in contemplation of on-going operating needs (including working
capital) to support the technology and by amounts associated with the use of
"core technology" in products under development.
The assumptions made regarding pricing, margins and expenses were consistent
with the acquired company's historical trends.
Following is a summary of the acquisition reserve for 1997 and 1998. The
beginning reserve balance represents the acquisition reserve accruals for both
Tylan and Amicon:
<TABLE>
<CAPTION>
Reserve
Beginning Balance at
Reserve Cash Asset December 31,
Balance Payments Write-offs 1997
------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Employee costs............... $31,903 $14,801 $ -- $17,102
Facilities-related costs..... 6,963 1,442 -- 5,521
Contract termination costs... 5,431 1,284 -- 4,147
Write-down of assets to fair
value....................... 6,594 -- 2,590 4,004
Other integration expenses... 8,109 5,815 -- 2,294
------- ------- ------ -------
Total...................... $59,000 $23,342 $2,590 $33,068
======= ======= ====== =======
<CAPTION>
Reserve Reserve
Balance at Balance at
December 31, Cash Asset December 31,
1997 Payments Write-offs 1998
------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Employee costs............... $17,102 $13,602 $ -- $ 3,500
Facilities-related costs..... 5,521 4,607 -- 914
Contract termination costs... 4,147 2,257 -- 1,890
Write-down of assets to fair
value....................... 4,004 -- 3,519 485
Other integration expenses... 2,294 1,979 -- 315
------- ------- ------ -------
Total...................... $33,068 $22,445 $3,519 $ 7,104
======= ======= ====== =======
</TABLE>
As of December 31, 1998, the Company has terminated 450 employees in
connection with these acquisitions (of which 300 where involved with
manufacturing operations and 150 with general and administrative functions).
As of December 31, 1998, the Company has vacated all of the acquired Tylan
manufacturing facilities (one in Texas and two in California) in the U.S. and
transferred the operations to the new facility in Allen, Texas. All of the
vacated facilities were under long-term lease agreements. Although the Company
has finalized the settlement on the acquired Texas site, the two California
sites are still in negotiation. The Company is continuing to pay severance to
terminated employees. The Company believes that the remaining acquisition
accruals of $7,104 at December 31, 1998 will be sufficient to satisfy its
future obligations arising from the implementation of its integration plans.
The following table reflects unaudited pro forma combined results for 1996
of the Company, Amicon and Tylan on the basis that both acquisitions had taken
place on January 1, 1996.
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Revenues......................................................... $824,555
Net Income....................................................... $ 26,175
Net Income per common share--Basic............................... $ 0.60
Shares used in computation....................................... 43,602
</TABLE>
F-12
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
These pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisitions had
been effective at the beginning of 1996. Pro forma results for 1997 resulting
from the acquisition of Tylan would not have been materially different from
the results reported.
NOTE F--Basic and Diluted Earnings per Share
For 1997, basic and diluted earnings per share are the same, as the Company
was in a loss position. The following table sets forth the computation of
basic and diluted earnings per share for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------ -------- -------
<S> <C> <C> <C>
Numerator:
Net income (loss).............................. $4,017 $(38,784) $43,622
====== ======== =======
Denominator:
Basic weighted average shares outstanding...... 43,864 43,527 43,602
Effect of dilutive securities-stock options.... 425 -- 855
------ -------- -------
Diluted weighted average shares outstanding.... 44,289 43,527 44,457
====== ======== =======
Net income (loss) per share:
Basic.......................................... $0.09 $(0.89) $1.00
Diluted........................................ $0.09 $(0.89) $0.98
</TABLE>
NOTE G--Inventories
Inventories at December 31, stated at the lower of first-in, first-out
(FIFO) cost or market, consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Raw materials............................................ $ 35,433 $ 42,518
Work in process.......................................... 18,620 16,545
Finished goods........................................... 53,188 68,129
-------- --------
$107,241 $127,192
======== ========
</TABLE>
NOTE H--Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land.................................................... $ 9,248 $ 8,750
Leasehold improvements.................................. 30,154 18,846
Buildings and improvements.............................. 132,783 118,923
Production and other equipment.......................... 229,115 223,720
Construction in progress................................ 24,375 16,440
-------- --------
425,675 386,679
Less: accumulated depreciation.......................... 188,261 166,585
-------- --------
$237,414 $220,094
======== ========
</TABLE>
Depreciation expense for the years ended 1998, 1997, and 1996 was $36,778,
$32,797 and $27,972, respectively.
F-13
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
NOTE I--Notes Payable
Short-term borrowings and related lines of credit at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Notes payable........................................ $171,340 $165,576
-------- --------
Unused lines of credit............................... $ 80,000 $204,424
Average amount outstanding at month-end during the
year................................................ $184,239 $226,379
Maximum amount outstanding at month-end during the
year................................................ $214,113 $392,817
Weighted average interest rate during the year....... 6.1% 6.0%
Weighted average interest rate at year-end........... 6.3% 6.1%
</TABLE>
On January 22, 1997, the Company entered into an unsecured Revolving Credit
Agreement with a group of banks. The agreement allowed for borrowings of up to
$450,000 and expires on January 22, 2002. In July, 1997, the Company reduced
the maximum funds available under the agreement from $450,000 to $350,000 and
in May, 1998, the amount was reduced from $350,000 to $250,000. Individual
borrowings under the Revolving Credit Agreement are made on terms not to
exceed six months. At December 31, 1998 the Company had $80,000, available
under this facility. Interest is payable on outstanding borrowings at a
floating rate defined in the agreement as LIBOR plus a margin. The agreement
also calls for a facility fee. The exact amount of the margin and the facility
fee is dependent on the Company's debt rating. The agreement calls for the
Company to maintain certain financial covenants in the areas of operating cash
flow and interest coverage. At December 31, 1998 the Company also had $1,340
of other short-term borrowings.
The Company's financial results for the quarter ended September 30, 1998
made it necessary for the Company to renegotiate certain financial covenants
relating to operating cash flow and interest coverage under the agreement.
Pursuant to this renegotiation, the lenders involved waived defaults under
those covenants and accepted less restrictive operating cash flow and interest
coverage covenants for 1999 and a portion of 2000. The Company agreed to an
additional minimum earnings covenant, the payment of amendment fees totaling
$647, and to increases in both the interest rate margin and the facility rate
thereunder. The Company agreed to an increase in the interest rate from a
margin range over LIBOR of 0.18 to 0.65 percent to a range of 0.23 to 1.125
percent. The Company also agreed to an increase in the facility rate under the
agreement from a rate ranging from 0.10 to 0.25 percent to a rate ranging from
0.125 to 0.375 percent.
In addition, at December 31, 1997, the Company had access to a $20,000
short-term unused line of credit which was cancelled during 1998.
NOTE J--Long-term Debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
7.23% unsecured notes due in 2002.................... $100,000 $100,000
7.60% unsecured notes due in 2007.................... 100,000 100,000
7.23% notes payable due in 2004...................... 100,000 100,000
Unrealized gain on revaluation of yen-denominated
debt................................................ (890) (13,156)
-------- --------
Long-term debt....................................... $299,110 $286,844
======== ========
</TABLE>
F-14
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
In March, 1997, the Company sold $100,000 of 7.23 percent unsecured notes
due in 2002 and $100,000 of 7.60 percent unsecured notes due in 2007, pursuant
to a public offering. Net proceeds from the offering of $197,950 were used to
repay borrowings outstanding under the Company's revolving credit agreement.
Interest on the new notes is payable semi-annually in April and October. At
December 31, 1998, these notes had a fair market value of $94,020 and $86,770,
respectively.
The Company's financial results for the fiscal quarter September 30, 1998
made it necessary for the Company to renegotiate certain financial covenants
relating to operating cash flow and interest coverage under the $100,000 note
due in 2004. Pursuant to this renegotiation, the lender involved waived
defaults under those covenants and accepted less restrictive operating cash
flow and interest coverage covenants for 1999 and a portion of 2000. The
Company agreed to an increase in the interest rate on the $100,000 note due in
2004 from 6.88 percent to 7.23 percent as of November 2, 1998. The interest on
these notes is payable semi-annually in March and September. As these notes
are not publicly traded, a determination of their fair value is not readily
determinable. However, the Company believes that the carrying values
approximate fair value.
In January, 1994, the Company exchanged $80,000 of dollar debt service
obligations for a yen denominated obligation of 8,760,000 yen, which bears
interest at a rate of 4.49 percent. This swap matures in 2004. In December
1997, the Company entered into a currency swap maturing in 2003. Under the
terms of this swap, the Company exchanged $30,000 of dollar debt service
obligations for a yen-denominated obligation of 3,840,000 yen, which bears
interest at a rate of 1.39 percent. The Company's foreign currency obligations
had U.S. dollar effective weighted average interest rates of 4.60 and 4.53
percent in 1998 and 1997, respectively. The effect of foreign currency
exchange rate fluctuations resulting from the yen swap agreements open at
December 31, 1998 are included in translation adjustments.
The Company capitalized interest costs associated with the construction of
certain capital assets of $1,282 in 1998, $753 in 1997 and $785 in 1996.
Interest paid on short-term and long-term debt during 1998, 1997, and 1996
amounted to $30,690, $25,579 and $12,171 respectively.
NOTE K--Foreign Exchange
A significant volume of the Company's business is transacted in currencies
other than the U.S. dollar. This exposes the Company to risks associated with
currency rate fluctuations which impact the Company's sales and net income.
The Company has entered into foreign currency option contracts to sell yen, on
a continuing basis in amounts and timing consistent with the underlying
currency exposure so that gains on these transactions partially offset the
realized foreign exchange losses on the underlying exposure. The Company
realized gains, net of premiums, of $2,232 in 1998, $4,375 in 1997 and $2,687
in 1996 relating to these contracts. At December 31, 1998, the Company has
only option contracts to sell yen aggregating $47,288. In the event of a
significant strengthening of the U.S. dollar against the yen, the exercise of
these options will partially mitigate losses which would be incurred by the
Company on the underlying currency exposure. The unamortized premiums
associated with these option contracts was $1,389 as of December 31, 1998.
F-15
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
NOTE L--Income Taxes
Income taxes have been provided in accordance with the provisions of SFAS
No. 109. The Company's provisions for income taxes are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Domestic and foreign income before income
taxes:
Domestic.................................... $(34,658) $(69,479) $ 195
Foreign..................................... 35,660 51,369 56,828
-------- -------- -------
1,002 (18,110) 57,023
Less: Income (loss) on disposal of
discontinued operations...................... (7,542) -- --
-------- -------- -------
Income (loss) from continuing operations
before income taxes........................ $ 8,544 $(18,110) $57,023
======== ======== =======
Domestic and foreign provisions for income
taxes:
Domestic.................................... $ (6,496) $ 6,873 $(2,362)
Foreign..................................... 3,295 13,011 15,427
State....................................... 186 790 336
-------- -------- -------
(3,015) 20,674 13,401
Less: portion applied to discontinued
operations................................. (1,695) -- --
-------- -------- -------
$ (1,320) $ 20,674 $13,401
======== ======== =======
Current and deferred provisions for income
taxes:
Current..................................... $ 9,747 $ 14,839 $21,613
Deferred.................................... (12,762) 5,835 (8,212)
-------- -------- -------
$ (3,015) $ 20,674 $13,401
======== ======== =======
</TABLE>
A summary of the differences between the Company's consolidated effective
tax rate and the United States statutory federal income tax rate is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
U.S. statutory income tax rate..................... 35.0 % 35.0 % 35.0 %
Puerto Rico tax rate benefits...................... (10.8) (4.0) (6.4)
Ireland tax rate benefits.......................... (25.8) (8.2) (11.0)
State income tax, net of federal income tax bene-
fit............................................... 1.4 .5 .4
Foreign Sales Corporation income not taxed......... (15.2) (2.3) (4.0)
Change in valuation allowance...................... -- -- 9.5
----- ----- -----
Effective tax rate applicable to operations........ (15.4) 21.0 23.5
Non-deductible charge for purchased research and
development....................................... -- 93.2 --
----- ----- -----
Effective tax rate................................. (15.4)% 114.2 % 23.5 %
===== ===== =====
</TABLE>
Tax exemptions relating to Puerto Rico and Ireland operations are effective
through 2004 and 2010, respectively. Income taxes paid (net of refunds) during
1998, 1997, and 1996 were $20,359, $18,704, and $24,228, respectively.
F-16
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
The Company has not recorded deferred income taxes applicable to
undistributed earnings of foreign subsidiaries that are indefinitely
reinvested in foreign operations. These earnings amounted to approximately
$135,968 at December 31, 1998. If earnings of such foreign subsidiaries were
not indefinitely reinvested, a deferred tax liability of approximately $37,769
would have been required.
At December 31, 1998, the Company has foreign tax credit carryforwards of
approximately $9,300 that expire in the years 1999 through 2003. General
business credit carryforwards of approximately $5,900 expire in the years 2001
through 2010. Net operating loss carryforwards of $86,854 expire through the
year 2013. In addition, the Company has alternative minimum tax credit
carryforwards of approximately $15,166 which can be carried forward
indefinitely.
Significant components of the Company's net deferred tax assets are as
follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Intercompany and inventory related transactions...... $ 18,467 $ 15,962
Postretirement benefits other than pensions.......... 3,555 3,605
Tax credits (including foreign tax credits on
unremitted earnings)................................ 44,396 50,064
Net operating loss carryforwards..................... 30,399 10,750
Deferred gain on sale of securities.................. -- 8,750
Restructuring and divestiture related costs.......... 12,484 --
Amortization of intangible assets.................... 20,483 22,247
Depreciation......................................... (4,610) (3,756)
Other, net........................................... (3,508) 3,273
-------- --------
121,666 110,895
Valuation allowance.................................. (13,121) (22,135)
-------- --------
Net deferred tax asset............................... $108,545 $ 88,760
======== ========
</TABLE>
The valuation allowance is provided primarily against foreign tax credit
carryforwards and foreign tax credits on unremitted earnings which can be
utilized against future taxable income in the United States. The change in
valuation allowance for the year results from the write down of certain tax
credits for which the valuation allowance had been previously established.
These tax credits have expired and are no longer available to the Company.
Although realization is not assured, the Company believes it is more likely
than not that the remainder of the deferred tax asset, net of the valuation
allowance, will be realized primarily because of the anticipated increase of
taxable income in the U.S. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced.
NOTE M--Legal Proceedings
On May 2, 1997, the Environmental Quality Board ("EQB") of Puerto Rico
served an administrative order on Millipore Cidra, Inc., a wholly-owned
subsidiary of the Company. The administrative order ("EQB order") alleged: (i)
that the nitrocellulose filter membrane scrap produced by Millipore Cidra's
manufacturing operations is a hazardous waste as defined in EQB regulations;
(ii) that Millipore Cidra, Inc. failed to manage, transport and dispose of the
nitrocellulose membrane scrap as a hazardous waste; and (iii) that such
failure violated EQB regulations. The EQB order proposed penalties in the
amount of $96,500 and ordered Millipore Cidra, Inc. to manage the
nitrocellulose membrane scrap as a hazardous waste. The Company recorded a
charge of $5,000 in the first quarter of 1998 reflecting its costs to settle
this matter.
F-17
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
The Company also recorded a charge of $3,100 in the first quarter of 1998
reflecting its costs to settle a separate lawsuit with an intervening party in
the EQB administrative case described above.
The Company recorded a charge of $3,666 in the first quarter of 1998 to
settle a patent lawsuit with Mott Metallurgical Corporation. In the lawsuit,
each party claimed infringement of one of its patents by the other. As part of
the settlement, the parties agreed to cross license the two patents at issue.
The Company and Waters Corporation were engaged in an arbitration proceeding
and a related litigation in the Superior Court, Middlesex, Massachusetts, both
of which commenced in the second quarter of 1995 with respect to the amount of
assets required to be transferred by the Company's Retirement Plan in
connection with the Company's divestiture of its former Chromatography
Division. In the second quarter of 1996, Waters filed a Complaint in the
Federal District Court of Massachusetts alleging that the Company's operation
of the Retirement Plan violated ERISA and certain sections of the Internal
Revenue Code. Judgments in the Company's favor were handed down by both the
Massachusetts Superior Court and the Federal District Court in May 1997 and
July 1997, respectively. Waters appealed the federal court judgment, which was
affirmed by the United States Court of Appeals for the First Circuit by
opinion dated April 3, 1998. On June 2, 1998, the Company transferred $2,439
(including interest through the date of transfer) from its Retirement Plan to
the Waters Retirement Plan as provided by the amended and restated Purchase
and Sale Agreement. In order to fund the transfer, in the second quarter of
1998 the Company made a contribution of $2,255 to its Retirement Plan in
accordance with ERISA funding requirements.
In the past the Company has been named as a potentially responsible party by
the Environmental Protection Agency ("EPA") at twelve hazardous waste
("Superfund") sites and prior to 1995, the Company had paid $14,000 to settle
claims at those sites. However, as is typical with settlements in such
Superfund proceedings, EPA and the relevant state agencies reserved the right
to maintain actions against the settling parties, including the Company, in
the event certain actions occur or do not occur. In addition, during 1998 the
Company was named as a potentially responsible party in a Massachusetts
proceeding with respect to two sites to which chemical wastes from one of the
above Superfund sites were transshipped. Due to the fact that Superfund sites
at which the Company was named a potentially responsible party are in the late
stages of remedy and a significant portion of the remedy cost has already been
funded, and that the remedies required at the above Massachusetts sites are
believed to be relatively modest and the Company's share is expected to be
limited, the Company believes that its probable future financial obligation at
December 31, 1998 will not materially affect its future operating results and
liquidity. Amounts paid by the Company in 1998 and 1997 with respect to the
Superfund obligations were insignificant.
The Company is also subject to a number of other claims and legal
proceedings which, in the opinion of the Company's management, are incidental
to the Company's normal business operations. In the opinion of the Company,
although final settlement of these suits and claims may impact the Company's
financial statements in a particular period, they will not, in the aggregate,
have a material adverse effect on the Company's financial position.
NOTE N--Leases
Operating lease agreements cover sales offices, manufacturing and warehouse
space. These leases have expiration dates through 2008. Certain land and
building leases contain renewal options for periods ranging from one to ten
years and purchase options at fair market value. Rental expense was $12,033 in
1998, $11,849 in
F-18
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
1997, and $9,034 in 1996. At December 31, 1998 future minimum rents payable
under noncancelable leases with initial terms exceeding one year were as
follows:
<TABLE>
<S> <C>
1999............................................................... $11,684
2000............................................................... 8,957
2001............................................................... 4,509
2002............................................................... 3,973
2003............................................................... 3,317
2004-2008.......................................................... 9,672
</TABLE>
At December 31, 1998, the Company had long-term lease obligations related to
three Tylan manufacturing sites vacated as part of the Tylan integration.
Amounts associated with these leases are excluded from the above presentation.
Costs expected to be incurred by the Company to vacate these premises prior to
completion of each respective lease term are accrued as discussed in Note E.
As part of the announced restructuring program, the Company plans to
establish regional transaction service centers resulting in the elimination of
duplicate facilities. The Company will vacate these facilities by 2000.
Accordingly, future rents payable under these leases are included for 1999
through 2000. Costs expected to be incurred by the Company to vacate these
premises prior to completion of each respective lease term are accrued, as
discussed in Note C.
NOTE O--Stock Plans
Stock Option Plans
The Company has two fixed option plans which reserve shares of common stock
for issuance to key employees and directors, respectively. The Company also
has a stock purchase plan which allows employees to purchase shares of the
Company's common stock as discussed below. The Company has adopted the
disclosure-only provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized. Had
compensation cost been determined based on the fair value at the grant date
consistent with the provisions of SFAS 123, the Company's net income and basic
earnings per share would have been reduced by $3,748 or $0.08 per share in
1998, $2,112 or $0.05 per share in 1997, and $1,015 or $0.02 per share in
1996. The weighted average fair value of options granted under the stock
option plan was $8.29 in 1998, $11.13 in 1997, and $12.48 in 1996. The
weighted average fair value of shares issued under the employee stock purchase
plan was $4.61 in 1998 and 1997, and $3.97 in 1996. The pro forma expense
amounts assume that the fair value assigned to the option grants was amortized
over the vesting period of the options, which is four years, while the fair
value assigned to grants under the stock purchase plan is recognized in full
at the date of grant.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes model with the following assumptions in 1998, 1997 and
1996: expected life of five years and an expected annual dividend increase of
$.04 per year. The expected volatility was 30 percent in 1998 and 25 percent
in 1997 and 1996. The weighted average risk-free interest rate was 4.5 percent
in 1998, 5.9 percent in 1997 and 6.1 percent in 1996. This rate approximated
that of 5 year U.S. government interest bearing securities.
1995 Combined Stock Option Plan
During 1996, the Company adopted the "1995 Combined Stock Option Plan",
which replaced the "1985 Combined Stock Option Plan". The terms of the 1995
Plan are substantially similar to those of the 1985 Plan.
F-19
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
In conjunction with the adoption of the 1995 Plan, shares authorized for
issuance under the Plan, when aggregated with shares authorized under the 1985
Plan, were increased from 8,100,000 to 9,131,000. The Plan provides that the
option price per share may not be less than the fair market value of the stock
at the time the option is granted and that options must expire not later than
10 years from the date of grant.
Non-Employee Director Stock Option Plan
Under the Company's Non-Employee Director Stock Option Plan, each eligible
director receives an option to purchase 4,000 shares of Millipore common stock
on the date of his or her first election, and thereafter automatically
receives an additional option to purchase 2,000 shares at the first board of
directors meeting following the Annual Meeting of Shareholders. The plan
provides that the option price per share may not be less then the fair market
value of the stock at the time the option is granted. At December 31, 1998,
153,500 options are both issued and outstanding.
Stock activity under both the 1995 Combined Stock Option Plan and the Non-
Employee Director Stock Option Plan is presented as follows:
<TABLE>
<CAPTION>
Weighted Average
Option Option Exercise Price
Shares Price Per Share
--------- ------------- ----------------
<S> <C> <C> <C>
Outstanding at December 31,
1995........................... 3,056,000 $13.56-$37.63 $20.76
Granted....................... 479,000 $37.63-$42.00 $41.29
Exercised..................... (384,000) $13.56-$37.63 $17.37
Canceled...................... (62,000) $16.88-$37.63 $25.06
--------- ------------- ------
Outstanding at December 31,
1996........................... 3,089,000 $13.81-$42.00 $24.28
--------- ------------- ------
Granted....................... 699,000 $36.94-$44.13 $37.98
Exercised..................... (303,000) $13.81-$37.63 $18.25
Canceled...................... (24,000) $17.44-$42.00 $29.19
--------- ------------- ------
Outstanding at December 31,
1997........................... 3,461,000 $13.81-$44.13 $27.54
--------- ------------- ------
Granted....................... 884,000 $18.88-$48.13 $29.07
Exercised..................... (155,000) $14.50-$23.69 $17.32
Canceled...................... (79,000) $17.25-$43.50 $36.74
--------- ------------- ------
Outstanding at December 31,
1998........................... 4,111,000 $13.81-$48.13 $28.08
--------- ------------- ------
Exercisable at:
December 31, 1998............. 2,408,000
December 31, 1997............. 2,092,000
December 31, 1996............. 1,926,000
</TABLE>
The following table summarizes information about stock options at December
31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------------------
Weighted
Average Weighted
Options Remaining Average Weighted
Range of Outstanding Contractual Exercise Exercisable Average
Exercise Price at 12/31/98 Life Price at 12/31/98 Exercise Price
-------------- ----------- ----------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$13.81-$23.69 1,771,000 5 $18.68 1,763,000 $18.67
$26.38-$37.50 1,431,000 10 $32.06 148,000 $36.27
$37.63-$48.13 909,000 8 $40.14 497,000 $39.61
------------- --------- ---------
$13.81-$48.13 4,111,000 2,408,000
</TABLE>
F-20
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Employees' Stock Purchase Plan
Under the Company's Employees' Stock Purchase Plan, all employees of the
Company and its subsidiaries who have 90 days continuous service prior to the
beginning of the plan year, May 1, may purchase shares of Millipore common
stock by payroll deduction. The purchase price per share during the plan year
is the lesser of the fair market value of the common stock at the time of
purchase or on May 1.
In 1998, 1997 and 1996, shares issued under the Plan were 38,000, 33,000 and
72,000, respectively. As of December 31, 1998, 225,000 shares of Millipore
common stock were available for sale to employees under the Plan.
Incentive Plan for Senior Management
Under this plan, Millipore common stock is awarded to key members of senior
management at no cost to them. The stock cannot be sold, assigned, transferred
or pledged during a restriction period which is normally four years but in
some cases may be less. In most instances, shares are subject to forfeiture
should employment terminate during the restriction period.
The stock issued under the plan is recorded at its fair market value on the
award date; the related deferred compensation is amortized to selling, general
and administrative expenses over the restriction period. At the end of 1998,
1997, and 1996, 139,000, 117,000 and 119,000 shares, respectively, were
outstanding under the plan. Plan expense was $800 in 1998, $657 in 1997 and
$559 in 1996. As of December 31, 1998, 9,500 shares of Millipore common stock
were available for future awards under this plan.
NOTE P--Employee Retirement Plans
Participation and Savings Plan
The Millipore Corporation Employees' Participation and Savings Plan
("Participation and Savings Plan"), maintained for the benefit of all U.S.
employees, combines both a defined contribution plan ("Participation Plan")
and an employee savings plan ("Savings Plan"). Contributions to the
Participation Plan are allocated among the U.S. employees of the Company who
have completed at least two years of continuous service on the basis of the
compensation they received during the year for which the contribution is made.
The Savings Plan allows employees with one year of continuous service to make
certain tax-deferred voluntary contributions which the Company matches with a
25 percent contribution (50 percent contribution for employees with 10 or more
years of service). Total expense under the Participation and Savings Plan was
$7,392 in 1998, $6,700 in 1997 and $4,866 in 1996.
Retirement Plan
The Company's Retirement Plan for Employees of Millipore Corporation
("Retirement Plan") is a defined benefit plan for all U.S. employees which
provides benefits to the extent that assets of the Participation Plan,
described above, do not provide guaranteed retirement income levels.
Guaranteed retirement income levels are determined based on years of service
and salary level as integrated with Social Security benefits. Employees are
eligible under the Retirement Plan after one year of continuous service and
are vested after five years of service. For accounting purposes, the Company
uses the projected unit credit method of actuarial valuation. The actuarial
method for funding purposes is the entry age normal method. The Company
contributes annually to the Retirement Plan, subject to Internal Revenue
Service and ERISA funding limitations. No contributions were required for
1998, 1997 and 1996. Plan assets are invested primarily in mutual funds and
money market funds.
F-21
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
In addition to the Retirement Plan, the Company sponsors several unfunded
defined benefit postretirement plans covering all U.S. employees, which are
included in Other Benefits. The plans provide medical and life insurance
benefits and are, depending on the plan, either contributory or non-
contributory.
Plan data as of December 31, 1997 includes assets and obligations pertaining
to employees of the Company's former Waters Division, as the assets subject to
these former employees had not yet been transferred to Waters Corporation. In
the second quarter of 1998, the Company transferred $2,440 of plan assets
(including interest through the date of the transfer) and $400 of benefit
obligations from its Retirement Plan to the Waters Retirement Plan. In order
to fund the transfer, the Company made a contribution of $2,255 to its
Retirement Plan in accordance with ERISA funding requirements. These amounts
had been previously accrued and included in net loss on disposal of
discontinued operations in 1994.
The following tables summarize the funded status of the Employee Retirement
Plans and amounts reflected in the Company's consolidated balance sheets at
December 31, based on Statement No. 132, Employers' Disclosures about Pensions
and Other Postretirement Benefits.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
year............................. $ 7,824 $ 7,022 $ 6,584 $ 6,809
Service cost...................... 27 270 379 317
Interest cost..................... 524 523 448 418
Plan participants' contributions.. 321 245 75 71
Actuarial loss (gain)............. 552 423 515 (777)
Acquisitions...................... -- -- -- 150
Benefits paid..................... (1,006) (659) (428) (404)
Settlement........................ (400) -- -- --
-------- ------- -------- --------
Benefit obligation at end of
year............................. $ 7,842 $ 7,824 $ 7,573 $ 6,584
======== ======= ======== ========
Change in plan assets:
Fair value of plan assets at
beginning of year................ $ 8,794 $ 7,657 $ -- $ --
Actual return on plan assets...... 1,311 1,551 -- --
Company contributions............. 2,255 -- 353 333
Plan participant contribution..... 321 245 75 71
Benefits paid..................... (1,006) (659) (428) (404)
Settlement........................ (2,440) -- -- --
-------- ------- -------- --------
Fair value of plan assets at end
of year.......................... $ 9,235 $ 8,794 $ -- $ --
======== ======= ======== ========
Funded status....................... $ 1,394 $ 970 $ (7,573) $ (6,584)
Unrecognized net loss (gain)........ 2,235 2,542 (2,939) (3,587)
Unrecognized prior service cost..... 89 100 -- --
Unrecognized net transition obliga-
tion............................... (311) (411) -- --
-------- ------- -------- --------
Prepaid (accrued) benefit cost...... $ 3,407 $ 3,201 $(10,512) $(10,171)
======== ======= ======== ========
</TABLE>
F-22
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
<TABLE>
<CAPTION>
Pension
Benefits Other Benefits
---------------- ----------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Weighted average assumptions as of
December 31:
Discount rate........................ 6.5% 7.0% 7.5% 6.5% 7.0% 7.5%
Expected return on plan assets....... 8.0% 8.0% 8.0% N/A N/A N/A
Rate of compensation increase........ 5.0% 5.0% 5.0% N/A N/A N/A
</TABLE>
For measurement purposes, a 6 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5 percent for 2000 and remain at that level
thereafter.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------- -------------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost:
Service cost (benefit)........ $ 27 $ 270 $ (29) $ 379 $ 317 $ 298
Interest cost................. 524 523 499 449 418 453
Expected return on plan
assets....................... (690) (589) (569) -- -- --
Amortization of unrecognized
gain......................... (82) (84) (84) (133) (166) (205)
Amortization of prior service
cost......................... 11 11 11 -- -- --
Recognized actuarial loss..... 121 187 274 -- -- --
----- ----- ----- ----- ----- -----
Net periodic benefit cost..... $ (89) $ 318 $ 102 $ 695 $ 569 $ 546
===== ===== ===== ===== ===== =====
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
the assumed health care cost trend rates would have the following effects.
<TABLE>
<CAPTION>
1% Point 1% Point
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of services and interest cost compo-
nents................................................ $133 $(114)
Effect on postretirement benefit obligations.......... 960 (852)
</TABLE>
NOTE Q--Business Segment Information
The Company adopted Financial Accounting Standards No. 131 "Disclosures
about Segments of an Enterprise and Related Information" (FAS 131) as of
December 31, 1998 and prior year information was restated in conformity with
this accounting standard. The Company has two reportable business segments as
defined by the FAS 131--Biopharmaceutical & Research and Microelectronics.
The Biopharmaceutical & Research segment develops, manufactures and sells
consumable products and capital equipment to pharmaceutical companies,
biotechnology companies, food and beverage companies, university and
government laboratories and research institutes. The segment also provides
process design, engineering and repair services to it customers. The product
offering of the Biopharmaceutical & Research segment include membranes,
membrane based filter and separation devices, test kits, laboratory water
purification systems, resin based cartridge filters, laboratory test equipment
and manufacturing process equipment. The segment's products are used in
laboratory and research applications for detecting and identifying molecules,
compounds or micro-organisms in a fluid sample. Filters, separation devices
and process equipment sold by the segment are used in manufacture of
pharmaceutical products, diagnostic devices and beverages to isolate and
purify specific components or to remove contaminants in a fluid stream. The
products are sold worldwide principally through a direct sales force.
Distributors are used in selected regions for specific product lines.
F-23
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
The Microelectronics segment develops, manufactures and sells consumables
and capital equipment to semiconductor fabrication companies as well as OEM
suppliers to those companies. The segment also provides capital equipment
warranty and repair services to its customers. Microelectronics products
include membrane and metal based filters, housings, precision liquid dispense
filtration pumps, resin based gas purifiers and mass flow and pressure
controllers. The segment's products are used by customers in manufacturing
operations to remove contaminants in process fluid streams and process gas
applications to purify process gases, to measure and control flow rates in
process gas streams and to control and monitor pressure and vacuum levels in
process chambers. The products are sold worldwide through a direct sales
force.
The operating segment results for Biopharmaceutical & Research,
Microelectronics and Corporate included below are presented in "local
currencies". For comparability of financial results, the foreign currency
balances, in all periods presented, are translated at Millipore's 1998
budgeted exchange rates which differ from actual rates of exchange. The
foreign exchange impact is shown separately and reconciles the local currency
reporting to the consolidated results at the actual rates of exchange. This
provides a clearer presentation of underlying trends in the Company's
business, before the impact of foreign currency translation.
Operating Segments:
<TABLE>
<CAPTION>
Consolidated Net Sales
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Biopharmaceutical & Research................. $526,982 $491,369 $409,831
Microelectronics............................. 188,222 261,810 159,944
Foreign exchange............................. (15,897) 5,740 48,960
-------- -------- --------
Total net sales............................ $699,307 $758,919 $618,735
======== ======== ========
<CAPTION>
Consolidated Operating
(Loss) Income
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Biopharmaceutical & Research................. $107,932 $100,190 $ 82,292
Microelectronics............................. (16,627) 33,748 40,021
Corporate.................................... (26,820) (27,726) (23,366)
Restructuring and unusual charges............ (60,582) (119,091) (68,311)
Foreign exchange............................. (4,569) 13,986 29,776
-------- -------- --------
Total operating (loss) income.............. $ (666) $ 1,107 $ 60,412
======== ======== ========
<CAPTION>
Depreciation and
Amortization Expense,
included in Operating
(Loss) Income
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Biopharmaceutical & Research................. $ 18,013 $ 15,200 $ 13,420
Microelectronics............................. 12,567 9,892 3,847
Corporate.................................... 13,109 14,504 10,334
Foreign exchange............................. 720 1,065 2,986
-------- -------- --------
Total depreciation and amortization........ $ 44,409 $ 40,661 $ 30,587
======== ======== ========
</TABLE>
F-24
<PAGE>
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
(In thousands except share and per share data)
<TABLE>
<CAPTION>
Segment Assets--
Inventory only
------------------
1998 1997
-------- --------
<S> <C> <C>
Biopharmaceutical & Research........................... $ 77,274 $ 82,245
Microelectronics....................................... 28,368 37,578
Corporate.............................................. (1,083) 11,095
Foreign exchange....................................... 2,682 (3,726)
-------- --------
Total segment assets................................. $107,241 $127,192
======== ========
</TABLE>
Geographical Segments:
The Company attributes net sales and long-lived assets to different
geographic areas on the basis of the location of the customer. The Company has
three geographic regions. The United States represents greater than 90% of the
Americas region. Net sales and long-lived asset information by geographic area
in U.S. dollars as of December 31, 1998, 1997 and 1996 and for each of the
three years ended December 31, 1998 is presented as follows:
<TABLE>
<CAPTION>
Net Sales
--------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Americas........................................ $292,173 $321,634 $217,700
Europe.......................................... 237,786 222,452 192,827
Japan and Asia.................................. 169,348 214,833 208,208
-------- -------- --------
Total......................................... $699,307 $758,919 $618,735
======== ======== ========
<CAPTION>
Long-Lived Assets
-----------------
1998 1997
-------- --------
<S> <C> <C>
Americas........................................ $254,017 $248,464
Europe.......................................... 58,179 50,002
Japan and Asia.................................. 36,947 33,172
-------- --------
Total......................................... $349,143 $331,638
======== ========
</TABLE>
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of Millipore Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity, and of cash flows
present fairly, in all material respects, the financial position of Millipore
Corporation and its subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 20, 1999, except for Note B, for which the date is February 5, 1999
F-26
<PAGE>
Quarterly Results (Unaudited)
The Company's unaudited quarterly results are summarized below.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
1998
Net sales.................... $185,662 $175,172 $159,181 $179,292 $699,307
Cost of sales................ 86,429 85,507 101,493 91,038 364,467
-------- -------- -------- -------- --------
Gross profit............... 99,233 89,665 57,688 88,254 334,840
Selling, general and
administrative expenses..... 61,687 60,809 56,588 57,437 236,521
Research and development
expenses.................... 13,135 13,910 13,301 13,232 53,578
Restructuring charges........ -- -- 33,641 -- 33,641
Settlement of litigation..... 11,766 -- -- -- 11,766
-------- -------- -------- -------- --------
Operating income (loss).... 12,645 14,946 (45,842) 17,585 (666)
Gain on sale of equity
securities.................. 35,594 -- -- -- 35,594
Interest income.............. 614 761 877 838 3,090
Interest expense............. (7,073) (7,058) (7,098) (8,245) (29,474)
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes....... 41,780 8,649 (52,063) 10,178 8,544
Provision (benefit) for
income taxes................ 10,370 1,816 (15,643) 2,137 (1,320)
-------- -------- -------- -------- --------
Net income (loss) from
continuing operations....... 31,410 6,833 (36,420) 8,041 9,864
Net loss on disposal of
discontinued operations..... -- -- 5,847 -- 5,847
-------- -------- -------- -------- --------
Net income (loss)............ $ 31,410 $ 6,833 $(42,267) $ 8,041 $ 4,017
======== ======== ======== ======== ========
Basic net income (loss) per
share:
Income (loss) from
continuing operations..... $ 0.72 $ 0.16 $ (0.83) $ 0.18 $ 0.22
Net income (loss) per
share..................... $ 0.72 $ 0.16 $ (0.96) $ 0.18 $ 0.09
Diluted net income (loss) per
share:
Income (loss) from
continuing operations..... $ 0.71 $ 0.15 $ (0.83) $ 0.18 $ 0.22
Net income (loss) per
share..................... $ 0.71 $ 0.15 $ (0.96) $ 0.18 $ 0.09
Weighted average shares
outstanding
Basic...................... 43,727 43,819 43,891 44,005 43,864
Diluted.................... 44,307 44,327 43,891 44,294 44,289
1997
Net sales.................... $178,839 $192,498 $184,544 $203,038 $758,919
Cost of sales................ 80,634 86,424 82,372 92,807 342,237
-------- -------- -------- -------- --------
Gross profit............... 98,205 106,074 102,172 110,231 416,682
Selling, general and
administrative expenses..... 59,777 63,273 58,965 63,570 245,585
Research and development
expenses.................... 13,151 15,003 14,353 13,392 55,899
Purchased research and
development expense......... 114,091 -- -- -- 114,091
-------- -------- -------- -------- --------
Operating (loss) income.... (88,814) 27,798 28,854 33,269 1,107
Gain on sale of equity
securities.................. 1,769 -- 5,304 1,257 8,330
Interest income.............. 761 636 708 832 2,937
Interest expense............. (6,024) (8,159) (8,026) (8,275) (30,484)
-------- -------- -------- -------- --------
(Loss) income before income
taxes..................... (92,308) 20,275 26,840 27,083 (18,110)
Provision (benefit) for
income taxes................ 5,454 3,894 5,637 5,689 20,674
-------- -------- -------- -------- --------
Net (loss) income.......... $(97,762) $ 16,381 $ 21,203 $ 21,394 $(38,784)
======== ======== ======== ======== ========
Net (loss) income per
share:
Basic..................... $ (2.25) $ 0.38 $ 0.49 $ 0.49 $ (0.89)
Diluted................... $ (2.25) $ 0.37 $ 0.48 $ 0.48 $ (0.89)
Weighted average shares
outstanding
Basic...................... 43,391 43,512 43,565 43,629 43,527
Diluted.................... 43,391 44,274 44,428 44,344 43,527
</TABLE>
F-27
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
OF
MILLIPORE CORPORATION
For the Fiscal Year Ended December 31, 1998
****************
EXHIBITS
****************
================================================================================
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT VOLUME
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
3.1 Restated Articles of Organization, as amended May 6, 1996................................... **
3.2 By Laws, as amended......................................................................... **
4.1 Indenture dated as of May 3, 1995, relating to the issuance of
$100,000,000 principal amount of Company's 6.78% Senior
Notes due 2004.............................................................................. **
4.2 Indenture dated as of April 1, 1997, relating to
the issuance Debt Securities in Series...................................................... **
10.1 Distribution Agreement, dated as of July 1, 1996, by and
among the Company and Fisher Scientific Company............................................. **
10.2 Revolving Credit Agreement, dated as of January 22, 1997, among
Millipore Corporation and The First National Bank of Boston, ABM
AMRO Bank N.V. and certain other lending institutions
which are or become parties thereto......................................................... **
10.3 Shareholder Rights Agreement, dated as of April 15, 1988,
between Millipore and The First National Bank of Boston..................................... **
10.4 Long Term Restricted Stock (Incentive) Plan for Senior Management........................... **
10.5 1985 Combined Stock Option Plan............................................................. **
10.6 Supplemental Savings and Retirement Plan for Key
Salaried Employees of Millipore Corporation................................................. **
10.7 Executive Termination Agreement............................................................. **
10.8 Executive "Sale of Business" Incentive Termination Agreements............................... **
10.9 1995 Employee Stock Purchase Plan........................................................... **
10.10 1995 Management Incentive Plan.............................................................. **
10.11 1995 Combined Stock Option Plan, as amended................................................. **
10.12 Second Amendment, effective as of September 30, 1998, to
Revolving Credit Agreement, dated as of January 22, 1997, among
Millipore Corporation and The First National Bank of Boston, ABM
AMRO Bank N.V. and certain other lending institutions....................................... 4
10.13 Note Purchase and Exchange Agreement, as amended through
November 2, 1998, between Millipore Corporation and
Metropolitan Life Insurance Company......................................................... 21
</TABLE>
================================================================================
** Incorporated by Reference to a prior filing with the Commission
<PAGE>
INDEX TO EXHIBITS [Cont'd]
<TABLE>
<CAPTION>
Exhibit Volume
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
10.14 Form of letter agreement with directors relating to the deferral
of directors fees and conversion into phantom
stock units ................................................................................ 98
10.15 1989 Stock Option Plan for Non-Employee Directors .......................................... 102
10.16 Commercial Lease Agreement between EBP 3, Ltd.
and Millipore Corporation with respect to Premises
located in Allen, Texas .................................................................... 111
11 Computation of Per Share Earnings........................................................... *+
21 Subsidiaries of Millipore Corporation....................................................... 148
23 Consent of Coopers & Lybrand L.L.P......................................................... 150
24 Power of Attorney........................................................................... 152
27 Financial Data Schedule..................................................................... 155++++
</TABLE>
================================================================================
*+ Incorporated by reference to Note F to Financial Statements on page
F-13
++++ EDGAR Filing only
<PAGE>
EXHIBIT 10.12
SECOND AMENDMENT, EFFECTIVE AS OF SEPTEMBER 30, 1998,
TO REVOLVING CREDIT AGREEMENT, DATED AS OF JANUARY 22, 1997,
AMONG MILLIPORE CORPORATION AND THE FIRST NATIONAL BANK
OF BOSTON, ABM AMRO BANK N.V. AND CERTAIN OTHER LENDING INSTITUTIONS
<PAGE>
SECOND AMENDMENT TO
REVOLVING CREDIT AGREEMENT
--------------------------
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Second
Amendment") is made and entered into as of September 30, 1998, by and among (a)
MILLIPORE CORPORATION, a Massachusetts corporation having its principal place
of business at 80 Ashby Road, Bedford, MA 01730 (the "Borrower"), (b)
--------
BANKBOSTON, N.A., with its head office at 100 Federal Street, Boston,
Massachusetts 02110 ("BkB"), ABN AMRO BANK N.V., with its Boston branch at One
---
Post Office Square, Boston, Massachusetts 02109 ("ABN"), and the other lending
institutions party hereto (collectively with BkB and ABN, the "Banks") and (c)
-----
BANKBOSTON, N.A., as administrative agent for the Banks (the "Administrative
--------------
Agent") and ABN AMRO BANK N.V., as documentation agent for the Banks (the
-----
"Documentation Agent", and collectively with the Administrative Agent, the
--------------------
"Agents").
-------
WHEREAS, the Borrower, the Agents and certain of the Banks entered into a
Revolving Credit Agreement dated as of January 22, 1997, which was amended
pursuant to that certain First Amendment Revolving Credit Agreement (the "First
-----
Amendment"), dated as of February 11, 1997 (as amended by the First Amendment,
---------
the "Credit Agreement"), pursuant to which the Banks extended credit to the
----------------
Borrower on the terms set forth therein;
WHEREAS, the Borrower has requested that the Banks make certain revisions
to its financial covenants as hereinafter set forth, and the Banks have agreed
to make such revisions;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Effective as of September 30, 1998:
1. DEFINITIONS. Capitalized terms used herein without definition
------------
shall have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENT TO (S)1.1.
--------------------
The definitions of "Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization or EBITDA" and "Pricing Table" in (S)1.1 of the
Credit Agreement are deleted in their entirety and the following new
definitions are inserted in their place:
Consolidated Earnings Before Interest, Taxes, Depreciation and
------------ -------- ------ -------- ----- ------------ ---
Amortization or EBITDA. For any period, without duplication,
------------ ------
Consolidated Net Income (or Deficit) plus (a) Consolidated Total
-----
<PAGE>
Interest Expense, (b) income taxes, (c) depreciation expense, (d)
amortization expense, (e) restructuring charges and other one time expense
items as identified by the Borrower in the press release announcing
Borrower's third quarter 1998 financial results, not to exceed $55,000,000
in the aggregate, before tax benefits, taken as a special charge to the
extent deducted from Consolidated Net Income (or Deficit) in the quarter
ending September 30, 1998, minus one-time gains of $35,594,000, on the sale
of Perkin-Elmer stock recognized in the fiscal quarter ending March 31,
1998, to the extent such gains were added to Consolidated Net Income;
provided that, for purposes of calculating the financial covenants pursuant
to (S)9, the portion of EBITDA derived from Subsidiaries acquired since the
date of the most recent financial statements delivered to the Banks
pursuant to (S)7.4 hereof shall be included in the calculation of EBITDA if
(i) the financial statements of such acquired Subsidiaries have been
audited for the period sought to be included by an independent accounting
firm satisfactory to the Administrative Agent or (ii) the Administrative
Agent consents to such inclusion, such consent not to be unreasonably
withheld.
PRICING TABLE.
--------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Level Senior Public Funded Debt Applicable Applicable Applicable
Debt Rating To EBITDA Facility Rating LC Rate Margin
Ratio (per annum) (per annum) (per annum)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Baal/BBB+ less than 4.00 0.1250% 0.2300% 0.2300%
- ----------------------------------------------------------------------------------------------------------------------------
2 Baa2/BBB less than 4.00 0.1500% 0.2750% 0.2750%
- ----------------------------------------------------------------------------------------------------------------------------
3 Baa3/BBB- less than 4.00 0.2250% 0.3750% 0.3750%
- ----------------------------------------------------------------------------------------------------------------------------
4 Ba1/BB+ less than=4.00 but more than 4.50 0.3000% 0.7000% 0.7000%
- ----------------------------------------------------------------------------------------------------------------------------
5 Ba2/BB or less than=4.50 0.3750% 1.1250% 1.1250%
Below
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The applicable rates or margin charged on any day shall be determined by
the Senior Public Debt Rating in effect as of that day; provided that (A)
Level 4 pricing shall be effective from September 30, 1998, through the
receipt of the Company's Compliance Certificate for the quarter ended
December 31, 1998, unless a change in the Senior Public Debt Rating would
require Level 5 pricing, and (B) thereafter, if the Company's Funded Debt
to EBITDA ratio as reported on its Compliance Certificate equals or exceeds
(a) 4:1, but is less than 4.50:1, Level 4 pricing shall apply, and (b)
4.50:1, Level 5 pricing shall apply. Any change in applicable rates or
margins based on the Funded Debt to EBITDA ratio shall become effective the
first day after receipt by the Banks of a Compliance Certificate indicating
a Funded Debt to EBITDA ratio of greater than or equal to 4:1. If at any
time any Compliance Certificate is not delivered within the time period
specified in (S)7.4(a)
<PAGE>
or (b), Level 5 pricing shall be in effect, subject to adjustment
prospectively upon actual receipt of such Compliance Certificate.
Notwithstanding the above, if the Senior Public Debt Rating and Funded Debt
to EBITDA ratio indicate two different levels of pricing, the higher of the
two levels shall apply.
3. NEW (S)6.19. Section 6, "Representations and Warranties", is
-----------
hereby amended by adding a new Section 6.19 immediately after existing Section
6.18, as follows:
(S)6.19. Year 2000 Compliance. The Borrower and its Subsidiaries have
--------------------
reviewed the areas within their businesses and operations which could be
adversely affected by, and have developed or are developing a program to
address on a timely basis, the "year 2000 Problem" (i.e. the risk that
computer applications used by the Borrower or any of its Subsidiaries may
be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999).
Based upon such review, the Borrower reasonably believes that the "Year
2000 Problem" will not have any materially adverse effect on the business
or on the consolidated financial condition of the Borrower and its
Subsidiaries.
4. AMENDMENT TO (S)7.18. Section 7.18 is hereby amended by deleting it in
--------------------
its entirety and replacing it with the following section:
(S)7.18 Amendment of Note Purchase Agreement. Metropolitan Life
--------------------------------------------
Insurance Company shall have: (a) agreed to amend its Note Purchase
Agreement on terms which mirror or are no more restrictive than the Credit
Agreement, as amended and (b) waived any default thereunder until the date
of such amendment. Such amendment shall be in full force and effect no
later than November 2, 1998.
5. AMENDMENT TO (S)8.4. Section 8.4 is hereby amended by deleting it in
-------------------
its entirety and replacing it with the following paragraph:
Except as provided below, neither the Borrower nor any of its
Subsidiaries will (a) declare or pay any Distributions, or (b) redeem,
convert, retire or otherwise acquire shares of any class of its capital
stock (other than in connection with a merger permitted by (S)8.3 hereof or
conversion into another form of equity of any preferred shares of the
Borrower existing as of the Closing Date pursuant to the terms thereof. If
no Default or Event of Default has occurred and is continuing, or would be
created as a result of such Distribution, (1) the Borrower and its
Subsidiaries may declare or pay cash dividends and (2) the Borrower and its
Subsidiaries may redeem, convert, retire, or otherwise acquire stock, so
long as (A) the aggregate amount of all such Distributions, beginning
September 30, 1998, do not exceed (i) $20,000,000 plus (ii) 50% of positive
----
Consolidated Net Income attributable to the fourth quarter of the year
ending December 31, 1998, plus (iii) 50% of positive Consolidated Net
----
Income for each full year thereafter, and (B) with respect to Distributions
under clause (2) above only, the ratio of Funded Debt to
<PAGE>
EBITDA is less than 2.50:1, as reported in the most recent Compliance
Certificate, and would remain less than 2.50:1, after giving effect to any
Indebtedness to be incurred in connection with such Distribution.
Notwithstanding the above, any Subsidiary may make Distributions to the
Borrower and the Borrower agrees that neither the Borrower nor any
Subsidiary will enter into any agreement restricting Distributions from
such Subsidiary to the Borrower, and warrants that no such restriction is
in effect as of the Closing Date, provided, that the provisions of this
--------
sentence shall not apply to restrictions on the use or any Distribution of
the proceeds of industrial development grants obtained by the Borrower's
Subsidiary from any industrial development authority.
6. Amendment to Section 9.1 is hereby amended by deleting the existing
table and replacing it in its entirety with the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
For the Quarters Ending: Ratio
- -----------------------------------------------------------------------------
<S> <C>
9/30/98 4.50:1.00
- -----------------------------------------------------------------------------
12/31/98 5.25:1.00
- -----------------------------------------------------------------------------
3/31/99 5.15:1.00
- -----------------------------------------------------------------------------
6/30/99 5.00:1.00
- -----------------------------------------------------------------------------
9/30/99 4.25:1.00
- -----------------------------------------------------------------------------
12/31/99 3.50:1.00
- -----------------------------------------------------------------------------
3/31/00 3.00:1.00
- -----------------------------------------------------------------------------
6/30/00 2.75:1.00
- -----------------------------------------------------------------------------
Thereafter 2.50:1.00
- -----------------------------------------------------------------------------
</TABLE>
7. Amendment to (S)9.2. Section 9.2 is hereby amended by deleting the
--------------------
existing table and replacing it in its entirety with the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
For the Quarters Ending: Ratio
- -----------------------------------------------------------------------------
<S> <C>
9/30/98 1.25:1.00
- -----------------------------------------------------------------------------
12/31/98 0.70:1.00
- -----------------------------------------------------------------------------
3/31/99 1.00:1.00
- -----------------------------------------------------------------------------
6/30/99 1.25:1.00
- -----------------------------------------------------------------------------
9/30/99 2.25:1.00
- -----------------------------------------------------------------------------
12/31/99 3.25:1.00
- -----------------------------------------------------------------------------
3/31/00 3.75:1.00
- -----------------------------------------------------------------------------
Thereafter 4.00:1.00
- -----------------------------------------------------------------------------
</TABLE>
8. New (S)9.3. Section 9, Financial Covenants of the Borrower, is hereby
----------- -----------------------------------
amended by adding a new Section 9.3 immediately after existing Section 9.2, as
follows:
<PAGE>
(S)9.3 MINIMUM EBITDA. As of the end of any fiscal quarter in which
--------------
the Funded Debt to EBITDA ratio exceeds 2.50:1.00, EBITDA for the Reference
Period ending on such date shall not be less than the amount set forth
below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
For the Four Quarters Ending: EBITDA:
- -------------------------------------------------------------------------------------------
<S> <C>
9/30/98 $100,000,000
- -------------------------------------------------------------------------------------------
12/31/98 $ 90,000,000
- -------------------------------------------------------------------------------------------
3/31/98 $ 93,000,000
- -------------------------------------------------------------------------------------------
6/30/99 $ 95,000,000
- -------------------------------------------------------------------------------------------
9/30/99 $112,500,000
- -------------------------------------------------------------------------------------------
12/31/99 $130,000,000
- -------------------------------------------------------------------------------------------
3/31/00 $150,000,000
- -------------------------------------------------------------------------------------------
Thereafter $165,000,000
- -------------------------------------------------------------------------------------------
</TABLE>
9. AMENDMENT TO SCHEDULE 1 TO THE CREDIT AGREEMENT. Schedule 1 to the
----------------------------------------------- ----------
Credit Agreement is hereby amended by deleting such schedule in its entirety and
substituting the Schedule 1 attached hereto in place thereof. The parties
----------
hereto hereby acknowledge and agree that each reference to Schedule 1 in the
-------- -
Credit Agreement or any other Loan Document shall henceforth be a reference to
Schedule 1 attached hereto or as subsequently amended.
- ----------
10. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
------------------------------
as follows:
(a) The execution and delivery of this Second Amendment and the
performance of the transactions contemplated hereby (i) are within the corporate
authority of the Borrower, (ii) have been duly authorized by all necessary
corporate proceedings on the part of the Borrower, (iii) do not conflict with or
result in any material breach or contravention of any provision of law, statute,
rule or regulation to which the Borrower is subject or any judgement, order,
writ, injunction, license or permit applicable to the Borrower so as to
materially adversely affect the assets, business or any activity of the
Borrower, and (iv) do not conflict with any provision of the corporate charter
or bylaws of the Borrower or any agreement or other instrument binding upon the
Borrower. Except for the merger of certain wholly-owned Subsidiaries into the
Borrower, there have been no amendments to the charter documents or by-laws of
the Borrower since February 11, 1997.
(b) The execution and delivery of this Second Amendment and the
performance of the transactions contemplated hereby will result in valid and
legally binding obligations of the Borrower party thereto enforceable against
the Borrower in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
<PAGE>
(c) The execution and delivery by the Borrower of this Second Amendment
and the consummation by the Borrower of the transactions contemplated hereby and
thereby do not require any approval or consent of, or filing with, any
governmental agency or authority other than those already obtained.
(d) The representations and warranties contained in the Credit Agreement
or in any document or instrument delivered pursuant to or in connection with the
Credit Agreement or this Second Amendment were true as of the date as of which
they were made and are true at and as of the Effective Date with the same effect
as if made at and as of that time (except to the extent of changes resulting
from transactions contemplated or permitted by the Credit Agreement and by this
Second Amendment and changes occurring in the ordinary course of business which
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly and solely to an earlier
date).
(e) The Borrower has performed and complied with all terms and conditions
in the Credit Agreement and this Second Amendment required to be performed or
complied with by it prior to or at the Effective Date, and no Default or Event
of Default or condition which would result in a Default or Event of Default has
occurred and is continuing, except that which would have occurred but for the
modifications contained in this Second Amendment.
11. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
-----------------
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Second Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement, any other Loan Document or any
agreement or instrument related to the Credit Agreement shall hereafter refer to
the Credit Agreement as amended by this Second Amendment.
12. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
13. COUNTERPARTS. This Second Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
14. EFFECTIVENESS. This Second Amendment shall become effective upon the
-------------
satisfaction of each of the following conditions (the "Effective Date"):
--------------
<PAGE>
(a) This Second Amendment shall have been executed and delivered by the
respective parties hereto, including by the Majority Banks;
(b) All corporate action necessary for the valid execution and delivery by
the Borrower of this Second Amendment and the performance of the transactions
contemplated hereby and thereby shall have been taken, and satisfactory
evidence thereof shall have been provided to the Administrative Agent;
(c) The Borrower shall have paid to each Bank that has executed and
delivered this Second Amendment, an amendment fee (the "Amendment Fee"), which
shall be in an amount equal to 0.25% of each such Bank's Commitment; and
(d) The Borrower shall have paid all fees required under that certain Fee
Letter of even date herewith and shall have reimbursed the Administrative Agent
for all costs and expenses (including legal fees) incurred by the Administrative
Agent in connection with the closing of this Second Agreement and related Loan
Documents.
IN WITNESS WHEREOF, each of the undersigned has duly executed this Second
Amendment under seal as of the date first set forth above.
THE BORROWER:
-------------
MILLIPORE CORPORATION
By: /s/ Francis J. Lunger
---------------------
Francis J. Lunger
Chief Financial Officer
THE BANKS AND AGENTS:
---------------------
BANKBOSTON, N.A.,
Individually and as Agent
By: /s/ William R. Rogers
---------------------
William R. Rogers
Vice President
<PAGE>
ABN AMRO BANK N.V.
------------------
By: /s/ James S. Adelsheim
----------------------
James S. Adelsheim
Group Vice President
By: /s/ John D. Rogers
------------------
John D. Rogers
Vice President
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By: /s/ Pamela Donnelly
-------------------
Pamela Donnelly
Vice President
By:
Name:
Title:
THE CHASE MANHATTAN BANK
By: /s/ Jeffrey Heuer
-----------------
Jeffrey Heuer
Vice President
FLEET NATIONAL BANK
By: /s/ Roger C. Boucher
--------------------
Roger C. Boucher
Vice President
<PAGE>
By:
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
By:
Name:
Title:
THE SANWA BANK, LIMITED
By: /s/ Jean-Michel Fatovic
-----------------------
Jean-Michel Fatovic
Vice President
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Bruce A. Berneir
--------------------
Bruce A. Berneir
Vice President
By:
Name:
Title:
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Nelson Chang
----------------
Nelson Chang
Account Officer
By:
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ John M. Mikolay
-------------------
John M. Mikolay
Vice President
MELLON BANK, N.A.
By: /s/ R. Jane Westrich
--------------------
R. Jane Westrich
Vice President
By:
Name:
Title:
<PAGE>
THE SAKURA BANK, LIMITED NEW YORK BRANCH
By: /s/ Yasumasa Kikuchi
--------------------
Yasumasa Kikuchi
Senior Vice President
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By:
Name:
Title:
By:
Name:
Title:
THE SUMITOMO BANK, LIMITED
By: /s/ J. Bruce Meredith
---------------------
J. Bruce Meredith
Senior Vice President
By:
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY
By: /s/ Gina S. Thompson
--------------------
Gina S. Thompson
Vice President
By:
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Vladimir Labun
------------------
Vladimir Labun
First Vice President - Manager
By:
Name:
Title:
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE INC.
By: /s/ R. TenHave
--------------
R. TenHave
Senior Vice President
By: /s/ Frederic W. Hall
--------------------
Frederic W. Hall
Vice President
<PAGE>
CREDITO ITALIANO SPA
By: /s/ Harmon P. Butler
--------------------
Harmon P. Butler
FVP & Deputy Manager
By:
Gianfranco Bisangi
First Vice President
<PAGE>
SCHEDULE 1
----------
BANKS; COMMITMENT PERCENTAGES
-----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
BANK COMMITMENT PERCENTAGE
- ------------------------------------------------------------------------------
<S> <C>
BANKBOSTON, N.A.
Domestic and Eurodollar Lending Office:
100 Federal Street, M/S 01-08-06
Boston, MA 02110 8.8888888890%
Attention: William R. Rogers
Fax Number: (617) 434-0819
- ------------------------------------------------------------------------------
ABN AMRO BANK N.V.
Domestic and Eurodollar Lending Office:
One Post Office Square, 39th Floor
Boston, MA 02109
Attention: James Adelsheim 8.8888888889%
Fax Number: (617) 988-7910
- ------------------------------------------------------------------------------
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
Domestic and Eurodollar Lending Office:
1251 Avenue of the Americas
New York, NY 10020-1104 8.7037037038%
Attention: Thomas Fennessey
Fax Number: (212) 782-6440
- ------------------------------------------------------------------------------
THE CHASE MANHATTAN BANK
Domestic and Eurodollar Lending Office:
85 Wells Avenue, Suite 200
Newton, MA 02459 8.7037037038%
Attention: Jeff Heuer
Fax Number: (617) 928-3057
- ------------------------------------------------------------------------------
FLEET NATIONAL BANK
Domestic and Eurodollar Lending Office:
One Federal Street, MAOFD07L
Boston, MA 02110 8.7037037038%
Attention: Roger C. Boucher
Fax Number: (617) 346-0145
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------
<S> <C>
THE BANK OF NOVA SCOTIA
Domestic and Eurodollar Lending Office:
28 State Street
Boston, MA 02209 6.1111111111%
Attention: M.R. Bradley
Fax Number: (617) 624-7607
- ------------------------------------------------------------------------------
THE SANWA BANK, LIMITED
Domestic and Eurodollar Lending Office:
Park Avenue Plaza
55 East 52nd Street 6.1111111111%
New York, NY 10055
Attention: Jean-Michel Fatovic
Fax Number: (212) 754-1304
- ------------------------------------------------------------------------------
CITIZENS BANK OF MASSACHUSETTS
Domestic and Eurodollar Lending Office:
28 State Street
Boston, MA 02110 4.4444444444%
Attention: Bruce Bernier
Fax Number: (617) 725-5690
- ------------------------------------------------------------------------------
THE DAI-ICHI KANGYO BANK, LTD.
Domestic and Eurodollar Lending Office:
One World Trade Center, Suite 4911
New York, NY 10048 4.4444444444%
Attention: Nelson Chang
Fax Number: (212) 912-1879
- ------------------------------------------------------------------------------
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
Domestic and Eurodollar Lending Office:
60 Wall Street
New York, NY 10260 4.4444444444%
Attention: Deborah Brodheim
Fax Number: (212) 648-5939
- ------------------------------------------------------------------------------
MELLON BANK, N.A.
Domestic and Eurodollar Lending Office:
One Boston Place, Aim #024-006A
Boston, MA 02108 4.4444444444%
Attention: R. Jane Westrich
Fax Number: (617) 722-3516
- ------------------------------------------------------------------------------
THE SAKURA BANK, LIMITED
NEW YORK BRANCH
Domestic and Eurodollar Lending Office:
101 Park Avenue, 15th floor 4.4444444444%
New York, NY 10178
Attention: Takehiro Matsumoto
Fax Number: (212) 909-4599
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------
<S> <C>
STATE STREET BANK AND TRUST COMPANY
Domestic and Eurodollar Lending Office:
225 Franklin Street, M2
Boston, MA 02110 4.4444444444%
Attention: Monica M. Sheehan
Fax Number: (617) 664-4971
- ------------------------------------------------------------------------------
THE SUMITOMO BANK, LIMITED
Domestic and Eurodollar Lending Office:
U.S. Corporate Department
277 Park Avenue 4.4444444444%
New York, NY 10172
Attention: Bruce Gregory
Fax Number: (212) 224-5188
- ------------------------------------------------------------------------------
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Attention: Jim Reilly 4.4444444444%
Fax Number: (212) 250-7218
- ------------------------------------------------------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
Domestic and Eurodollar Lending Office:
1301 Avenue of the Americas, 18th Floor
New York, NY 10019 3.2539682540%
Attention: Tony Muller
Fax Number: (212) 459-3179
- ------------------------------------------------------------------------------
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE INC.
565 Fifth Avenue
New York, NY 10017 2.8571428571%
Attention: Rick Hall
Fax Number: (212) 880-1040
- ------------------------------------------------------------------------------
CREDITO ITALIONO SPA
375 Park Avenue
New York, NY 10152 2.2222222222%
Attention: Harmon Butler
Fax Number: (212) 546-9675
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.13
NOTE PURCHASE AND EXCHANGE AGREEMENT, AS AMENDED THROUGH
NOVEMBER 2, 1998, BETWEEN MILLIPORE CORPORATION AND
METROPOLITAN LIFE INSURANCE COMPANY
<PAGE>
MILLIPORE CORPORATION
METROPOLITAN LIFE INSURANCE COMPANY
AMENDMENT
To
NOTE PURCHASE AND EXCHANGE AGREEMENT
THIS AMENDMENT, dated November 2, 1998 to the Millipore Corporation Note
Purchase and Exchange Agreement, dated March 3, 1994, as heretofore amended
(including the Amendment Agreement, dated March 21, 1997) (collectively the
"Purchase Agreement"), between Metropolitan Life Insurance Company (the
"Noteholder") and Millipore Corporation (the "Company").
WHEREAS, Noteholder and the Company have entered into the Purchase
Agreement providing for the issue and sale (and subsequent exchange) of
$100,000,000 of the Company's 6.78% Senior Notes, due March 3, 2004 (the
"Notes") to the Noteholder;
WHEREAS, Pursuant to (S)10.2 of the Purchase Agreement, the Company and
Noteholder wish to modify the Purchase Agreement;
NOW THEREFORE in consideration of the premises and the covenants and
agreements contained herein the parties agree, subject to paragraph 5 hereof,
that:
1. The effective date of this Amendment Agreement shall be September 30,
1998 (the "Effective Date"). Except as otherwise specifically provided herein,
all capitalized terms used herein shall have the respective meanings given to
them in the Purchase Agreement.
2. The Noteholder hereby permanently waives the Debt Test Default under
(S)6.9 of the Purchase Agreement that occurred as of the end of the Company's
fiscal quarter ended September 30, 1998.
<PAGE>
3. As of the Effective Date the Purchase Agreement is hereby amended as
follows:
A. The term EBITDA shall have the following meaning:
"EBITDA. For any period, without duplication, Consolidated Net Income (or
------
Deficit) plus (a) Consolidated Total Interest Expense, (b) income taxes, (c)
----
depreciation expense, (d) amortization expense, (e) restructuring charges and
other one time expense items as identified by the Company in the press release
announcing the Company's third quarter 1998 financial results, not to exceed
$55,000,000 in the aggregate, before tax benefits, taken as a special charge
to the extent deducted from Consolidated Net Income (or Deficit) in the
quarter ending September 30, 1998, minus one time gains of $35,594,000, on the
sale of Perkin-Elmer stock recognized in the fiscal quarter ended March 31,
1998, to the extent that such gains were added to Consolidated Net Income;
provided that, for purposes of calculating the financial covenants pursuant to
(S)6.9(a), the portion of EBITDA derived from Subsidiaries acquired since the
date of the most recent financial statements delivered to the Noteholder
pursuant to (S)6.6 hereof shall be included in the calculation of EBITDA if
(i) the financial statements of such acquired Subsidiaries have been audited
for the period sought to be included by an independent accounting firm
satisfactory to you or (ii) you consent to such inclusion."
B. (S)6.9(a) is amended in its entirety to read as follows:
"(1) Funded Debt to EBITDA Ratio. As of the end of any fiscal quarter of
---------------------------
the Company, the ratio of (a) Funded Debt as at the end of such quarter to (b)
EBITDA for the period of four (4) consecutive fiscal quarters ending on such
date shall not exceed the stated ratio for the periods set forth below:
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
FOR THE QUARTERS ENDING: RATIO
- ---------------------------------------------------------------------------
<S> <C>
9/30/98 4.50:1.00
- ---------------------------------------------------------------------------
12/31/98 5.25:1.00
- ---------------------------------------------------------------------------
3/31/99 5.15:1.00
- ---------------------------------------------------------------------------
6/30/99 5.00:1.00
- ---------------------------------------------------------------------------
9/30/99 4.25:1.00
- ---------------------------------------------------------------------------
12/31/99 3.50:1.00
- ---------------------------------------------------------------------------
3/31/00 3.00:1.00
- ---------------------------------------------------------------------------
6/30/00 2.75:1.00
- ---------------------------------------------------------------------------
Thereafter 2.50:1.00
- ---------------------------------------------------------------------------
</TABLE>
"(2) Interest Coverage Ratio. As of the end of any fiscal quarter, the
-----------------------
ratio of (a) EBITDA minus Capital Expenditures for the period of four (4)
-----
consecutive fiscal quarters ending on such date to (b) Consolidated Total
Interest Expense for the period of four (4) consecutive fiscal quarters ending
on such date shall not be less than the stated ratio for the periods set forth
below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
FOR THE QUARTERS ENDING: RATIO
- ---------------------------------------------------------------------------
<S> <C>
9/30/98 1.25:1.00
- ---------------------------------------------------------------------------
12/31/98 0.70:1.00
- ---------------------------------------------------------------------------
3/31/99 1.00:1.00
- ---------------------------------------------------------------------------
6/30/99 1.25:1.00
- ---------------------------------------------------------------------------
9/30/99 2.25:1.00
- ---------------------------------------------------------------------------
12/31/99 3.25:1.00
- ---------------------------------------------------------------------------
3/31/00 3.75:1.00
- ---------------------------------------------------------------------------
Thereafter 4.00:1.00
- ---------------------------------------------------------------------------
</TABLE>
"(3) Minimum EBITDA. As of the end of any fiscal quarter in which the
--------------
Funded Debt to EBITDA ratio exceeds 2.50:1.00, EBITDA for the period of four (4)
consecutive fiscal quarters ending on such date shall be not less than the
amount set forth below:
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
FOR THE FOUR FISCAL QUARTERS ENDING: EBITDA
- ---------------------------------------------------------------------------
<S> <C>
9/30/98 $ 100,000,000
- ---------------------------------------------------------------------------
12/31/98 $ 90,000,000
- ---------------------------------------------------------------------------
3/31/99 $ 93,000,000
- ---------------------------------------------------------------------------
6/30/99 $ 95,000,000
- ---------------------------------------------------------------------------
9/30/99 $ 112,500,000
- ---------------------------------------------------------------------------
12/31/99 $ 130,000,000
- ---------------------------------------------------------------------------
3/31/00 $ 150,000,000
- ---------------------------------------------------------------------------
Thereafter $ 165,000,000"
- ---------------------------------------------------------------------------
</TABLE>
4. Attached hereto as Annex A is a true and correct copy of the Company's
press release referred to in the definition of EBITDA in paragraph 3A above.
5. Unless the Noteholder shall have received payment of one of the
following amounts on or before November 30, 1998:
(i) an amendment fee of $1,500,000 to the Noteholder by wire transfer of
immediately available funds; or
(ii) prepayment by wire transfer of immediately available funds equal to
$50,000,000 of the aggregate principal amount of the Notes together with
interest thereon at the rate of 6.88% from the most recent interest payment
date to which interest has been paid to the date of payment hereunder, but
without premium;
then, in such event, effective as of November 2, 1998, the Company shall pay
interest to the Noteholder at the rate of 7.23% in lieu of the face rate of
6.78% for the Notes. This increased interest rate shall be payable only to the
Noteholder for so long as the Noteholder shall be the registered owner of the
Notes and shall not be payable to any subsequent purchaser of the Notes. In the
event that the interest rate shall be increased as aforesaid, the Company agrees
to deliver to the Noteholder such representations, corporate documents and
opinions of the Company's General Counsel as the Noteholder may reasonably
request.
<PAGE>
6. Except as specifically provided herein, the Purchase Agreement shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, this instrument has been executed on the date first
above written.
METROPOLITAN LIFE INSURANCE COMPANY MILLIPORE CORPORATION
By: ________________________ By: _________________________
Date: ________________________ Date: _________________________
<PAGE>
ANNEX A
TO AMENDMENT DATED NOVEMBER 2, 1998 TO NOTE PURCHASE & EXCHANGE AGREEMENT
-------------------------------------------------------------------------
INVESTOR CONTACT MEDIA CONTACT
- ---------------- -------------
Geoffrey Helliwell Thomas Anderson
Director, Treasury Operations Director, Corporate Communications
(781) 533-2032 (781) 533-2225
(800) 225-3384 (800) 225-3384
[email protected] [email protected]
MILLIPORE ANNOUNCES THIRD QUARTER RESULTS
Bedford, Massachusetts, October 14, 1998 - Millipore Corporation (NYSE/MIL)
announced today that its third quarter revenues were $159 million, down 14
percent from the same period last year. In local currency, revenues were down
10 percent. For the first nine months of 1998, revenues were down 6 percent, 2
percent in local currency.
Millipore reported a loss of $0.96 per share for the third quarter compared to a
profit of $0.48 per share for the same period last year. The loss for the third
quarter includes a restructuring charge of $33.6 million, charges for unusual
items of $15.2 million and charges related to discontinued operations of $7.5
million. These charges are detailed in the attached schedule. Excluding the
restructuring charges and unusual items from both periods Millipore would have
reported a loss of $0.06 per share in the third quarter from continuing
operations versus a gain of $0.39 per share for the same period last year.
The restructuring actions were initiated in July of this year. These actions,
combined with the savings from Millipore's microelectronics plant consolidation,
are expected to yield annual savings of $38 million. There were 620 full-time
and temporary positions out of a base of 4,800 affected by these actions, most
of which were in Millipore's microelectronics business.
Commenting on the results for the quarter, C. William Zadel, Millipore's
Chairman and CEO said: "We expected this would be a difficult quarter. We
forecasted in our pre-announcement that microelectronics revenues would be soft
and, in fact, they were down 42 percent in local currency, due to the continued
slowdown in the microelectronics industry, compounded by the Asian financial
crisis. Analytical sales were negatively influenced by the recession in Japan,
which reduced the sales growth rate to 3% in local currency.
"On a more positive note, we achieved double-digit growth in our
biopharmaceutical business," continued Zadel. "This result reflects the strength
of the biotechnology and pharmaceutical industry, and the products and expertise
we bring to them."
"Our restructuring and streamlining efforts are beginning to yield positive
results," added Zadel. "We are responding to market conditions, and are making
sensible adjustments that will improve our profitability for both the short and
long term. At the same time we continue to invest in key R&D and product
programs essential for our future growth. "
<PAGE>
Earnings for the year to date from continuing operations, excluding non-
recurring charges and unusual items, were $0.42 per share compared with $1.22
per share last year.
Millipore's revenue growth by market and by geographic region was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Q-3 Q-3 % % Growth
1997 1998 Growth Local Currency
----- ----- ------ --------------
<S> <C> <C> <C> <C>
MICROELECTRONICS MFG. $ 66 $ 35 (47)% (42)%
BIOPHARMACEUTICAL MFG. 49 55 12 % 15 %
ANALYTICAL LABORATORY 70 69 (1)% 3 %
----- ----- ---- ----
TOTAL $ 185 $ 159 (14)% (10)%
Q-3 Q-3 % % Growth
1997 1998 Growth Local Currency
----- ----- ------ --------------
AMERICAS $ 79 $ 68 (14)% (13)%
EUROPE 50 54 8 % 7 %
ASIA / PACIFIC 56 37 (34)% (21)%
----- ----- ---- ----
TOTAL $ 185 $ 159 (14)% (10)%
- ----------------------------------------------------------------------------
</TABLE>
Millipore is a multinational, high technology company that applies its
purification technology to critical research and manufacturing problems in the
microelectronics, biopharmaceutical and analytical laboratory markets.
THE MATTERS DISCUSSED HEREIN, AS WELL AS IN FUTURE ORAL AND WRITTEN STATEMENTS
BY MANAGEMENT OF THE COMPANY, THAT ARE FORWARD-LOOKING STATEMENTS, ARE BASED ON
CURRENT MANAGEMENT EXPECTATIONS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE RESULTS EXPRESSED
IN, OR IMPLIED BY, THESE FORWARD-LOOKING STATEMENTS. POTENTIAL RISKS AND
UNCERTAINTIES THAT COULD AFFECT THE COMPANY'S FUTURE OPERATING RESULTS INCLUDE,
WITHOUT LIMITATION, FOREIGN EXCHANGE RATES; INCREASED REGULATORY CONCERNS ON THE
PART OF THE BIOPHARMACEUTICAL INDUSTRY; FURTHER CONSOLIDATION OF DRUG
MANUFACTURERS; COMPETITIVE FACTORS SUCH AS NEW MEMBRANE TECHNOLOGY, AND/OR A NEW
METHOD OF CHIP MANUFACTURE WHICH RELIES LESS HEAVILY ON PURIFIED CHEMICALS AND
GASES; AVAILABILITY OF COMPONENT PRODUCTS ON A TIMELY BASIS; INVENTORY RISKS DUE
TO SHIFTS IN MARKET DEMAND; CHANGE IN PRODUCT MIX; CONDITIONS IN THE ECONOMY IN
GENERAL, INCLUDING UNCERTAINTIES IN SELECTED ASIAN ECONOMIES, AND IN THE
MICROELECTRONICS MANUFACTURING MARKET IN PARTICULAR; THE DIFFICULTY IN
INTEGRATING ACQUIRED COMPANIES; FAILURE TO REALIZE THE SAVINGS CONTEMPLATED BY
CERTAIN RESTRUCTURING ACTIVITIES; POTENTIAL ENVIRONMENTAL LIABILITIES; THE
INABILITY TO UTILIZE TECHNOLOGY IN CURRENT OR PLANNED PRODUCTS DUE TO OVERRIDING
RIGHTS BY THIRD PARTIES, AND THE RISK FACTORS LISTED FROM TIME TO TIME IN THE
COMPANY'S FILINGS WITH THE SEC.
To receive the latest information about Millipore via FAX, dial (800) 758-5804
(PIN#101371). To access Millipore's Web site, go to URL
http://www.millipore.com.
Results for the third quarter and year to date in 1998 are as follows:
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30 1998 1997
---- ----
<S> <C> <C>
Net Sales $159,181 $184,544
Cost of Sales 101,493 82,372
-------- --------
Gross Profit 57,688 102,172
Selling, General & Administrative Expenses 56,588 58,965
Research & Development Expenses 13,301 14,353
Restructuring Charges 33,641 -
-------- --------
Operating (Loss)/Income (45,842) 28,854
Gain on Sale of Equity Securities - 5,304
Interest Income 877 708
Interest Expense (7,098) (8,026)
-------- --------
(Loss)/Income from Continuing Operations Before
Income Taxes (52,063) 26,840
Income Tax (Benefit)/Expense (15,643) 5,637
-------- --------
Net (Loss)/Income from Continuing Operations (36,420) 21,203
Loss on Disposal of Discontinued Operations, Net of Income
Taxes of $1,695 5,847 -
-------- --------
Net (Loss)/Income $(42,267) $ 21,203
======== ========
Per Share Information:
Diluted Net (Loss)/Income Per Share:
Continuing Operations $ (0.83) $ 0.48
Discontinued Operations $ (0.13) $ -
Diluted Earnings Per Share $ (0.96) $ 0.48
Cash Dividends Per Common Share $ 0.11 $ 0.10
Diluted Weighted Average Common Shares Outstanding 43,891 44,428
</TABLE>
Geoffrey E. Helliwell
Director of Treasury Operations
(800) 225-3384 or (781) 533-2032
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 1998 1997
---- ----
<S> <C> <C>
Net Sales $520,015 $555,881
Cost of Sales 273,429 249,430
-------- --------
Gross Profit 246,586 306,451
Selling, General & Administrative Expenses 190,850 182,015
Research & Development Expenses 40,346 42,507
Purchased Research & Development Expenses - 114,091
Restructuring Charges 33,641 -
-------- --------
Operating Loss (18,251) (32,162)
Gain On Sale Of Equity Securities 35,594 7,073
Interest Income 2,252 2,105
Interest Expense (21,229) (22,209)
-------- --------
Loss from Continuing Operations Before Income Taxes
(1,634) (45,193)
Income Tax (Benefit)/Expense (3,457) 14,985
-------- --------
Net Income/(Loss) from Continuing Operations 1,823 (60,178)
Loss on Disposal of Discontinued Operations, Net of Income
Taxes of $1,695 5,847 -
-------- --------
Net Loss $ (4,024) $(60,178)
======== ========
Per Share Information:
Diluted Net Income/(Loss) Per Share:
Continuing Operations $ 0.04 $ (1.38)
Discontinued Operations $ (0.13) $ -
Diluted Earnings Per Share $ (0.09) $ (1.38)
Cash Dividends Per Common Share $ 0.32 $ 0.29
Diluted Weighted Average Common Shares Outstanding 43,814 43,492
</TABLE>
Geoffrey E. Helliwell
Director of Treasury Operations
(800) 225-3384 or (781) 533-2032
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DEC. 31, 1997
(Unaudited)
<S> <C> <C>
Assets
Cash $ 1,474 $ 2,240
Short-term investments 42,512 18,029
Accounts receivable, net 155,536 176,585
Inventories 117,616 127,192
Other current assets 9,756 28,362
-------- --------
Total current assets 326,894 352,408
Property, plant & equipment, net 225,098 220,094
Intangible assets 77,333 77,394
Deferred income taxes 106,001 88,760
Other assets 22,061 27,588
-------- --------
Total assets $757,387 $766,244
======== ========
</TABLE>
Geoffrey E. Helliwell
Director of Treasury Operations
(800) 225-3384 or (781) 533-2032
<PAGE>
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DEC. 31, 1997
(Unaudited)
<S> <C> <C>
Liabilities & Shareholders' Equity
Notes payable $ 186,272 $ 165,576
Accounts payable 41,522 46,088
Accrued expenses 81,629 74,856
Dividends payable 4,833 4,369
Accrued retirement plan contributions 6,119 7,088
Accrued income taxes 5,811 6,896
--------- ---------
Total current liabilities 326,186 304,873
Long-term debt 282,749 286,844
Other liabilities 26,355 25,533
Shareholders' equity:
Common stock, par value $1.00 per share,
120,000 shares authorized, 56,988 shares
issued as of September 30, 1998 and
December 31, 1997, respectively 56,988 56,988
Additional paid-in capital 10,927 10,927
Retained earnings 470,407 490,289
Accumulated other comprehensive loss (35,583) (21,720)
--------- ---------
502,739 536,484
Less: Treasury stock at cost 13,048 and
13,291 shares as of September 30, 1998
and December 31, 1997, respectively (380,642) (387,490)
--------- ---------
Total shareholders' equity 122,097 148,994
--------- ---------
Total liabilities & shareholders' equity $ 757,387 $ 766,244
========= =========
</TABLE>
<PAGE>
MILLIPORE CORPORATION
SUMMARY OF RESTRUCTURING CHARGES & UNUSUAL ITEMS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
Cost of Sales
<S> <C>
Write-off of inventory and manufacturing equipment associated with product line
rationalization activities and changes in manufacturing processes $ 9,175
Provision for excess inventory 6,000
--------
Impact on Gross Margin (15,175)
Restructuring Charges
Write-off of intangible assets and equipment, and severance costs associated with
discontinuance of non-strategic product lines 9,010
Severance costs, lease termination expenses and other costs to realign European
country organization structure to an operating business unit focus 7,240
Severance costs, equipment write-offs and lease termination expenses resulting
from the consolidation of certain manufacturing operations 4,577
Severance costs related to the streamlining of functional organizations and the
outsourcing of a number of activities 4,478
Write-off of prepaid licensing and other fees to reflect the amendment of
marketing and research alliance agreements 3,432
Severance costs, lease termination expenses and other charges necessary to reduce
administration and management cost in Asia 3,188
Cancellation charges and other costs arising from realignment of supply chain
management function and vendor consolidation program 1,716
--------
Total Restructuring Charges 33,641
--------
Impact on Loss from Continuing Operations Before Income Taxes (48,816)
Tax Impact of Restructuring Charges and Unusual Items (14,961)
--------
Impact on Net Loss from Continuing Operations (33,855)
Loss on Disposal of Discontinued Operations
Final determination of the value of the remaining assets and liabilities
associated with the Waters Chromatography Division and the non- membrane
bioscience business ($7,542 before taxes) 5,847
--------
Impact on Net Loss $(39,702)
========
Impact on Net Loss Per Share $ (0.90)
</TABLE>
<PAGE>
MILLIPORE CORPORATION
SUMMARY OF RESTRUCTURING CHARGES & UNUSUAL ITEMS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 1998 1997
---- ----
<S> <C> <C>
Cost of Sales
Unusual Items $ 15,175 $ -
Purchase Accounting Adjustment - 5,000
-------- ---------
Impact on Gross Margin (15,175) (5,000)
Selling, General & Administrative Expenses
Settlement of Legal Matters 11,766 -
Purchased Research & Development Expenses - 114,091
Restructuring Charges 33,641 -
-------- ---------
Impact on Operating Loss (60,582) (119,091)
Gain on Sale of Equity Securities 35,594 7,073
-------- ---------
Impact on Loss from Continuing Operations Before Income Taxes
(24,988) (112,018)
Tax Impact of Restructuring Charges and Unusual Items (8,361) 948
-------- ---------
Impact on Net Loss from Continuing Operations (16,627) (112,966)
Loss on Disposal of Discontinued Operations 5,847 -
-------- ---------
Impact on Net Loss $(22,474) $(112,966)
======== =========
Impact on Net Loss Per Share $ (0.51) $ (2.60)
</TABLE>
<PAGE>
MILLIPORE CORPORATION
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT dated March 21, 1997 to the Millipore Corporation Note
Purchase and Exchange Agreement dated March 3, 1994 between Metropolitan Life
Insurance Company (the "Noteholder") and Millipore Corporation (the "Company").
WHEREAS, Noteholder and the Company have entered into the Millipore
Corporation Note Purchase and Exchange Agreement dated March 3, 1994, providing
for the issue and sale (and subsequent exchange) of $100,000,000 of the
Company's Senior Notes to the Noteholder (the "Purchase Agreement");
WHEREAS, Pursuant to (S)10.2 the Company and Noteholder wish to modify the
Purchase Agreement;
NOW THEREFORE in consideration of the premises and the covenants and
agreements contained herein the parties agree that the Purchase Agreement is
hereby amended as follows:
1. Except as otherwise specifically provided herein, all capitalized
terms used herein shall have the respective meanings given to them in the
Purchase Agreement.
<PAGE>
2. For purposes of this Amendment Agreement the following terms shall
have the meanings set forth in this (S)2:
Amicon Acquisition. The acquisition of the Amicon business from
------------------
W. R. Grace & Co. - Conn. pursuant to the Purchase and Sale Agreement dated
November 18, 1996.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
--------------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); provided that Capital Assets shall not
--------
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by the Company
--------------------
or any of its Subsidiaries in connection with the purchase or lease by the
Company or any of its Subsidiaries of Capital Assets that would be required to
be capitalized and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles.
Capitalized Leases. Leases under which the Company or any of its
Subsidiaries (including Tylan and its Subsidiaries) is the lessee or obligor,
the discounted future rental payment obligations under which are required to be
capitalized on the balance sheet of the lessee or obligor in accordance with
GAAP.
Consolidated or consolidated. With reference to any term defined herein,
----------------------------
shall mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with GAAP.
EBITDA. For any period, Consolidated Net Income (or deficit) plus (a)
------ ----
Consolidated Total Interest Expense, (b) income taxes, (c) depreciation expense,
(d)
<PAGE>
amortization expense, (e) non-cash expenses, not to exceed $70,000,000, in
connection with the Amicon Acquisition taken as a special charge in the quarter
ending December 31, 1996, (f) non-cash expenses, not to exceed $120,000,000, in
connection with the Tylan Tender Offer or Tylan Merger which will be taken as a
special charge in the quarter ending March 31, 1997, and (g) other non-recurring
charges in connection with the Amicon Acquisition and the Tylan Merger, not to
exceed $25,000,000 in the aggregate, which will be taken as a special charge in
the quarter ending March 31, 1997, to the extent that each was deducted in
determining Consolidated Net Income (or Deficit).
Consolidated Net Income (or Deficit). The consolidated net income (or
------------------------------------
deficit) of the Company and its Subsidiaries on a consolidated basis, after
deduction of all expenses, taxes, and other proper charges, determined in
accordance with GAAP.
Consolidated Total Interest Expense. For any period, the aggregate amount
-----------------------------------
of interest expense required by GAAP to be paid or accrued during such period on
all Indebtedness of the Company and its Subsidiaries outstanding during all or
any part of such period, including capitalized interest expense for such period.
Funded Debt. Consolidated Indebtedness of the Company and its Subsidiaries
-----------
for borrowed money and purchase money Indebtedness, and guarantees of such debt,
recorded on the Consolidated balance sheet, including the amount of any
Indebtedness for Capitalized Leases which corresponds to principal and for
Permitted Receivables Transactions determined on a consolidated basis in
accordance with GAAP.
Generally accepted accounting principles, or GAAP. (i) When used in
-------------------------------------------------
(S)6.9(a), whether directly or indirectly through reference to a capitalized
term used therein, means (A) principles that are consistent with the principles
promulgated or adopted by the
<PAGE>
Financial Accounting Standards Board and its predecessors in effect for the
fiscal year ended on December 31, 1995 and (B) to the extent consistent with
such principles, the accounting practice of the Company reflected in its
financial statements for the year ended on December 31, 1995, and (ii) when used
in general, other than as provided above, means principles that are (A)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (B) consistently applied with past financial statements of the Company
adopting the same principles, provided that in each case referred to in this
definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion with respect to the use of
such principles (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.
Indebtedness. All obligations, contingent and otherwise, that in
------------
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct or
indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge, or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (iii) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or
<PAGE>
to assure the owner of indebtedness against loss, through an agreement to
purchase goods, supplies, or services for the purpose of enabling the debtor to
make payment of the indebtedness held by such owner or otherwise, and the
obligations to reimburse the issuer in respect of any letters of credit.
MCTG. MCTG Acquisition Corp., a Delaware corporation and a wholly-owned
----
Subsidiary of the Company.
Permitted Receivables Transaction. Any sale or sales of, and/or
---------------------------------
securitization of, any accounts receivable of the Company and/or any of its
Subsidiaries (the "Receivables") pursuant to which the Company and its
Subsidiaries realize aggregate net proceeds of not more than $100,000,000 at any
one time outstanding, including, without limitation, any revolving purchase(s)
of Receivables where the maximum aggregate uncollected purchase price (exclusive
of any deferred purchase price) for such Receivables at any time outstanding
does not exceed $100,000,000.
Person. Any individual, corporation, partnership, limited liability
------
company, trust, unincorporated association, business, or other legal entity, any
government or any governmental agency or political subdivision thereof.
Reference Period. The period of four consecutive fiscal quarters (or such
----------------
shorter period of one, two, or three consecutive fiscal quarters as has elapsed
since December 31, 1996).
Subsidiary. Any corporation, association, trust, or other business entity
----------
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority of the outstanding
capital stock or other interest entitled to vote generally.
<PAGE>
Tylan. Tylan General, Inc., a Delaware corporation.
-----
Tyler Merger. The merger of MCTG with and into Tylan pursuant to the Tylan
------------
Merger Agreement, with Tylan being the surviving corporation and a Subsidiary of
the Company.
Tylan Merger Agreement. The Agreement and Plan of Merger dated as of
----------------------
December 16, 1996 among Tylan, the Company and MCTG.
Tylan Tender Offer. The Offer to Purchase, dated December 20, 1996, made
------------------
by MCTG, to purchase all of the outstanding shares of common stock, together
with all associated Series A Junior Participating Preferred Stock Purchase
Rights of Tylan (collectively, the "Tylan Shares").
3. (S)6.9(a) is amended in its entirety to read as follows:
(1) Funded Debt to EBITDA Ratio. As of the end of any fiscal quarter of
---------------------------
the Company, the ratio of (a) Funded Debt as at the end of such quarter to (b)
EBITDA for the period of four (4) consecutive fiscal quarters ending on such
date shall not exceed the stated ratio for the periods set forth below:
For the Quarters Ending: Ratio
----------------------------------------------------------------
On or before 12/31/97 3.25:1.00
----------------------------------------------------------------
3/31/98 through 12/31/98 2.75:1.00
----------------------------------------------------------------
Thereafter 2.50:1.00
----------------------------------------------------------------
(2) Interest Coverage Ratio. As of the end of any fiscal quarter, the
-----------------------
ratio of (a) EBITDA minus Capital Expenditures for the Reference Period ending
-----
on such date to (b) Consolidated Total Interest Expense for the Reference Period
ending on such date shall not be less than the stated ratio for the periods set
forth below:
<PAGE>
For the Quarters Ending: Ratio
----------------------------------------------------------------
3/31/97 and 6/30/97 3.00:1.00
----------------------------------------------------------------
9/30/97 through 12/31/98 3.50:1.00
----------------------------------------------------------------
Thereafter 4.00:1.00
----------------------------------------------------------------
4. Effective as of March 21, 1997, the Company shall pay interest to the
Noteholder at the rate of 6.88% per annum in lieu of the face rate of 6.78% for
its Senior Notes Due 2004. This increased interest rate shall be payable only
to the Noteholder, its subsidiaries and their respective successors for as long
as the Noteholder, its subsidiaries or any of their respective successors shall
be the registered owner of the aforementioned Notes but shall not be payable to
any subsequent purchaser of the Notes.
5. Except as specifically provided herein, the Purchase Agreement shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, this instrument has been executed on the date first
above written.
METROPOLITAN LIFE INSURANCE COMPANY MILLIPORE CORPORATION
By: ________________________ By: _______________________
Date: ________________________ Date: _______________________
<PAGE>
MILLIPORE CORPORATION
NOTE PURCHASE AND EXCHANGE AGREEMENT
MARCH 3, 1994
METROPOLITAN LIFE INSURANCE COMPANY
ONE MADISON AVENUE
NEW YORK, NEW YORK 10010
ATTENTION: TREASURER
GENTLEMEN:
MILLIPORE CORPORATION, a Massachusetts corporation (herein called the
"Company"), and you hereby agree as follows:
(S)1. Issue of Notes.
--------------
(S)1.1. Authorization. The Company has duly authorized an issue of
-------------
$100,000,000 aggregate principal amount of its Senior Notes due March 3, 2004
(the "Notes"), such Notes to have terms and provisions substantially as set
forth in Exhibit A hereto. The term "Notes" as used herein shall include all
promissory notes delivered pursuant to the provisions of this Agreement and all
promissory notes delivered in substitution or exchange therefor or in lieu
thereof, and, where applicable, shall include the singular number as well as the
plural. The term "Note" shall mean one of the Notes.
(S)1.2. Sale of Notes; Closing. The Company hereby agrees to sell to
-----------------------
you, and subject to the terms and conditions herein set forth, you hereby agree
to purchase from the Company, Notes in the aggregate principal amount of
$100,000,000.
Delivery of the Notes so to be purchased by you hereunder shall be made at
the home office of Metropolitan Life Insurance Company, One Madison Avenue, New
York, New York, at 10:00 a.m. Eastern time on March 3, 1994 (the "Closing
Date"). On the Closing Date you shall deliver to the Company the 9.20% Notes
due March 30, 1998 of the Company (the "9.20% Notes") issued to you in the
aggregate principal amount of $100,000,000 pursuant to the Indenture, dated as
of March 30, 1988, between the Company and Rhode Island Hospital Trust National
Bank, as Trustee (the "1988 Indenture") in exchange for the Company's delivery
to you of one or more Notes (as specified by you prior to the Closing Date)
payable to you (or your nominee) or registered assigns, dated the Closing Date,
in the aggregate principal amount of $100,000,000 and duly executed by the
Company, and the payment by the Company to you by wire transfer of immediately
available funds to your account as provided in Annex I hereto of (i) interest
<PAGE>
accrued on the outstanding principal amount of the 9.20% Notes to the Closing
Date, plus (ii) a Prepayment Premium, as defined in this (S)1.2.
For the purposes of this (S)1.2 the "Prepayment Premium" shall mean the
excess of (i) the sum of the respective Payment Values of each prospective
interest payment and the principal payment at maturity in respect of the 9.20%
Notes (the amount of each such interest payment being herein referred to as an
"Interest Payment" and the amount of the principal payment at maturity being
herein referred to as the "Principal Payment") over (ii) the unpaid principal
amount of the 9.20% Notes. The Payment Value of the Principal Payment shall be
determined by discounting the Principal Payment at the rate of 4.30% per annum
for the period from March 30, 1995 to the Closing Date. The Payment Value of
each Interest Payment shall be determined by discounting such Interest Payment
at the rate of 4.30% per annum for the period from the scheduled date of such
payment to the Closing Date. Two days prior to the Closing Date, you shall
determine the amount of such Prepayment Premium and notify the Company thereof.
In the event that the Closing Date is rescheduled, you shall redetermine the
amount of such Prepayment Premium as of two days prior to the rescheduled
Closing Date and notify the Company thereof.
(S)2. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants that:
(S)2.1 Financial Statements. You have been furnished with copies of the
--------------------
consolidated balance sheets of the Company and its Subsidiaries as of December
31 in the years 1991 to 1993, inclusive, and the related consolidated statements
of income, stockholders' equity and cash flows of the Company and its
subsidiaries for the fiscal periods ended on said dates, accompanied in each
case by the opinion of its independent certified public accountants, provided,
however, that such financial statements and such opinion for the year 1993 shall
be in draft form.
Said financial statements fairly present (a) the consolidated financial
condition of the company and its subsidiaries as at the respective dates of said
balance sheets, and (b) the consolidated results of the operations of the
Company and its Subsidiaries for the fiscal periods ended on said dates, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as otherwise stated therein or in
the notes thereto).
(S)2.2. No Material Changes. There has been no material and adverse
-------------------
change in the business, operations, properties, prospects, assets or condition,
financial or other, of the Company and its Subsidiaries considered as one
enterprise subsequent to September 30, 1993 except as disclosed in the Company's
Form 8-K, dated November 11, 1993, as filed with the Commission. Since that
date, none of the business, operations, properties, prospects or assets of the
Company or its Subsidiaries has been materially and adversely affected in any
way as the result of any fire, explosion, earthquake, disaster, accident,
<PAGE>
labor disturbance, requisition or taking of property by governmental authority,
flood, drought, embargo, riot, activity of armed forces or act of God or the
public enemy.
(S)2.3. Organization, Authority and Good Standing of Company. The Company
----------------------------------------------------
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Massachusetts with power and
authority (corporate and other) to own, lease and operate its properties and to
conduct its business as described in the Company's Annual Report. For the
purposes of this Agreement, the term "Annual report" shall mean, collectively,
the Company's Annual Report for 1992 on Form 10-K filed with the Commission and
the Company's Form 8-K, dated November 11, 1993, filed with the Commission, a
copy each of which has heretofore been delivered to you, and the Company's
Annual Report to Stockholders for 1993, a draft of which has heretofore been
delivered to you. The company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would materially adversely affect the conduct of the
business, results of operations or financial condition of the Company and its
Subsidiaries considered as one enterprise.
(S)2.4. Organization, Authority and Good Standing of Subsidiaries. The
---------------------------------------------------------
Subsidiaries listed on Exhibit B hereto include each active Subsidiary of the
Company and each such Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation with corporate power and authority to own, lease and operate
its properties and to conduct its business as now being conducted and is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which the failure so to qualify would materially
adversely affect the conduct of the business, results of operations or financial
condition of the Company and its subsidiaries considered as one enterprise. All
of the issued shares of capital stock of each Subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and to the extent owned by the Company, are owned free and clear of all liens,
encumbrances, equities or claims.
(S)2.5. Title to Properties. The Company and its Subsidiaries have good
--------------------
and marketable title in fee simple to the real property and good and marketable
title to all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as do not materially adversely
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries; all
property held under lease by the Company and its Subsidiaries is held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries.
<PAGE>
(S)2.6. Trademarks, Patents, etc. The Company and its Subsidiaries own or
------------------------
possess, or can acquire on reasonable terms, adequate trademarks, service marks,
trade names, copyrights and licenses necessary to conduct the business now
operated by them, provided that the loss of any such rights, either alone or in
the aggregate, which does not materially adversely affect the conduct of the
business, results of operations or financial condition of the Company and its
Subsidiaries considered as one enterprise shall not be considered a violation of
this representation. Neither the Company nor any of its Subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any trademarks, service marks, trade names, copyrights or
licenses which, either alone or in the aggregate, would materially adversely
affect the conduct of the business, results of operations or financial condition
of the Company and its subsidiaries considered as one enterprise.
(S)2.7. Litigation. Except as set forth in the Annual Report referred to
----------
in (S)2.3, there are no actions, suits or proceedings (whether or not
purportedly on behalf of the Company or any Subsidiary) pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
subsidiary at law or in equity or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind,
which involve any of the transactions herein contemplated or the possibility of
any material and adverse change in the business, operations, properties,
prospects, assets or condition, financial or other, of the Company or any of its
Subsidiaries; and neither the Company nor any Subsidiary is in default or
violation of any judgement, order, writ, injunction, decree or award or in
violation of any rule or regulation of any court, arbitrator or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(S)2.8. Burdensome Provisions. Neither the Company nor any Subsidiary is
---------------------
a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgement, order, writ, injunction, decree, award,
rule or regulation which materially and adversely affects or in the future may
(so far as the Company can now foresee) materially and adversely affect the
business, operations, properties, prospects, assets or condition, financial or
other, of the Company or any Subsidiary.
(S)2.9. Compliance with other Instruments. Neither the Company nor any of
---------------------------------
its Subsidiaries is in violation of its charter or by-laws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any contract indenture, mortgage, loan agreement or lease to
which it or any of them is a party or by which it or any of them or their
properties is bound, which violation or default would materially adversely
affect the conduct of the business, results of operations or financial condition
of the Company and its Subsidiaries considered as one enterprise; and the
execution and delivery of this Agreement, the Indenture and the Notes, the
incurrence of the obligations set forth herein and therein and the consummation
of the transactions contemplated hereby and thereby and the compliance by the
Company and its Subsidiaries with the terms, conditions and provisions hereof
and thereof have been duly authorized by all necessary
<PAGE>
corporate action and will not conflict with, constitute a breach of or default
under or result in the creation or imposition of any lien pursuant to or result
in any violation of the provisions of the charter or by-laws of the Company or
any of its Subsidiaries or any bond, debenture, note or other evidence of
indebtedness or any contract, indenture, mortgage, loan agreement or lease to
which the Company or any of its Subsidiaries is a party or by which it or any of
them or their properties is bound or any law, rule, regulation, judgement,
decree or award.
(S)2.10. Disclosure. Neither this Agreement, nor any of the Exhibits
----------
hereto, or any certificate or other data furnished to you in writing by or on
behalf of the Company in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein not
misleading. To the knowledge of the Company, there is no fact which materially
and adversely affects or in the future may (so far as the Company can now
foresee) materially and adversely affect the business, operations, properties,
prospects or conditions, financial or other, of the Company and its Subsidiaries
considered as one enterprise which has not been disclosed to you in writing.
(S)2.11. Compliance with Trading with the Enemy Act, etc. Neither this
-----------------------------------------------
agreement nor the transactions contemplated hereby is in violation of the
Trading with the Enemy Act, as amended, the International Emergency Economic
Powers Act or the Executive Orders of the President of the United States issued
pursuant to such Acts, or any regulations issued under such Acts or Executive
orders, including, without limitation, (i) the following regulations of the
United States Treasury Department (31 C.F.R. Subtitle B, Chapter V, as amended):
the Foreign Assets Control Regulations, the Transaction Control Regulations, the
Cuban Assets Control Regulations, the Foreign Funds Control Regulations, the
Iranian Assets Control Regulations and the Libyan Sanctions Regulations and (ii)
the following Executive Orders of the President of the United States: Executive
Orders Nos. 8389, 9193 and 12544 (Libya) and Executive Orders 12722 and 12724
(Blocking Iraqi Government Property and Prohibiting Transactions with Iraq); nor
will the Company take any action which would cause this Agreement or the
transactions contemplated hereby to violate such Acts or any such Executive
Orders or regulations.
(S)2.12. Compliance with Law. Neither the company nor any of its
-------------------
Subsidiaries is in violation of any statute, rule or regulation of any federal,
state, municipal or other governmental department, commission, board, bureau,
agency, instrumentality, domestic or foreign (including, without limitation, any
statute, rule or regulation relating to employment practices or to occupational
and health standards and controls or to environmental standards for air, water
and land in any jurisdiction in which it is presently doing business), the
violation of which, considered individually or in the aggregate, would
materially and adversely affect the business, operations, properties, prospects,
assets or condition, financial or other, of the Company and its Subsidiaries
considered as one enterprise.
<PAGE>
(S)2.13. ERISA. Each ERISA Plan as to which the Company or any ERISA
-----
Affiliate may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no "reportable event"
(as defined in ERISA) has occurred with respect to any Defined Benefit Plan
sponsored by the Company or any ERISA Affiliate which will have the effect of
creating a liability of the Company or any ERISA Affiliate which will be
material to the Company; (ii) neither the Company nor any ERISA Affiliate has
withdrawn from any Multi-Employer Plan or initiated steps to do so, except in
accordance with all applicable requirements of law and regulations and in a
manner which will not create a liability to the Company or any ERISA Affiliate
which will be material to the Company; (iii) no steps have been taken to
terminate any Pension Plan except in accordance with all applicable requirements
of law and regulations and in a manner which will not create a liability of the
company or any ERISA Affiliate which will be material to the Company or any
ERISA Affiliate which will be material to the Company; and (iv) during the
twelve consecutive months prior to the date on which this representation is
made, no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a lien under Section 302(f)(1) of ERISA. Neither the
Company nor any Subsidiary has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than (i) liability for
continuation coverage described in Part 6 of Title 1 of ERISA and (ii) as set
forth in the financial statements of the Company as of December 31, 1993. Based
on your representation in (S)4.2, your purchase of the Notes and the execution
and delivery to you by the Company of the Notes will not involve any "prohibited
transaction" within the meaning of Section 4975 of the Code.
(S)2.14. Regulation G; Use of Proceeds. Neither the Company nor any
-----------------------------
Subsidiary owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 C.F.R., Chapter 11, Part 207) of the Board of
Governors of the Federal Reserve System (herein called "margin stock"). The
proceeds from the sale of the Notes will be applied by the company to prepay the
9.20% Notes. None of such proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulation G. Neither
the Company, any Subsidiary nor any agent acting on its behalf has taken or will
take any action which might cause the transaction contemplated herein to violate
said Regulation G or Regulation X (12 C.F.R., Chapter II, Part 224) or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Securities Exchange Act of 1934, in each case as now in effect or as the
same may hereafter be in effect on the Closing Date.
(S)2.15. Tax Liability. The Company and each of its Subsidiaries has
-------------
filed all tax returns which are required to be filed and has paid all taxes
which have become due pursuant to such returns and all other taxes, assessments,
fees and other governmental charges upon the Company and upon its or their
properties, assets, income and franchises, which have become due and payable by
the Company or any of its Subsidiaries, except those wherein the amount,
applicability or validity are being contested by the Company or
<PAGE>
its Subsidiaries and in respect of which adequate reserves have been
established. The Federal income tax liabilities of the Company have been audited
by the Internal Revenue Service and satisfied for all taxable years up to and
including the taxable year ended December 31, 1986; the Federal income tax
returns of the Company and its Subsidiaries through the Company's fiscal year
ended December 31, 1984, are closed under the general statute of limitations set
forth in Section 6501(a) of the Code; and no Federal income tax deficiency has
been assessed against the Company which has not been paid or adequately provided
for. In the opinion of the Company, all tax liabilities of the Company were
adequately provided for as of December 31, 1993, and are so provided for on the
books of the Company.
(S)2.16. Governmental Consent. No consent, approval or authorization of,
--------------------
or declaration or filing with, any governmental authority on the part of the
Company is required for the valid execution and delivery of this Agreement or
performance thereunder or the valid offer, issue, sale and delivery of the Notes
pursuant to this Agreement, provided that the Company makes no representation or
--------
warranty as to any consents, approvals, authorizations, declarations or filings
required under laws regulating insurance companies as such.
(S)2.17. Offering of Notes. Neither the Company nor any agent acting in
-----------------
its behalf has, either directly or indirectly, sold or offered for sale or
disposed of, or attempted or offered to dispose of, the Notes or any part
thereof, or any similar obligation of the Company, to, or has solicited any
offers to buy any thereof from, or has otherwise approached or negotiated in
respect thereof with, any Person or Persons other than you and not more than
five other institutional investors; and the Company agrees that neither it nor
any agent acting on its behalf will sell or offer for sale or dispose of, or
attempt or offer to dispose of, any thereof to, or solicit any offers to buy any
thereof from, or otherwise approach or negotiate in respect thereof with, any
Person or Persons so as thereby to bring the issuance or sale of the Notes
within the provisions of Section 5 of the Securities Act of 1933, as amended.
(S)2.18. Outstanding Debt, Liens and Capital Leases. Exhibit C hereto
------------------------------------------
correctly sets forth all Indebtedness outstanding on the date hereof and all
liens and security interests securing Indebtedness and all Capital Leases of the
Company existing on the date hereof.
(S)2.19. Investment Company Act. The Company is not an "investment
-----------------------
company," or a Person "controlled" by an "investment company", within the
meaning of the investment Company Act of 1940, as amended.
(S)3. Closing Conditions. Your obligation to purchase and pay for the
------------------
Notes to be purchased by you on the Closing Date, as provided in (S)1.2, shall
be subject to the performance by the Company of all its agreements theretofore
to be performed hereunder, to the accuracy of its representations and warranties
herein contained and to the satisfaction, prior thereto or concurrently
therewith, of the following further conditions:
<PAGE>
(S)3.1. Opinion of Counsel. You shall have received, on the Closing
------------------
Date, from Geoffrey Nunes, Esq., Senior Vice-President and General Counsel and
Assistant Clerk of the Company, a favorable written opinion, in form and
substance satisfactory to you, to the effect set forth as in Exhibit D.
(S)3.2. Representations True. The representations and warranties in
--------------------
(S)2.1 to (S)2.19, inclusive, shall be true on and as of the Closing Date.
(S)3.3. Events of Default. No event shall have occurred and be
-----------------
continuing on the Closing Date and no condition shall exist on the Closing Date
which event or condition would constitute an Event of Default or a Debt Test
Default or with notice or lapse of time or both would become such Event of
Default or Debt Test Default.
(S)3.4. No Merger or Change of Control. On the Closing date, the
------------------------------
Company shall not have consolidated with, merged into, or sold, leased,
transferred or otherwise disposed of all or substantially all of its properties
and assets to, any other corporation or Person and there shall not have occurred
a Change of Control Date.
(S)3.5. Legality. The Notes being purchased by you on the Closing Date
--------
shall qualify on the Closing Date as a legal investment for mutual life
insurance companies under Section 1405(a)(2) of the New York Insurance Law and
such purchase shall not subject you to any penalty or other onerous condition
under or pursuant to any applicable law or governmental regulation; and you
shall have received such certificates or other evidence as you may reasonably
request to establish compliance with this condition.
(S)3.6. Officers' Certificate. The Company shall have delivered to you
---------------------
on the Closing Date a certificate, or certificates, signed by an authorized
officer of the Company, to the effect that the facts required by (S)3.2, (S)3.3
and (S)3.4 exist on such Closing Date.
(S)3.7. Proceedings. All proceedings to be taken in connection with the
-----------
transactions contemplated by this Agreement, and all documents incidental
thereto, shall be satisfactory in form and substance to you; and you shall have
received copies of all documents which you may reasonably request in connection
with said transaction and copies of the records of all corporate proceedings in
connection therewith in form and substance satisfactory to you.
(S)4. Representations of Purchaser.
----------------------------
(S)4.1. Acquisition for Investment. This Agreement is made with you in
--------------------------
reliance upon your representation to the Company (which, by your acceptance
hereof, you confirm) that you are acquiring the Notes for your own account for
the purpose of investment and not with a view to, or for sale in connection
with, the distribution thereof or with any present intention of distributing or
selling such Notes, subject, nevertheless, to any
<PAGE>
requirement of law that the disposition of your property (including the Notes)
shall at all times be within your control.
(S)4.2. Source of Funds. This Agreement is made with you in reliance
---------------
upon your further representation to the Company (which, by your acceptance
hereof, you confirm) that, no part of the funds to be used by you to acquire the
Notes will be from the assets of any separate account maintained by you.
As used in this (S)4.2, the term "separate account" shall have the meaning
assigned to it in Section 3(17) of ERISA.
(S)4.3. Public Notes. You represent to the Company that upon the terms
------------
and conditions set forth herein you have agreed to acquire the Public Notes.
This is the only explanation to be furnished by you to the Company in writing
expressly for use in the Registration Statement or in the Prospectus.
(S)5. Exchange of Notes.
-----------------
(S)5.1. Prepayment of Notes. Pursuant to (S)2.06 of the Notes and
-------------------
subject to the terms and conditions of this (S)5, on or before March 3, 1995,
the Company may at its option, prepay the Notes as a whole, but not in part, by
delivering to you one or more Public Promissory Notes due March 3, 2004
(hereafter referred to as the "Public Notes") in exchange for the same aggregate
principal amount as the principal amount of the Notes.
(S)5.2. Conditions to the Delivery of Public Notes. The Company's right
------------------------------------------
to prepay and exchange the Notes for the Public Notes on the Exchange Date as
contemplated by (S)2.06 of the Notes and your obligation to accept such
prepayment and exchange are subject to the accuracy of the Company's
representations and warranties referred to in Clause (ii) of this (S)5.2 and to
the satisfaction prior to or concurrently with the delivery of the Public Notes
of the following further conditions:
(i) Issue of the Public Notes; Authorization. The Company shall have
----------------------------------------
duly authorized an issue of $100,000,000 aggregate principal
amount of the Public Notes pursuant to resolutions (herein called
the "Public Note Resolutions") which shall be duly adopted by its
Board of Directors prior to the Exchange Date. The Public Note
Resolutions shall be in form and substance satisfactory to you.
The Public Notes will be issued under and entitled to the
benefits of, an indenture, dated as of the Exchange Date (herein
called the "Indenture") between the Company and Rhode Island
Hospital Trust National Bank, a banking corporation duly
organized and existing under the laws of the State of Rhode
Island, as Trustee, or a similarly qualified bank or trust
company (herein called the "Trustee"), in substantially the form
of the 1988 Indenture hereto except that the interest rate on the
Public Notes shall be 6.7%, the interest payment and maturity
---
dates of the Notes shall be identical to the Notes and the
prepayment provision of the Indenture shall provide for optional
prepayments by the
<PAGE>
Company of the-Public Notes at the Yield Maintenance Price as
provided in and as defined in the Notes (with only such changes
as shall be approved by you and the Company). A conformed copy of
the Indenture shall have been delivered to you prior to the
Exchange Date. The Public Notes shall be substantially in the
form of the 9.20% Notes except that the interest rate on the
Public Notes shall be 6.78%, the interest payment and maturity
dates of the Indenture shall be identical to the corresponding
provisions of the Notes (with only such other changes as shall be
approved by you and the Company). The term "Public Notes" shall
include all the Public Notes delivered pursuant to the provisions
of this (S)5 and all promissory notes delivered in substitution
or exchange therefor or in lieu thereof in accordance with the
Indenture, and, where applicable, shall include the singular
number as well as the plural. The term "Public Note" shall mean
one of the Public Notes.
The Public Notes so to be delivered to you will be duly executed
by the company and authenticated by the Trustee in accordance
with the Indenture, will be dated the Exchange Date, will be
registered in your name (or your nominees name) in any
denominations (multiples of $1,000) designated by you. Unless you
otherwise specify at least two Business Days prior to the
Exchange Date, the Company will deliver on the Exchange Date to
you a single Public Note registered in your name in the aggregate
principal amount of $100,000,000.
(ii) Representations and Warranties. The Company shall have dated the
-------------------------------
Exchange Date and signed by an authorized officer of the Company,
in the form set forth in Exhibit E hereto, with appropriate
insertions, and the representations and warranties of the Company
contained in such certificate shall be true and correct as of the
Exchange Date.
(iii) No Stop Order. No stop order suspending the effectiveness of the
-------------
Registration Statement shall have been issued and no proceedings
therefor instituted or threatened by the Commission.
(iv) Opinion of Company Counsel. You shall have received on the
--------------------------
Exchange Date from Geoffrey Nunes, Esq., Senior Vice-President
and General counsel and Assistant Clerk of the company, a
favorable written opinion dated as of the Exchange Date, in form
and substance satisfactory to you, to the effect set forth in
Exhibit F.
(v) Opinion of Outside Counsel. You shall have received on the
--------------------------
Exchange Date from Ropes & Gray, counsel for the Company, a
favorable written opinion dated as of the Exchange Date, in form
and substance satisfactory to you, to the effect set forth in
Exhibit G.
<PAGE>
(vi) Events of Default. No event shall have occurred and be
-----------------
continuing on the Exchange Date and no conditions shall exist on
the Exchange Date which event or condition, would constitute an
Event of Default or a Debt Test Default or with notice or lapse
of time or both would constitute an Event of Default or a Debt
Test Default.
(vii) No Merger. After the date of this Agreement and through the
---------
Exchange Date, the Company shall not have consolidated with,
merged into, or sold, leased, transferred or otherwise disposed
of all or substantially all of its properties and assets to, any
other Person except as disclosed in the Company's Form 8-K dated
November 11, 1993, as filed with the Commission, and there shall
not have occurred a Change of Control Date.
(viii) Legality. The Public Notes being purchased by you on the
--------
Exchange Date shall qualify on the Exchange Date as a legal
investment for mutual life insurance companies under Section
1405(a)(2) of the New York Insurance Law, and such purchase shall
not subject you to any penalty or other onerous condition under
or pursuant to any applicable law or governmental regulation; and
you shall have received such certificates or other evidence as
you may reasonably request to establish compliance with this
condition.
(ix) No Change in Registration Statement, etc. After the date on
----------------------------------------
which the Registration Statement becomes effective and through
the Exchange Date, there shall not have come to your attention
any facts that reasonably cause you to believe that the
Prospectus, on the Exchange Date, contains any untrue statement
of a material fact or omits to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in the light of the circumstances existing on the
Exchange Date, not misleading. The Public Note Resolutions, in
form and substance satisfactory to you, shall have been duly
adopted by the Board of Directors.
(x) Officer's Certificate. The Company shall have delivered to you
---------------------
on the Exchange Date a certificate or certificates, signed by an
authorized officer of the Company to the effect that the facts
required to exist by Clauses (iii), (vi) and (vii) of this (S)5.2
exist on such Exchange Date.
(xi) Comfort Letter. You shall have received on the Exchange Date
--------------
from Coopers & Lybrand a letter, dated as of the Exchange Date,
addressed to you and in form and substance satisfactory to you,
to the effect set forth in Exhibit H .
(xii) Proceedings. All proceedings to be taken in connection with the
-----------
transactions contemplated by this Agreement, including all
filings with the Commission, and all documents incidental
thereto, shall be reasonably satisfactory in form and substance
to you; and you shall have received copies of all documents which
you may reasonably request in connection
<PAGE>
with said transactions and copies of the records of all corporate
proceedings in connection therewith in form and substance
satisfactory to you.
(xiii) Trustee's Certificate. You shall have received on the Exchange
---------------------
Date a certificate dated the Exchange Date and signed by an
authorized officer of the Trustee on behalf of the Trustee to the
effect that: (a) the Indenture has been duly authorized, executed
and delivered by the Trustee (assuming due authorization,
execution and delivery thereof by the Company); and (b) the
Public Notes delivered to you on the Exchange Date have been duly
authenticated and delivered by the Trustee in accordance with the
provisions of the Indenture (assuming payment for the Notes by
you in accordance with this Agreement and assuming that all
necessary corporate actions on the part of the Company have been
taken).
(S)6. Covenants of the Company.
------------------------
(S)6.1. Home Office Payment. Notwithstanding any provision to the
--------------------
contrary in the Notes, the Public Notes or the Indenture, the company will
promptly and punctually pay to you at the place and in the manner provided in
Annex I hereto, (or in such other manner or at such other address as you may
from time to time designate by written notice to the Company) all amounts
payable in respect of the principal of, the premium, if any, and interest on,
any Notes or Public Notes then held by you or your nominee, without any
presentment thereof and without any notation of such payment being made thereon.
In the event that you shall sell any Notes or Public Notes, you shall,
prior to the delivery of such Notes or Public Notes, make or cause to be made a
notation thereon of the date to which interest has been paid thereon and, if not
theretofore made, a notation of the extent to which payment has been made on
account of the principal thereof.
The provisions of this (S)6.1 shall apply to you and your respective
successors, and any payments made to any subsequent holder of the Notes shall be
made as provided in the Notes and any payments made to any subsequent holder of
the Public Notes shall be made as provided in the Indenture.
(S)6.2. Expenses. Whether or not the transactions contemplated by this
--------
Agreement shall be consummated, the Company agrees to pay (i) all expenses
incident to the performance of its obligations under this Agreement, the
Indenture, the Notes and the Public Notes, including but not limited to (a) the
printing and filing of the Registration Statement, the Prospectus and the
Indenture and all amendments and supplements thereto and (b) the fees and
disbursements of the Company's counsel and accountants and (ii) to pay to you
$15,000 as a processing fee to cover your expenses in preparing for, documenting
and closing the transactions contemplated by this Agreement and to pay all your
reasonable out-of-pocket expenses incident to any amendment, consent or waiver
(whether or not given) relating to this Agreement, the Notes, the Public Notes
or the
<PAGE>
Indenture. The obligations of the Company under this (S)6.2 shall survive the
Closing Date and the Exchange Date.
If at any time after the date of this Agreement, the Company shall default
in the performance or observance of any covenant or agreement contained in this
Agreement, the Company will pay to you, to the extent permitted under applicable
law, all reasonable out-of-pocket expenses incurred by you in connection with
such default and such further amount as shall be sufficient to cover the cost
and expense of recovering any judgement relating to such default, including
reasonable compensation to the counsel retained by you for any services rendered
in that connection.
(S)6.3. Indemnity for Replacement Notes. If you or any of your
-------------------------------
subsidiaries or your respective successors shall hold any of the Notes or the
Public Notes, then, notwithstanding (S)1.03 of the Notes or Section 306 of the
Indenture, respectively, an indemnity agreement provided by you or such
subsidiary or your respective successors in favor of the Company, in the case of
the Notes, and in favor of the Company, the Trustee and any authenticating
agent, in the case of the Public Notes, shall constitute sufficient indemnity
(and security shall not be required) for the purposes of the Notes or the
Indenture, as the case may be, in any case of destruction, loss, theft or
mutilation of any of the Notes or the Public Notes. This covenant shall survive
the Closing Date and the Exchange Date.
(S)6.4. Amendments to Registration Statement. If at any time after the
------------------------------------
date on which the Registration Statement becomes effective and through the
Exchange Date any event shall have occurred or any condition shall exist as a
result of which in your reasonable opinion or in the reasonable opinion of
counsel for the Company, it shall be necessary to amend or supplement the
Prospectus, as then amended or supplemented, so that the Prospectus will not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading or if, in your reasonable opinion or
in the reasonable opinion of such counsel, it shall be necessary at any such
time to amend or supplement the Registration Statement or the Prospectus in
order to comply with the requirements of the Securities Act or the Exchange Act
or the respective rules and regulations of the Commission thereunder, the
company shall promptly prepare and file with the Commission such amendment or
supplement, whether by filing documents pursuant to the Exchange Act, the
Securities Act or otherwise, as shall be necessary to correct such untrue
statement or omission or to effect such compliance.
(S)6.5. Notice of Certain Actions. After the date on which the
-------------------------
Registration Statement becomes effective and through the Exchange Date, the
Company will notify you immediately (and confirm such notice in writing) (i) of
the effectiveness of any amendment to the Registration Statement, (ii) of the
receipt of any comments from the Commission with respect to the Registration
Statement or the Prospectus, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement
<PAGE>
or the institution or threatening of any proceedings for such purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
and, if any such stop order shall be issued, to obtain the lifting thereof at
the earliest possible time. After the date of this Agreement and through the
Exchange Date, the Company will promptly, upon mailing or delivery to the
Commission, provide you with copies of any amendment or supplement to the
Prospectus, any amendment to the Registration Statement or any other document to
be filed with the Commission.
(S)6.6. Filing of Exchange Act Reports. After the date on which the
------------------------------
Registration Statement becomes effective and through the Exchange Date, the
Company will file promptly all documents required to be filed with the
Commission pursuant to Section 13 or 14 of the Exchange Act, and so long as
either the Notes or the Public Notes are outstanding, shall provide to you
copies of all such documents, including, without limitation, all financial
statements of the Company required to be filed with the Commission and, in
addition, copies of the Company's Annual and Quarterly Reports to its
shareholders and any other reports to its shareholders.
(S)6.7. Delivery of Registration Statement, etc. The Company will
---------------------------------------
furnish to you upon request, without charge, a conformed copy of the
Registration Statement (including all exhibits filed therewith or incorporated
or deemed to be incorporated by reference therein) and of each amendment thereto
which shall become effective on or prior to the Exchange Date and such number of
copies of any amendments and supplements to the Prospectus as you may reasonably
request.
(S)6.8. Change of Control and Debt Test Default Redemptions. Within 10
---------------------------------------------------
days after the occurrence of a Change of Control Date and within 30 days after
the occurrence and continuance of a Debt Test Default, the Company will give you
written notice thereof and shall describe in reasonable detail the facts and
circumstances and the effect thereof on the Company. Upon such occurrence and
notwithstanding anything to the contrary contained in the Notes or the Public
Notes, the Company will redeem, if you shall so request, all of the Notes or the
Public Notes, subject to the terms of this (S)6.8, which you then hold at the
Redemption Price plus interest accrued on the outstanding principal amount of
such Notes or such Public Notes to the date of redemption. Such request shall
be made by you in writing not later than 45 days after such Change of Control
Date or 60 days after such notice of a Debt Test Default (if such Debt Test
Default has not been cured within 30 days after the occurrence thereof) and
shall specify (a) the date (the "Redemption Date") upon which the Company shall
redeem such Notes or such Public Notes, which date shall be not less than 15
days nor more than 45 days after the date of such request, and (b) the aggregate
outstanding principal amount of the Notes then held by you.
On the Calculation Date, you shall give written notice to the Company of
the amount of the Redemption Price of the Notes held by you, which notice shall
set forth in reasonable detail the computation thereof provided, however, that
-------- -------
your failure to make such determination shall not affect the obligation of the
Company to pay such Redemption Price when due in accordance with the terms
hereof and you shall have no liability to the
<PAGE>
Company for failure to make such determination. The Redemption Price set forth
in such notice shall be binding on the Company absent manifest error.
On the Redemption Date, the Company shall redeem the unpaid principal
amount of the Notes or the Public Notes held by you by payment to you of (a) the
Redemption Price of the Notes or the Public Notes held by you and (b) interest
accrued on the aggregate outstanding principal amount of the Notes or the Public
Notes held by you to the Redemption Date. Upon such payment by the Company in
accordance with the provisions of this (S)6.8, you shall surrender the Notes or
Public Notes held by you to the Company for cancellation. Payment of the
Redemption Price shall be made as provided in (S)6.1 hereof.
For the purposes of this (S)6.8, the term "Redemption Price" shall mean the
greater of (1) the sum of the respective Payment Values of each prospective
interest payment and the principal payment at maturity in respect of the Notes
being redeemed pursuant to this (S)6.8 (the amount of each such payment being
herein referred to as a "Payment"), and (2) the unpaid principal amount of the
Notes so being redeemed. The Payment Value of each Payment shall be determined
by discounting such Payment at the Reinvestment Rate for the period from the
scheduled date of such Payment to the Redemption Date. The Reinvestment Rate is
the sum of (a) .50% and (b) the yield which shall be imputed from the yields of
those actively traded "On The Run" United States Treasury securities, as
reported on the Cantor-Fitzgerald brokerage screen available on Telerate
Information Systems (page 500 mid-point of Bid/Ask price), having maturities as
close as practicable to the final maturity of the Notes so to be redeemed or, if
such yields shall not be reported as of such time or the yields reported as of
such time are not ascertainable in accordance with the preceding clause, then
the arithmetic mean of the rates, published for the 5 Business Days preceding
the applicable Calculation Date, in the weekly statistical release designated
H.15(519) (or any successor publication) of the Board of Governors of the
Federal Reserve System under the caption "U.S. Government Securities--Treasury
Constant Maturities" opposite the maturity corresponding to the final maturity
of the Notes, (rounded to the nearest month) so to be redeemed. If no maturity
exactly corresponding to such final maturity of the Notes shall appear therein,
yields for the next longer and the next shorter published maturities shall be
calculated pursuant to the foregoing sentence and the Redemption Price shall be
interpolated from such yields on a straight-line basis (rounding in each of such
relevant periods, to the nearest month). The yields of such United States
Treasury securities (under both of the methods described above) shall be
determined as of 10:00 a.m., New York time, on the Calculation Date.
For the purpose of this (S)6.8, the term "Calculation Date" shall mean the
fifth Business Day prior to the Redemption Date.
The provisions of this (S)6.8 shall apply only to you and your subsidiaries
which hold any of the Notes or the Public Notes and to your respective
successors but shall not apply to any other subsequent holder of the Notes or
the Public Notes. The obligations of the Company under this (S)6.8 shall
survive the Closing Date and the Exchange Date and may be enforced by specific
performance.
<PAGE>
(S)6.9. Indebtedness.
------------
(a) Maintenance Test. The Company will not at any time permit
----------------
Total Indebtedness to exceed 60% of Total Capital.
(b) Optional Redemption. If at any time the Company determines
-------------------
that within 3 months after such date of determination that the Company
shall be in violation of the covenant contained in (S)6.9(a), it may give
you written notice thereof and a written request for a waiver or consent
with respect to such violation. Such notice shall include a certificate
signed by the chief financial officer of the Company describing in
reasonable detail the facts and circumstances giving rise to such
anticipated violation. In the event that you fail to grant the Company a
waiver or consent with respect to such anticipated violation within 60 days
(the "Waiver Period") after the date of such notice, the company may, at
its option and notwithstanding anything to the contrary contained in the
Notes, redeem all of the Notes or the Public Notes, subject to the term of
this (S)6.9, then held by you at the Redemption Price plus interest accrued
on the outstanding principal amount of the Notes or the Public Notes to the
date of redemption. The Company shall give you written notice of such
election to so redeem the Notes or the Public Notes not later than 5 days
after the earlier of (i) the date on which it has received written notice
from you declining to grant such waiver or consent or (ii) the expiration
of the Waiver Period, which notice shall specify (a) the date (the
"Redemption Date") upon which the Company shall redeem such Notes or Public
Notes which date shall be not less than 15 days nor more than 45 days after
the date of such notice, and (b) the aggregate principal amount of the
Notes or the Public Notes then held by you.
On the calculation Date you shall give written notice to the Company of the
amount of the Redemption Price of the Notes or the Public Notes held by you,
which notice shall set forth in reasonable detail the computation thereof
provided, however, that your failure to make such determination shall not affect
- -------- -------
the obligation of the Company to pay such Redemption Price when due in
accordance with the terms hereof and you shall have no liability to the Company
for failure to make such determination. The Redemption Price set forth in such
notice shall be binding on the Company absent manifest error.
On the Redemption Date, the Company shall redeem the unpaid principal
amount of the Notes or the Public Notes held by you by payment to you of (a) the
Redemption Price of the Notes or the Public Notes held by you and (b) interest
accrued on the aggregate outstanding principal amount of the Notes or the Public
Notes held by you to the Redemption Date. Upon such payment by the Company in
accordance with the provisions of this (S)6.9, you shall surrender the Notes or
Public Notes held by you to the Company for cancellation. Payment of the
Redemption Price shall be made as provided in (S)6.1 hereof.
For the purpose of this (S)6.9, the terms "Redemption Price" and "Calculation
Date" shall have the meanings set forth for such terms in (S)6.8.
<PAGE>
The provision of this (S)6.9 shall apply only to you and your subsidiaries
which hold any of the Notes or the Public Notes and to your respective
successors but shall not apply to any other subsequent holder of the Notes or
the Public Notes. The obligations of the Company under this (S)6.9 shall
survive the Closing Date and the Exchange Date and maybe enforced by specific
performance.
(S)7. Indemnification. (a) The Company will indemnify and hold you
---------------
harmless against any losses, claims, damages or liabilities, joint or several,
to which you may become subject in respect of claims of third parties, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus as amended or supplemented, or any other
prospectus issued or authorized by the Company relating to the Public Notes or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse you for any legal or other expenses reasonably incurred by you in
Connection with investigating or defending any such action or claim; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
contained in the Registration Statement, the Prospectus as amended or
supplemented, or any other prospectus issued or authorized by the Company
relating to the Public Notes, or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by you
expressly for use therein. The Company acknowledges that the statements set
forth under the heading "Plan of Distribution" in the Prospectus relating to the
Public Notes constitute the only information furnished in writing by you for
inclusion in the documents referred to in the foregoing indemnity, and you
confirm that such statements with respect to you are correct.
(b) You will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject
in respect of claims by third parties under the securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Prospectus as amended or
supplemented, or any other prospectus issued or authorized by the Company
relating to the Public Notes, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent. that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Prospectus as amended or supplemented, or any other
prospectus issued or authorized by the Company relating to the Public Notes or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by you expressly for use therein; and you
will reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such action or
claim.
<PAGE>
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof. the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be inside counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation and cooperation
with the defense thereof by the indemnifying party. An indemnifying party shall
not be liable for any settlement of any action or claim effected without its
consent.
(d) The obligations of the Company and you under this (S)7 shall be
in addition to any liability which the Company or you may otherwise have and
shall extend, upon the same terms and conditions, to each Person, if any, who
controls you or the Company, as the case may be, within the meaning of the
Securities Act or the Exchange Act and to each director of the Company and to
each officer of the Company who has signed the Registration Statement, as
amended.
(e) The provisions of this (S)7 shall survive the execution and
delivery of the Public Notes to you and the acquisition of the Public Notes by
you as provided in (S)5.
(S)8. Definitions. For all purposes of this Agreement, except as
-----------
otherwise expressly provided herein or unless the context otherwise requires,
the following terms shall have the respective meanings set forth below, or set
forth in the section of this Agreement or the Notes indicated following such
term, which shall include the plural as well as the singular:
"Affiliate" has the meaning specified in (S)6 of the Notes.
---------
"Annual Report" has the meaning specified in (S)2.3.
-------------
"Board of Directors" has the meaning specified in (S)6 of the Notes.
------------------
<PAGE>
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
------------
which is not a day on which banking institutions in the Borough of Manhattan,
The City of New York or Boston, Massachusetts are authorized or obligated by law
or executive order to close.
"Change of Control Date" shall mean the date of the first acquisition
----------------------
subsequent to March 3, 1994 by any Person, or related Persons which would
constitute a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, of (i) beneficial ownership of shares of the issued and outstanding
capital stock of the Company possessing more than 50% of the voting power to
elect members of the Board of Directors or (ii) all or substantially all of the
properties and assets of the Company.
"Closing Date" has the meaning specified in (S)1.2.
------------
"Commission" means the Securities and Exchange Commission or any
----------
governmental body succeeding to such of its authority an may from time to time
be relevant to this Agreement and the transactions contemplated hereby.
"Debt Test Default" shall mean failure by the Company to comply with the
-----------------
provisions of (S)6.9(a).
"Exchange Date" has the meaning specified in Section (S)6 of the Notes.
-------------
"Event of Default" has the meaning specified in (S)7 of the Notes.
----------------
"Exchange Act" has the meaning specified in Exhibit E hereto.
------------
"Incorporated Documents" has the meaning specified in Exhibit E hereto.
----------------------
"Indebtedness" has the meaning set forth in (S)6 of the Note.
------------
"Indenture" has the meaning specified in (S)5.2.
---------
"1998 Indenture" has the meaning specified in (S)1.2.
--------------
"Notes" has the meaning specified in (S)1.1.
-----
"Person" means any individual, corporation, partnership, joint venture,
------
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Prospectus" has the meaning specified in Exhibit E hereto.
----------
"Public Notes" has the meaning specified in (S)5.1.
------------
<PAGE>
"Public Note Resolutions" has the meaning specified in (S)5.2.
-----------------------
"Registration Statement" has the meaning specified in Exhibit E hereto.
----------------------
"Securities Act" has the meaning specified in Exhibit E hereto.
--------------
"Subsidiary" has the meaning specified in (S)6 of the Notes.
----------
"Total Capital" means the sum of Total Indebtedness and Total Net Worth.
-------------
"Total Indebtedness" means all Indebtedness of the Company and its
------------------
Subsidiaries on a consolidated basis.
"Total Net Worth" means the excess of the (i) total assets of the Company
---------------
and its Subsidiaries over (ii) total liabilities of the Company and its
Subsidiaries, on a consolidated basis.
"Trustee" has the meaning specified in (S)5.2.
-------
"Trust Indenture Act" has the meaning specified in Exhibit E hereto.
-------------------
(S)9. Communications. All communications provided for under this
--------------
Agreement or under the Notes or the Public Notes (other than payments in respect
thereof which shall be made in accordance with (S)5.1) shall be in writing, and
if to you, mailed (by registered or certified mail) or delivered at the address
set forth in Annex I hereto or sent by telecopier to the number set forth in
Annex I hereto and if to the Company, mailed (by registered or certified mail)
or delivered to the Company at its office at 80 Ashby Road, Bedford,
Massachusetts 01730, Attention: Chief Financial Officer, or sent to the Chief
Financial Officer by telecopier, number (781) 275-1071, or addressed to either
party at any other address in the United States of America that such party shall
hereafter designate by written notice to the other party.
(S)10. Miscellaneous.
-------------
(S)10.1. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the Commonwealth of Massachusetts
without reference to principles of conflict of laws, except as required by
mandatory provisions of law.
(S)10.2. No Oral Change. This Agreement may not be changed orally, but
--------------
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought.
<PAGE>
(S)10.3. Successors and Assigns. Except as otherwise provided in (S)6.1,
----------------------
(S)6.3, (S)6.8 and (S)6.9, all covenants, agreements, representations and
warranties made herein or in certificates delivered in connection herewith by or
on behalf of the Company shall survive the issue and delivery of the Notes and
the Public Notes to you, and shall bind the successors and assigns of the
Company, whether so expressed or not, and all such covenants, agreements,
representations and warranties shall inure to the benefit of your successors and
assigns, including any subsequent holder of any of the Notes or the Public
Notes.
(S)10.4. Headings. The headings of the sections and subsections of this
---------
Agreement are for convenience only and do not constitute a part of this
Agreement.
(S)10.5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign the form of acceptance on the enclosed counterpart of
this letter agreement and return one of the same to the Company, whereupon this
letter shall become a binding agreement between you and the Company.
Very truly yours,
MILLIPORE CORPORATION
BY:__________________________
Its:_________________________
THE FOREGOING AGREEMENT IS
hereby agreed to as of the
date hereof.
METROPOLITAN LIFE INSURANCE
COMPANY
By:__________________________
Its:_________________________
By:__________________________
Its:_________________________
<PAGE>
ANNEX I
-------
Aggregate Principal
Amount of Notes To
Purchaser Be Purchased
- --------- -------------------
METROPOLITAN LIFE
INSURANCE COMPANY
All payments on account of the Notes held by such
purchaser shall be made by wire transfer of
immediately available funds not later than
12:00 noon New York time on the date
payment is due for credit to:
Metropolitan Life Insurance Company -
Corporate Investments, Account
No. 002-2-410591
The Chase Manhattan Bank, N.A.
Metropolitan Branch
33 East 23rd Street
New York, New York 10010
ABA # 021000021
Each such wire transfer shall set forth the name of the
Company, the coupon rate of the Notes, a reference to
PPN 601073A@8 and shall request the bank to send a
credit advice to Metropolitan Life Insurance Company.
Addresses for all communications and notices:
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Attention: Treasurer
with a copy to:
Metropolitan Life Insurance Company
Corporate Investments
200 Park Avenue, 21st floor
New York, New York 10166
Attention: Vice President
Telecopier Number: (212) 692-5784
<PAGE>
EXHIBIT A
MILLIPORE CORPORATION
SENIOR NOTE
DUE MARCH 3, 2004
R-1 Boston, Massachusetts
$100,000,000 March 3, 1994
MILLIPORE CORPORATION, a corporation duly organized and existing under the laws
of the Commonwealth of Massachusetts (hereinafter called the "Company"), for
value received, hereby promises to pay to METROPOLITAN LIFE INSURANCE COMPANY or
registered assigns, on March 3, 2004, the principal amount of ONE HUNDRED
MILLION DOLLARS ($100,000,000) (or so much thereof as shall not have been
prepaid) in such coin or currency of the United States of America as at the time
of payment shall be legal lender for public and private debts, at the principal
office of the Bank of Boston, in the city of Boston, State of Massachusetts, and
to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) at said office, in like coin or currency, on the unpaid portion of said
principal amount from the date hereof, semi-annually on the 3rd day of March and
September in each year, commencing September 3, 1994, at the rate of 6.78% per
annum until March 3, 1995 and at the rate of 7.03% per annum from March 3, 1995
until such unpaid portion of such principal amount shall have become due and
payable and at the Overdue Interest rate thereafter and, so far as may be
lawful, on any overdue installment of interest at the Overdue Interest Rate.
(S)(S)1. The Notes, Exchanges, etc.
--------------------------
(S)1.01. The Notes.
---------
This Note is one of an authorized issue of registered senior
promissory notes (hereinafter called the "Notes"), each in the denomination of
$1,000 or a multiple thereof, made by the Company in an aggregate principal
amount of $100,000,000, maturing on March 3, 2004, and bearing interest payable
at the same rates and on the same dates as the interest on the principal amount
of this Note.
(S)1.02. Transfer or Exchange of Notes.
-----------------------------
The Notes are issuable only as registered Notes. The Company will keep
at its office or agency maintained as provided in (S)3.02 a register in which
the Company shall provide for the registration and registration of transfer of
the Notes.
<PAGE>
The holder of any Note may, at its option and either in Person or by
duly authorized attorney, surrender the same at said office for registration of
transfer or exchange, accompanied if surrendered for transfer by a written
instrument of transfer duly executed by such holder or attorney. In case any
holder shall so request transfer or exchange of a Note held by it, the Company
shall, without expense to such holder (other than transfer taxes, if any),
deliver to or upon its order one or more Notes in the same aggregate unpaid
principal amount as the Note so surrendered, each dated the later of the date
of, or the date to which interest has been paid on, the Note so surrendered, in
the principal amount of $1,000 or an integral multiple thereof, and registered
in such name or names as shall be specified by such holder. Every Note so made
and delivered in exchange for this Note shall be in the same form and have the
same terms as this Note, except for date, principal amount and name of the
registered holder.
(S)1.03. Loss, Theft or Destruction of Notes.
-----------------------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Note, and, in the case of any such
loss, theft or destruction, upon receipt of a bond or indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation, upon
surrender and cancellation of this Note, the Company will make and deliver, in
lieu of such lost, stolen, destroyed or mutilated Note, a new Note of like tenor
and unpaid principal amount and dated the later of the date of, or the date to
which interest has been paid on, the lost, stolen, destroyed or mutilated Note.
(S)l.04. Persons Deemed Owners.
---------------------
Prior to due presentment for registration of transfer of this Note,
the Company may deem and treat the registered holder hereof as the absolute
owner of this Note for the purpose of receiving payment of or on account of the
principal of and premium, if any, and interest on this Note, and for the purpose
of any notice, waiver or consent hereunder, and payment of this Note shall be
made only to or upon the order in writing of such holder.
(S)(S)2. Prepayment of Notes.
-------------------
(S)2.01. Optional Prepayments.
--------------------
Upon notice given as provided in (S)2.02, the Company at its option
may prepay the Notes at any time as a whole or in part from time to time (in
multiples of $1,000,000 principal amount) at the Yield Maintenance Price. Each
such notice shall specify on which such prepayment is to be made (the
"Redemption Date"), the principal amount of the Notes of each holder so to be
prepaid and the interest accrued thereon to the Redemption Date.
On the Calculation Date, the Computing Holder shall give written
notice to the Company of the amount of the Yield Maintenance Price of the
principal amount of the Notes so to be prepaid, which notice shall set forth in
reasonable detail the computation
<PAGE>
thereof; provided, however, that the failure of the Computing Holder to make
-------- -------
such determination shall not affect the obligation of the company to pay such
Yield Maintenance Price when due in accordance with the terms of the Notes and
the Computing Holder shall have no liability to the Company or any other holder
for its failure to make such determination. The Yield Maintenance Price set
forth in such notice shall be binding on the Company and all of the holders,
absent manifest error.
Promptly after each such Calculation Date, the Company shall deliver
to each holder of Notes on or before such Redemption Date a certificate signed
by a principal financial officer of the company setting forth the Yield
Maintenance Price of the principal amount of the Notes held by such holder so to
be prepaid, accompanied by a copy of the written notice by the Computing Holder
referred to above (which sets forth the computation of the Yield Maintenance
Price of the Notes held by the Computing Holder).
(S)2.02. Notice of Prepayment and Other Notices.
--------------------------------------
The Company shall give written notice of any prepayment of this Note
or any portion hereof pursuant to (S)2.01 not less than 30 nor more than 60 days
prior to the date fixed for such prepayment in such notice, which notice shall
specify the amount so to be prepaid, together with the interest to be paid
thereon and the date fixed for such prepayment. Any notice of prepayment and all
other notices to be given to any holder of this Note shall be given by
registered or certified mail to such holder at its address designated on the
date of such notice on the register or other record maintained by the Company.
(S)2.03. General Provisions concerning Prepayments.
-----------------------------------------
In the event of any prepayment of less than all the outstanding Notes
pursuant to (S)2.01, the Company will allocate the principal amount so to be
prepaid (but only in units of ,000) among the holders of Notes in proportion, as
nearly as may be, to the respective principal amounts of such Notes not
theretofore called for prepayment of which they shall be holders.
Upon notice of any prepayment pursuant to (S)2.01 being given as
provided in (S)2.02, the Company covenants and agrees that it will prepay on the
date therein fixed for prepayment the principal amount of this Note so to be
prepaid as specified in such notice at the Yield Maintenance Price together with
interest accrued thereon to such date fixed for prepayment.
(S)2.04. Surrender of Notes; Notation Thereon.
------------------------------------
The Company may, as a condition of Payment of all or any of the
principal of, premium, if any, or interest on this Note, require the holder to
present this Note for notation of such payment and, if this Note be paid in
full, require the surrender hereof.
<PAGE>
(S)2.05. Interest After Date Fixed for Prepayment.
----------------------------------------
This Note or any portion hereof to be prepaid pursuant to (S)2.01
shall cease to bear interest on and after the date fixed for such prepayment,
unless upon presentation for the purpose, the Company shall fail to pay this
Note or such portion, as the case may be, on or before the date fixed for such
prepayment, in which event this Note or such portion, as the case may be, shall
bear interest on the principal amount thereof or the Yield Maintenance Price as
the case may be, at the Overdue Interest Rate from and after such date until
paid and, so far as may be lawful, any overdue installment of interest shall
bear interest at the Overdue Interest Rate.
(S)2.06. Prepayment By Delivery of Public Notes
--------------------------------------
A. Subject to and upon compliance with the provisions of this
(S)2.06, the Company, at its option, may prepay and thereby satisfy finally and
in full the Notes, as a whole, (but not less than the whole) at any time on or
prior to March 3, 1995 at the principal amount thereof then outstanding,
together with interest thereon to the date fixed for such prepayment, which
aggregate amount of principal and accrued interest shall be paid and satisfied
by the Company by the delivery to each holder of Notes against delivery of the
Notes to the Company for cancellation of (i) a non-interest bearing promissory
note of the Company made in favor of such holder providing for the payment on
the next date which would otherwise have been an interest payment date hereunder
of a principal amount equal to the interest accrued on the Note to the date
fixed for prepayment and (ii) duly issued Public Notes, dated as of the Exchange
Date, and payable to such Person or Persons, or registered assigns, all as may
be designated by such holder, for the same aggregate principal amount as the
principal amount of the Notes being prepaid by the delivery of such Public
Notes. The Company shall give written notice of the prepayment of this Note in
accordance with this (S)2.06 not less than 15 nor more than 60 days prior to the
date fixed for prepayment in such notice, which date shall be known hereinafter
as the "Exchange Date".
B. The right of the Company to prepay and thereby satisfy in full
the Notes on the exchange date in the manner provided in paragraph A hereof
shall be subject to the execution and delivery of, and the satisfaction and
performance of all of the terms and conditions of (S)5 of the Agreement.
Notwithstanding anything to the contrary herein contained, the Company shall
provide the holders of Notes with copies of any Registration Statement,
Prospectus or any amendment or supplement thereto which are intended to be filed
with the Commission at least 5 Business Days prior to the intended filing
thereof. In the event that any such holder objects to all or any portion of such
document, the Corporation shall not file the same with the Commission until such
document, as modified, supplemented or otherwise altered, as the case may be,
shall be approved by the dissenting holder, which approval shall not
unreasonably be withheld.
<PAGE>
C. Upon the giving of written notice of the intent of the Company
to prepay this Note in compliance with the provisions of paragraph A hereof, the
Company will prepay the Note on the Exchange Date in accordance with the
provisions of this Note.
D. Any Note prepaid pursuant to the provisions of this (S)2.06
shall be deemed to have been paid and satisfied finally and in full by the
company by the delivery of the promissory note and Public Notes referred to in
paragraph A hereof, shall cease to be outstanding, shall be cancelled and
destroyed and the holder thereof shall cease to have any further rights in,
under or to such Note except to receive the promissory note and the Public Note
referred to in paragraph A hereof, and such promissory note and the Public Notes
shall be deemed to have been received by the holder in full and final payment
and absolute satisfaction of the Note and the indebtedness evidenced thereby and
the Company shall cease to have any further obligations with respect to the Note
and the indebtedness evidenced thereby. The provisions of (S)2.05 hereof shall
apply mutatis mutandis to any prepayment by the Company under this (S)2.06.
----------------
(S)(S)3. Affirmative Covenants.
---------------------
The company covenants and agrees that so long as this Note shall be
outstanding:
(S)3.01. To Pay Notes.
------------
The Company will punctually pay or cause to be paid the principal,
interest and Yield Maintenance Price, if any, to become due in respect of this
Note according to the terms hereof.
(S)3.02. Maintenance
-----------
The Company will maintain an office or agency in Bedford,
Massachusetts, (or such other place in the United States of America as the
Company may designate in writing to the holder hereof) , where notices,
presentations and demands to or upon the Company in respect of the Notes may be
given or made.
(S)3.03. Existence.
---------
Subject to (S)4.03, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and corporate franchises; provided, however, that the
-------- -------
Company will not be required to preserve any such right or franchise if the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of its business and that the loss thereof is not disadvantageous-in
any material respects to the holder of any Note.
<PAGE>
(S)3.04. Financial Statements; Compliance Certificates; Additional
---------------------------------------------------------
Information and Inspection.
- ---------------------------
A. Financial Statements and Reports. So long as you (or a nominee
---------------------------------
designated by you) shall hold any of the Notes, the Company will deliver to you
in duplicate:
(1) as soon as practicable, and in any event within 60 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year of the Company, the consolidated statement of income consolidated
stockholders' equity and consolidated cash flows of the Company and its
Subsidiaries for such period and for that part of the fiscal year ended with
such quarterly period and consolidated balance sheets of the Company and its
Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding figures as at the end of and for the
corresponding period of the preceding fiscal year, all in reasonable detail,
prepared in conformity with generally accepted accounting principles applied on
a basis consistent with that of previous years (except as otherwise stated
therein or in the notes thereto and except that footnotes shall not be required)
and certified by the chief financial officer of the Company as presenting fairly
the consolidated financial condition and results of operations and consolidated
cash flows of the Company and its Subsidiaries as at the end of and for the
fiscal periods to which they relate, subject to year-end audit adjustments;
(2) as soon as practicable, and in any event within 90 days after the
end of each fiscal year, the consolidated balance sheet and related statements
of consolidated income, consolidated stockholders' equity and consolidated cash
flows of the Company and its Subsidiaries as at the end of and for such year,
setting forth in each case in comparative form the corresponding figures of the
previous fiscal year, all in reasonable detail, prepared in conformity with
generally accepted accounting principles applied on a basis consistent with
that of previous years (except as otherwise stated therein or in the notes
thereto) and certified by the chief financial officer of the Company as
presenting fairly the financial condition and results of operations and
consolidated cash flows of the Company and its Subsidiaries as at the end of
and for the fiscal period to which they relate, and accompanied by a report or
opinion of independent auditors of recognized national standing selected by the
Company stating that such financial statements present fairly the consolidated
financial condition and results of operations and consolidated cash flows of
the Company and its Subsidiaries in accordance with generally accepted
accounting principles consistently applied (except for changes in application
with which such accountants concur) and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards;
<PAGE>
(3) concurrently with the financial statements delivered pursuant to
(S)3.04A(2), the written statement of said accountants that in making the audit
necessary for their report or opinion on said financial statements they have
obtained no knowledge of any Event of Default or event which, with notice or
lapse of time or both, would constitute such Event of Default or, if such
accountants shall have obtained knowledge of any Event of Default or event, they
shall disclose in such statement the Event of Default or event and the nature
and status thereof; but such accountants shall not be liable, directly or
indirectly, to anyone for any failure to obtain knowledge of any such Event of
Default or event;
(4) concurrently with the financial statements delivered pursuant to
(S)3.04A(2), a Certificate of the chief financial officer of the Company (a)
setting forth, as of the end of the preceding fiscal year, the extent to which
the Company and its Subsidiaries have complied with the requirements of
(S)(S)4.01 and 4.02 of the Notes and (S)6.9(a) of the Agreement, including in
each case a brief description, together with all necessary computations, of the
manner in which such compliance was determined, (b) stating that a view of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under his supervision to determine whether the Company has
fulfilled all of its obligations under the Agreement and the Notes and (c)
stating that, to the best of his knowledge, the Company is not and has not been
in default in the fulfillment of any of the terms, covenants, provisions or
conditions hereof or thereof, or, if any such default exists or existed,
specifying such default or defaults and the nature and status thereof;
(5) as soon as practicable, copies of all such financial statements,
proxy statements and reports as the Company shall send to its stockholders and
all registration statements and regular periodic reports, if any, which it or
any of its Subsidiaries may file with the Securities and Exchange Commission or
any governmental agency or agencies substituted therefor or with any national
securities exchange;
(6) immediately upon a responsible officer of the Company becoming aware
of the existence of a condition, event or act which constitutes an Event of
Default or an event of default under any other evidence of Indebtedness of the
Company or any Subsidiary, or which, with notice or lapse of time or both, would
constitute such an Event of Default or event of default, a written notice
specifying the nature and period of existence thereof and what action the
Company or such Subsidiary, as the case may be, is taking or proposes to take
with respect thereto; and
(7) such other information as to the business and properties of the
Company and of its Subsidiaries as you may from time to time reasonably request.
(S)3.05. Inspection. So long as you (or a nominee designated by
----------
you) shall hold any of the Notes, you shall have the right to visit and inspect,
at your expense, any of the Properties of the Company or of any of its
Subsidiaries and its books of account and those of its Subsidiaries and to
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with its and their officers and independent public accountants, all at such
reasonable times and as often as you may reasonably request.
<PAGE>
(S)(S)4. Restrictive Covenants.
---------------------
The Company covenants and agrees that so long as this Note shall be
outstanding:
(S)4.01. Limitations on Liens. Neither the Company nor any of its
--------------------
Subsidiaries shall mortgage or pledge, or permit to be created any mortgage,
pledge or other lien or encumbrance (such mortgages, pledges, liens or
encumbrances being referred to herein as "Liens") upon any of its property or
assets to secure Indebtedness, and shall from time to time take such steps as
may be necessary effectively to prevent any subsidiary from mortgaging or
pledging, or permitting any Lien to be created upon any of the property or
assets of such Subsidiary to secure Indebtedness, without making effective
provisions whereby the Notes then outstanding shall be secured by such Lien
equally and ratably with the Indebtedness thereby secured, so long as any such
other Indebtedness is so secured; provided, however, that nothing contained in
this (S)4.01 shall prevent, restrict or apply to:
(1) Liens existing on the date hereof securing Indebtedness outstanding on
the date hereof;
(2) Liens existing on any asset or shares of stock of any corporation at
the time such corporation becomes a Subsidiary;
(3) Liens on any asset securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring, constructing,
improving or repairing such asset (including, without limitation, Liens incurred
in connection with industrial revenue bonds), provided that such Lien attaches
to such asset concurrently with or within 120 days after the acquisition,
construction, improvement or repair thereof;
(4) Liens on any asset or shares of stock of any corporation existing at
the time such corporation is merged into or consolidated with the Company or a
subsidiary;
(5) Liens existing on any asset or shares of stock prior to the
acquisition thereof by the company or a Subsidiary;
(6) Liens arising pursuant to any statute or order of attachment,
distraint or similar legal process arising in connection with court proceedings
so long as the execution or other enforcement thereof is effectively stayed and
the claims secured thereby are being contested in good faith by appropriate
proceedings;
(7) Liens securing Indebtedness of a Subsidiary owing to the company or
another Subsidiary;
(8) Liens securing taxes, assessments or governmental charges not yet
delinquent or being contested in good faith by appropriate proceedings;
<PAGE>
(9) Liens securing obligations owing to landlords and mechanics and
materialmen incurred in the ordinary course of business for sums not yet due or
being contested in good faith by appropriate proceedings; and
(10) Liens arising out of the refinancing, extension, renewal or refunding
of any indebtedness secured by any Lien permitted by any of the foregoing
clauses of this (S)4.01, provided that such Indebtedness is not secured by any
additional assets.
Notwithstanding the foregoing provisions of this (S)4.01, the Company and its
subsidiaries may, without securing the Notes then outstanding, create Liens
securing Indebtedness which would otherwise be subject to the foregoing
restrictions in an aggregate amount (including the value of any Sale and
Leaseback Transaction not otherwise permitted by (S)4.02 or clauses (1) through
(10) of this (S)4.01 which does not at the time exceed 15% of Consolidated Net
Tangible Assets.
(S)4.02. Limitation on Sale and Leaseback Transactions. The Company
---------------------------------------------
will not, and will not permit any Restricted Subsidiary to sell or transfer any
Important Property owned by it with the intention of taking back a lease on such
property unless the Company or such Restricted Subsidiary would be entitled,
pursuant to the provisions of (S)4.01 hereof to incur Secured Debt equal in
amount to the amount of the Attributable Debt resulting from such Sale and
Leaseback Transaction without equally and ratably securing the Rates. This
covenant shall not apply to Attributable Debt with respect to any Sale and
Leaseback Transaction if:
(a) the lease in such Sale and Leaseback Transaction is for a period not
exceeding three years and the Company or the Restricted Subsidiary which is a
party to such lease intends that its use of such property will be discontinued
on or before the expiration of such period; or
(b) the sale or transfer of the Important Property is made prior to, at
the time of, or within 180 days after the later of the date of the acquisition
(including acquisition through merger or consolidation) of such Important
Property or the completion or construction thereof; or
(c) the Company or Restricted Subsidiary applies an amount equal to the
value of the property so leased (as determined in any manner approved by the
Board of Directors) to (i) the retirement, within 180 days after the effective
date of such arrangement, of any part of Consolidated Funded Debt or (ii) the
Purchase of other property which will constitute an Important Property or
Important Properties, or both (i) and (ii) ; provided, however, that the amount
-------- -------
to be so applied to the retirement of Consolidated Funded Debt or the purchase
of Important Property may be reduced by (i) the principal amount of any Notes
prepaid within 180 days before or after the effective date of any such
arrangement, and (ii) the principal amount of any Consolidated Funded Debt,
other than Notes, retired by the Company or a Restricted Subsidiary within 180
days before or after the effective date of any such arrangement.
Notwithstanding the foregoing, no retirement referred to in this clause (c) may
be effected by payment at maturity or
<PAGE>
pursuant to any mandatory sinking fund payment or any mandatory prepayment
provision or by retirement of Consolidated Funded Debt of the Company which is
subject and subordinated in right of payment to the obligations of the Company
in respect of the Notes; or
(d) the lease in such Sale and Leaseback Transaction secures or relates to
obligations issued by a governmental body, to finance the acquisition or
construction of property; or
(e) the Sale and Leaseback Transaction is between or among the Company and
one or more Restricted Subsidiaries or between or among Restricted Subsidiaries.
(S)4.03. Consolidation, Merger. Conveyance, Transfer.
--------------------------------------------
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, unless:
(1) the Person formed by such consolidation or into which the Company is
merged or the Person which acquired 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, shall be organized and validly existing under
the laws of the United States of America, any State thereof of the District of
Columbia and shall expressly assume, by a written instrument in form
satisfactory to you, the due and punctual payment of the principal of and
interest on all the Notes and the performance of every covenant contained in the
Notes or in the Agreement 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 a Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary 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 (S)4.01, the Company or such successor Person,
as the case may be, shall take such steps as shall be necessary effectively to
secure the Notes equally and ratably with (or Prior to) all indebtedness secured
thereby; and
(4) the Company has delivered to you a certificate of an authorized
officer of the Company and an opinion of counsel, each stating that such
consolidation, merger, conveyance, transfer of lease complies with this (S)4.03
and that all conditions precedent herein provided for relating to such
transactions have been complied with.
<PAGE>
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 this
(S)4.03, the successor Person formed by such consolidation or in which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and any exercise every right and power of,
the Company under this Note or the Agreement with the same effect as if such
successor Person had been named as the Company herein and therein, and
thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under the Agreement and the Notes.
(S)5. Consents, Waivers and Amendments.
--------------------------------
Any term, covenant, agreement or condition of the Notes may, with the
consent of the Company, be amended or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by one or more written instruments signed by the holder or
holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding; provided, however, that
-------- -------
A. no such amendment or waiver shall, without the Consent of the
holders of all outstanding Notes,
(1) change the maturity of the principal of, or any installment
of interest on any of the Notes, or reduce the principal amount thereof or the
interest thereon or any premium payable upon the redemption thereof including,
without limitation, the Yield Maintenance Price, or subordinate or otherwise
modify the terms of payment of the principal thereof or premium or interest
thereon including, without limitation, extend the time for any such payment, or
(2) give to any Note any preference over any other Note, or
(3) reduce the percentage of holders of Notes requited to
approve any such amendment or effectuate any such waiver; and
B. no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
Any amendment or waiver pursuant to this Section shall apply equally
to all the holders of the Notes and shall be binding upon them, upon each future
holder of any Note and upon the Company, whether or not a notation of such
amendment or waiver shall have been made on such Note. In the case of an
amendment or waiver of the character described in (S)5A, the holder of each Note
agrees to make a notation on such outstanding Note to indicate that such
amendment or waiver has been effected. In the case of any other amendment or
waiver, no notation need be made on the Notes at the time outstanding, but any
Note executed and delivered thereafter may, at the option of the Company, bear a
notation referring to any such amendment or waiver then in effect. For purposes
of determining whether the holders of outstanding Notes of the requisite
aggregate principal
<PAGE>
amount at any time have agreed or consented to any amendment or waiver pursuant
to the provisions of this Section, any Notes owned by the Company, any
Subsidiary or any Affiliate shall be disregarded and deemed not to be
outstanding.
The Company will not increase the rate of interest on any Note or
grant any holder of any Note any benefit or payment for or in connection with
any amendment or waiver in respect of the Notes, whether pursuant to this
Section or otherwise, unless such increase in interest or other benefit or
payment is extended on the same terms ratably to all other holders of Notes at
the time outstanding.
(S)6. Definitions.
-----------
For all purposes of this Note, except as otherwise expressly provided
or unless the context otherwise requires:
"Affiliate" means any Person which, directly or indirectly, controls
---------
or is controlled by or is under common control with the Company or which
beneficially owns or holds 5% or more of any class of stock of the Company. For
purposes of this definition, control means the power to direct the management
and policies of a 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.
"Agreement" means the Note Purchase and Exchange Agreement dated March
---------
3, 1994 among the Company and MetLife entered into in connection with the
issuance of the Notes.
"Attributable Debt" means, with respect to any particular lease under
-----------------
which any Person is at the time liable and at any date as of which the amount
thereof is to be determined, the total net amount of rent required to be paid by
such Person under such lease during the remaining primary term thereof,
discounted from the respective due dates there of to such date at the rate per
annum borne by the Notes. The net amount of rent required to be paid under any
such lease for any such period shall be the aggregate amount of the rent payable
by the lessee with respect to such period, after excluding amounts required to
be paid on account of maintenance and repairs, insurance, taxes, assessments,
water rates and similar charges and any additional rentals (in excess of fixed
minimums) based upon a percentage of gross receipts. In the case of any lease
which is terminable by the lessee, such rent amount shall also include the
amount of any penalty payable by the lessee upon such termination, but no rent
shall be considered as required to be paid under such lease subsequent to the
first date upon which it may be so terminated.
"Board of Directors" means either the board of directors of the
------------------
Company or any duly authorized committee of that board.
<PAGE>
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York or Boston, Massachusetts are authorized or
obligated by law or executive order to close.
"Calculation Date" means the date on which the Yield Maintenance Price
----------------
on the Notes being prepaid pursuant to (S)2.01 is to be determined by the
Computing Holder with respect to such Notes which date shall be the fifth
Business Day prior to the Redemption Date established pursuant to (S)2.01.
"Capital Lease" means which is, in accordance with generally accepted
-------------
accounting principles, be capitalized on a balance sheet of the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor provision thereto.
"Computing Holder" means as of a Calculation Date with respect to the
----------------
prepayment of Notes pursuant to (S)2.01, the holder of the largest aggregate
principal amount of the outstanding Notes. For purposes of such determination,
the holder of any Note and any of its affiliates or subsidiaries that are
holders of any Notes shall be treated as one holder.
"Consolidated Funded Debt" means Funded Debt of the Company and its
------------------------
consolidated Subsidiaries, determined on a Consolidated basis in accordance with
generally accepted accounting principles.
"Consolidated Net Tangible Assets" means the aggregate amount of
--------------------------------
assets (less applicable reserves) after deducting therefrom (a) all current
liabilities and (b) all amounts representing goodwill, trade names, trade marks,
patents, debt discount and expense and other like intangibles, all as set forth
on the most recent balance sheet of the Company and its Subsidiaries and
computed in accordance with generally accepted accounting principles.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means each "person" (as defined in Section 3(9) of
---------------
ERISA) which together with the Company or a Subsidiary would be deemed to be a
"single employer" within the meaning of Section 414 (b) , (c), (m) or (o) of the
Code.
"ERISA Plan" means any of the following "employee benefit plans" (as
----------
defined in Section 3(3) of ERISA) but only to the extent any of them is subject
to regulation under ERISA:
(i) Pension Plan as defined in Section 3(2) of ERISA;
------------
<PAGE>
(ii) Defined Benefit Plan means a Pension Plan of the type
--------------------
defined in Section 3(35) of ERISA;
(iii) Multi-Employer Plan means a Pension Plan of the type defined
-------------------
in Section 3(37) of ERISA; and
(iv) Welfare Plan as defined in Section 3(1) of ERISA.
------------
"Events of Default" has the meaning specified in (S)7.01.
-----------------
"Exchange Date" shall have the meaning set forth in (S)2.06.
-------------
"Funded Debt" means all Indebtedness maturing more than one year after
-----------
the date of determination thereof and all Indebtedness, regardless of its term,
renewable by the obligor pursuant to the terms thereof for more than one year
after the date of the creation of the Indebtedness which, would in accordance
with generally accepted accounting principles, be classified as long-term debt.
"Important Property" means any manufacturing plant or other building,
------------------
structure or other facility owned or leased by the company or any Subsidiary,
whether now owned or hereafter acquired which, in the opinion of the Board of
Directors, is of material importance to the total business conducted by the
Company and its Subsidiaries as a whole.
"Indebtedness" means (a) all items of indebtedness for money borrowed
------------
and all Capitalized Leases, whether now existing or hereafter created, and (b)
all items of indebtedness for money borrowed and Capitalized Leases of another
which are guaranteed, directly or indirectly, in any manner or are in effect
guaranteed through any agreement or other arrangement, even if not designated as
a guarantee, designed to provide funds for or to secure payment or performance
of such indebtedness for money borrowed or Capitalized Leases of another.
"MetLife" means Metropolitan Life Insurance Company, a corporation
-------
organized under the laws of the State of New York and its successors and
assigns.
"Overdue Interest Rate" means the greater of the interest rate on the
---------------------
Notes in effect, from time to time, plus 2% per annum and the rate of interest
publicly announced by The Chase Manhattan Bank, N.A. from time to time in New
York City as its corporate base rate of interest.
"Person" means any individual, corporation, partnership, joint
------
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Public Notes" has the meaning set forth in (S)8 of the Agreement.
------------
<PAGE>
"Restricted Subsidiary" means a Subsidiary which owns or leases any
---------------------
Important Property.
"Sale and Leaseback Transaction" means the sale or transfer of any
------------------------------
Important Property owned by the Company or any Restricted Subsidiary with the
intention of taking back a lease on such property.
"Secured Debt" means indebtedness for money borrowed that is secured
------------
by a Lien on (a) any Important Property of the Company or any Restricted
Subsidiary (but not including a property determined not to be an Important
Property of the Company or a Restricted Subsidiary by the Board of Directors in
its discretion) or on (b) any shares of stock or indebtedness of an Restricted
Subsidiary.
"Significant Subsidiary" means a Subsidiary, including its
----------------------
Subsidiaries, which meets any of the following conditions: (i) the Company's and
its other Subsidiaries' investments in, and advances to, such Subsidiary exceed
10% of the total assets of the Company and its Subsidiaries consolidated as of
the end of the most recently completed fiscal year, or (ii) the company's and
its other Subsidiaries' proportionate share of the total assets (after
intercompany eliminations) of such subsidiary exceeds 10% of the total assets of
the Company and its Subsidiaries consolidated as of the end of the most recently
completed fiscal year, or (iii) the Company's and it's other Subsidiaries'
equity in the income from continuing operations before income taxes,
extraordinary items and cumulative effect of changes in accounting principles of
the Subsidiary exceeds 10% of such income of the Company and its Subsidiaries
consolidated for the most recently completed fiscal year. For purposes of
making the prescribed income test, when a loss has been incurred by either the
Company and its Subsidiaries consolidated or the tested Subsidiary, but not
both, the equity in the income or loss of the tested Subsidiary should be
excluded from the income of the Company and its Subsidiaries consolidated for
purposes of the computation; and if income of the company and its Subsidiaries
consolidated for the most recent fiscal year is at least 10% lower than the
average of the income for the last five fiscal years, such average income should
be substituted for purposes of the computation, with any loss years omitted for
purposes of computing average income.
"Subsidiary" means a corporation more than 50% of the outstanding
----------
voting stock 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" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Yield Maintenance Price" means, with respect to any principal amount
-----------------------
of Notes being prepaid pursuant to (S)2.01 the greater of (1) the sum of the
respective Payment values of each prospective interest payment and the principal
payment at maturity in respect of the Notes so being prepaid pursuant to (S)2.01
(the amount of each such payment being herein referred to as a "Payment"), and
(2) the unpaid principal amount of the Notes so being prepaid. The Payment
Value of each Payment shall be determined by discounting
<PAGE>
such Payment at the Reinvestment Rate for the period from the scheduled date of
such Payment to the applicable date of prepayment. The Reinvestment Rate is the
sum of (a) .25% and (b) the yield which shall be imputed from the yields of
those actively traded "On The Run" United States Treasury securities, as
reported on the Cantor-Fitzgerald brokerage screen available on Telerate
Information Systems (page 500 mid point of Bid/Ask price), having maturities as
close as Practicable to the final maturity of the Notes so to be prepaid or, if
such yields shall not be reported as of such time or the Yields reported as of
such time are not ascertainable in accordance with the preceding, clause, then
the arithmetic mean of the rates, published for the 5 Business Days preceding
the applicable calculation Date, in the weekly statistical release designated
H.15(519) (or any successor publication) of the Board Governors of the Federal
Reserve, System under the caption "U.S. Government Securities--Treasury Constant
Maturities" opposite the maturity corresponding to the final maturity of the
Notes, (rounded to the nearest month) so to be prepaid or accelerated, as the
case may be. If no maturity exactly corresponding to such final maturity of the
Notes shall appear therein, yields for the next longer and the next shorter
published maturities shall be calculated pursuant to the foregoing sentence and
the Yield Maintenance Price shall be interpolated from such yields on a
straight-line basis (rounding in each of such relevant periods, to the nearest
month). The yields of such United States Treasury securities (under both of the
methods described above) shall be determined as of 10:00 a.m., New York time, on
the Calculation Date.
All "accounting terms" used herein and not expressly defined in this
Note shall have the meanings respectively given to them in accordance with
generally accepted accounting principles as they exist at the date of
applicability thereof.
(S)(S)7. Defaults and Remedies.
---------------------
(S)7.01. Events of Default.
-----------------
If one or more of the following events (herein called "Events of
Default") shall occur for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgement, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
A. default in the payment of any interest upon any Note when such
interest becomes due and payable and such default shall continue for a period of
five-days; or
B. default in the payment of principal of (or premium, if any, on) any
Note when and as the same shall become due and payable, whether at maturity or
at a date fixed for prepayment or by acceleration or otherwise; or
C. in the performance or observance of any other covenant, agreement or
condition contained in this Note or in the Agreement and continuance of such
default for a period of 30 days after written notice thereof, specifying such
default and requiring it to be remedied, shall have been given to the Company by
the holder of any Note; or
<PAGE>
E. default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company or any Subsidiary or under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness for money borrowed by the
Company, having an aggregate principal amount outstanding which, when aggregated
with all such other indebtedness then in default, is in excess of $5,000,000
(other than the Notes), whether such indebtedness now exists or shall hereafter
be created, which default 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 shall have resulted in such
indebtedness (in the aggregate in excess of $5,000,000) becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such indebtedness having been discharged, or
such acceleration having been rescinded or annulled; or
F. 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 Significant
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 Significant 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
Significant 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 Significant Subsidiary or of any
substantial part of its 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
G. the commencement by the Company or any Significant 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
Significant 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
or similar official of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for the
benefit of 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 Significant subsidiary in furtherance of any such action; or
<PAGE>
H. any representation by or on behalf of the Company in the Agreement or
any certificate or instrument furnished in connection therewith or with the
Notes proves to have been false or misleading in any material respect as of the
date given;
then (i) upon the occurrence of any Event of Default described in (S)(S)7.01F or
7.01G with respect to the Company (each a "Bankruptcy Default"), all of the
Notes shall automatically become immediately due and payable, (ii) upon the
occurrence of any Event of Default described in (S)7.01A or (S)7.01B, the holder
of any Note may at any time during its continuance, by written notice to the
Company, declare such Note to be due and payable, whereupon such Note shall
forthwith mature and become due and payable or (iii) upon the occurrence of any
Event of Default other than a Bankruptcy Default, the holder of holders of at
least a majority in principal amount of the Notes then outstanding (exclusive of
any Notes held by the Company, any Subsidiary or any Affiliate of the Company)
may at any time during its continuance, by written notice to the Company,
declare all of the Notes to be due and payable, whereupon in each case all of
the Notes shall forthwith mature and become due and payable.
The amount payable upon the occurrence of an Event of Default shall be
the entire unpaid principal amount of the Notes, together with interest accrued
thereon, to the extent permitted by law, to the date of payment, and such amount
shall be payable without presentment, demand, protest or other requirement of
any kind, all of which are expressly waived by the Company.
(S)7.02. Suits for Enforcement.
---------------------
In case an Event of Default shall occur and be continuing, the holder
of this Note may proceed to protect and enforce its rights by suit in equity,
action at law and/or other appropriate proceeding, whether for the specific
performance of any covenant contained in this Note or in aid of the exercise of
any power granted in this Note, or may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the holder of this
Note. If any holder of a Note shall demand payment thereof or take any other
action in respect of an Event of Default, the Company will forthwith give
written notice to the other holders of Notes specifying such action and the
nature and status of the Event of Default.
(S)7.03. Remedies Not Waived.
-------------------
No course of dealing between the holder hereof and the Company or any
delay on the part of the holder hereof in exercising any rights hereunder shall
operate as a waiver of any rights of any holder hereof.
(S)7.04. Remedies Cumulative.
-------------------
No remedy herein conferred upon the holder hereof is intended to be
exclusive of any other remedy and each and every remedy shall be in addition to
every
<PAGE>
other remedy given hereunder or now or hereafter existing-at law or in equity or
by statute or otherwise.
(S)(S)8. Miscellaneous.
--------------
(S)8.01. Costs and Expenses.
------------------
If an Event of Default shall occur, the Company shall occur, the
Company shall pay to each holder of the Notes, to the extent permitted under
applicable law, all reasonable out-of-pocket expenses incurred by such holder in
connection with such Event of Default and such further amount as shall be
sufficient to cover the cost and expense of collection, including reasonable
compensation to the attorneys and counsel of such holder for any services
rendered in that connection, upon the Notes held by such holder.
(S)8.02. Covenants Bind Successors and Assigns.
-------------------------------------
All covenants and agreements in this Note by the Company shall bind
its successors and assigns, whether so expressed or not.
(S)8.03. Governing Law.
--------------
This Note shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts.
(S)8.04. Headings.
---------
The Section headings herein are for convenience only and shall not
affect the construction hereof.
IN WITNESS WHEREOF, MILLIPORE CORPORATION, has caused this Note to be
signed in its corporate name by one of its officers thereunto duly authorized,
and to be dated as of the day and year first above written.
MILLIPORE CORPORATION
By:
Its:
<PAGE>
EXHIBIT B
MILLIPORE CORPORATION,
DOMESTIC AND FOREIGN ENTITIES
DOMESTIC ENTITIES:
NAME OF ENTITY: STATE OF ORGANIZATION:
--------------- ----------------------
IMMUNOSYSTEMS INCORPORATED MAINE
MILLICORP, INC. DELAWARE
MILLIPORE ASIA LIMITED DELAWARE
MILLIPORE CIDRA, INC. DELAWARE
MILLIPORE CORPORATION MASSACHUSETTS
THE MILLIPORE FOUNDATION MASSACHUSETTS
MILLIPORE INTERTECH (V.I.), INC. U.S. VIRGIN ISLANDS
MILLIPORE INVESTMENT HOLDINGS-LIMITED DELAWARE
MILLIPORP, JAPAN COMPANY L.L.C. DELAWARE
MILLIPORE OF NEW HAMPSHIRE, INC. NEW HAMPSHIRE
MILLISCOPE, INC. DELAWARE
STERIMATICS CORPORATION MASSACHUSETTS
FOREIGN ENTITIES:
NAME OF ENTITY: COUNTRY OF ORGANIZATION:
--------------- ------------------------
MILLIPORE AB SWEDEN
MILLIPORE AG SWITZERLAND
MILLIPORE A/S DENMARK
MILLIPORE AS NORWAY
MILLIPORE AUSTRALIA PTY. LIMITED AUSTRALIA
MILLIPORE B.V. THE NETHERLANDS
MILIPORE (CANADA) LTD. CANADA
MILLIPORE CHINA LIMITED HONG KONG
MILLIPORE GESMBH AUSTRIA
MILLIPORE GMBH GERMANY
MILLIPORE IBERICA, S.A. SPAIN
MILLIPORE INDUSTRIA E COMERCIO LTDA. BRAZIL
MILLIPORE INTERNATIONAL
HOLDING COMPANY B.V. NETHERLANDS
MILLIPORE IRELAND B.V. THE NETHERLANDS
MILLIPORE KOREA CO. LTD. KOREA
MILLIPORE OY FINLAND
MILLIPORE S.A. FRANCE
<PAGE>
MILLIPORE S.A. DE C.V. MEXICO
MILLIPORE S.A./N.V. BELGIUM
MILLIPORE S.P.A. ITALY
MILLIPORE (U.K.) LIMITED GREAT BRITAIN
MINERVA INSURANCE COMPANY LTD. BERMUDA
MSUB LTD. GREAT BRITAIN
NIHON MILLIPORE LIMITED JAPAN
SHALLFORD ENTITY SDN. BHD. MALAYSIA
<PAGE>
EXHIBIT C
---------
MILLIPORE CORPORATION
INDEBTEDNESS
MARCH 3,1994
<TABLE>
<CAPTION>
ASSETS CAPITAL
COUNTRY/LOCATION DEBT SECURED LEASE
- ---------------- ----- ------- -----
<S> <C> <C> <C>
Millipore Corp.: Long Term $100,910 $ 910 $ 0
Millipore Corp.: Short Term 28,185 0 0
Nihon Millipore, KK (Japan) 16,387 0 0
Millipore SA (France) 13,854 0 0
Millipore China Ltd. 903 0 0
Millipore Korea Co., Ltd. 871 0 0
Millipore Australia Pty. Ltd. 543 0 543
All Other - less than 10,000 5,000 5,000
-------- ------- -------
TOTAL $171,653 $ 5,910 $ 5,543
======== ======= =======
</TABLE>
<PAGE>
EXHIBIT D
Opinion of General Counsel of the Company
To the effect that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Massachusetts
and with power and authority (corporate and other) to own properties and to
carry on its business as described in the Annual Report;
(ii) each active Subsidiary of the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is Incorporated and has the corporate power to own
properties and to engage in the business carried on by it;
(iii) each of the Company and its active Subsidiaries is qualified to do
business in, and is in good standing under the laws of, each jurisdiction in
which the character of the property owned or leased by it or the nature of the
business transacted by it makes such qualification necessary and where failure
so to qualify would materially adversely affect the business or assets of the
Company and its Subsidiaries (considered as one enterprise) or impair their
right to enforce any material contracts against others or expose them to
substantial liabilities in any such jurisdiction;
(iv) all the issued shares of capital stock of each active subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable; and all the outstanding shares capital stock of each Subsidiary
(except for directors' qualifying shares and other shares required to be held by
a person other than the company under applicable law of any foreign
jurisdiction) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(v) to the best of such counsels knowledge, there are no legal or
government proceedings pending to which the Company or any of its Subsidiaries
is a party or which any property of the Company or any of its subsidiaries is
the subject, other than as set forth in the Annual Report and other litigation
or governmental proceedings incident to the kind of business Conducted by the
Company, and its Subsidiaries, which individually and in the aggregate are not
material to the Company and its Subsidiaries; and to the best of such counsels
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vi) neither the Company nor any of its Subsidiaries is in violation of
its charter or by-laws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any bond,
debenture, note or other evidence
<PAGE>
of indebtedness or in any contract, indenture, mortgage, loan agreement or lease
to which it or any of them is a party or by which it or any of them or their
properties is bound, which violation or default would materially adversely
affect the conduct of the business, operations, financial condition or income of
the Company and its Subsidiaries considered as one enterprise; and the execution
and delivery of the Agreement and the Notes, the incurrence of the obligations
set forth therein, the consummation of the transactions contemplated thereby and
the compliance by the Company and its Subsidiaries with the terms, conditions
and provisions thereof will not conflict with, constitute a breach of or a
default under, result in the creation or imposition of any lien pursuant to or
result in any violation of the existing provisions of, the charter or by-laws of
the Company or any of its Subsidiaries or any bond, debenture, note or other
evidence or indebtedness known to such counsel or any contract, indenture,
mortgage, loan agreement or lease known to such counsel to which the Company or
any of its Subsidiaries is a party or by which it or any of them or their
properties is bound or any law, rule, regulation, judgement, decree or award
known to such counsel;
(vii) there is no action, suit or proceeding known to such counsel before
or by any court or governmental agency or body, domestic or foreign, now pending
or threatened against or affecting the Company or any of its Subsidiaries which,
either alone or in the aggregate, might reasonably be expected to materially
adversely affect the conduct of the business, operations, financial condition or
income of the Company and its Subsidiaries considered as one enterprise, the
consummation of the transactions contemplated by the Agreement or the compliance
by the Company with the terms, conditions and provisions of the Agreement and
the Notes;
(viii) the Company and its Subsidiaries have good and marketable title in
fee simple to the real property and good and marketable title to all personal
property owned by them, free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries; all property held under lease by the Company and
its Subsidiaries is held by then under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property by the Company and its Subsidiaries;
(ix) All of the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and to the extent owned by the Company, are owned free and clear
of all liens, encumbrances, equities or claims.
(x) the Company has all corporate power and authority necessary to enter
into and perform under the Agreement and to issue, sell and deliver the Notes
and to carry out the terms of the Agreement and the Notes;
<PAGE>
(xi) the Agreement has been duly authorized, executed and delivered by
the Company and (assuming the due authorization and valid execution and delivery
thereof by you) constitutes a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
(a) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect relating to
creditors' rights generally and (b) that the remedies of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought; and no consent of the stockholders of the Company is
required for the execution and delivery of the Agreement or the Notes;
(xii) the issuance and sale of the Notes has been duly and validly
authorized by all necessary corporate action on the part of the Company, the
Notes delivered on the Closing Date have been duly and validly executed and
delivered in accordance with the Agreement and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, except (a) that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
relating to creditors' rights Generally and (b) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought;
(xiii) no consent, approval, authorization, order, registration or
qualification of or with any Massachusetts or Federal court or any Massachusetts
or federal regulatory Authority or other Massachusetts or federal governmental
agency or body having jurisdiction over the Company or any of its Subsidiaries
or their properties is required for the issue and sale of the Notes or the
consummation of the other transactions Contemplated by the Agreement;
(xiv) it is not necessary, in connection with the offering and delivery of
the Notes under the circumstances contemplated by the Agreement, to register the
Notes under the Securities Act of 1933, as presently in effect, or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, as
presently in effect;
(xv) based on the Company's representation set forth in (S)2.14 of the
Agreement, the issue and sale of the Notes will not violate Regulation G of the
Board of Governors of the Federal Reserve System, and it is not necessary for
you to obtain a statement in conformity with the requirements of Federal Reserve
Form G-3 under such Regulation G in connection with such issue and sale.
<PAGE>
EXHIBIT E
MILLIPORE CORPORATION
Representations and Warranties
------------------------------
This certificate is delivered pursuant to (S)5.2 of the Note Purchase and
Exchange Agreement, dated March 3, 1994, between Millipore corporation, a
Massachusetts corporation ("the Company") and Metropolitan Life Insurance
Company ("MetLife") .
The Company hereby represents and warrants to MetLife as follows and the
undersigned hereby certifies that:
1. Agreement. The representations and warranties contained in (S)2.1 to
---------
(S)2.19 inclusive of the Agreement are true on and as of the date hereof
other than as they apply to the Company's instruments division which has
been disposed of subsequent to November 11, 1993 and prior to the date of
this certificate.
2. Registration Statement and Prospectus. The Company meets the requirements
-------------------------------------
for use of Form S-3 under the Securities Act of 1933, as amended (herein
called the "Securities Act"), and has filed with the Securities and
Exchange Commission (herein called the "Commission") a Registration
Statement on Form S-3 ( )/1/ relating to $100,000,000 aggregate principal
amount of the Public Notes, filed with the Commission on ______________,
199_ and the Indenture has been qualified under the Trust Indenture Act of
1939, as amended (herein called the "Trust Indenture Act"). No stop order
suspending the effectiveness of such Registration Statement has been issued
and no proceeding for that purpose has been initiated or threatened by the
Commission, and no amendment or supplement thereto or to any document
Incorporated by reference therein has heretofore been filed with the
Commission. Such Registration Statement is herein called the "Registration
Statement". As used herein, the term "Registration Statement" means the
Registration Statement, including all exhibits thereto (other than the
Statement of Eligibility and Qualification under the Trust Indenture Act
(Form T-1) of the Trustee), as of the date the Registration Statement
became effective; the term "Prospectus" means the prospectus (setting
forth, inter alia, the principal amount of the Public Notes, the terms
----------
thereof as specified in the Public Notes Resolutions, the method of
distribution of the Public Notes and the price at which the Public Notes
are to be purchased by you) included in the Registration Statement in the
form on file with the Commission on the date the Registration Statement
became effective together with any prospectus supplement filed after such
effective date pursuant to Rule 424 under the Securities Act and attached
as Schedule I hereto, with only such changes as shall be approved by you,
and the Company. Any reference herein to the Registration Statement or the
Prospectus shall be deemed to refer to and include
<PAGE>
the documents or portions thereof incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (herein called the "Exchange Act"), on or
before the Exchange Date or the issue date of the Prospectus, as the case
may be; and, any reference to any amendment or supplement to the
Registration Statement or the Prospectus shall be deemed to refer to and
include any documents filed after such date or issue date, as the case may
be, under the Exchange Act which are incorporated or deemed to be
incorporated by reference in such amendment or supplement. All documents so
incorporated by reference or so deemed to be incorporated by reference in
the Registration Statement or the Prospectus, including any document to be
filed pursuant to the Exchange Act which will constitute an amendment or
supplement to the Registration Statement, or the Prospectus, are herein
called "Incorporated Documents".
Conformity to Securities Act; No Misstatement or Omission. As of the time
---------------------------------------------------------
the Prospectus is led with the Commission, at any time prior to the
Exchange Date that any subsequent amendment or supplement to the
Registration Statement or the Prospectus is filed with the Commission and
at the Exchange Date, (i) the Registration Statement, as amended as of any
such time, the Prospectus, as amended or supplemented as of any such time,
and the Indenture complies in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the Trust
Indenture Act, and the respective rules and regulations of the Commission
thereunder, (ii) the Registration Statement, as amended as of any such
time, does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (iii) the Prospectus, as amended
or supplemented as of any such time, does not contain an untrue statement
of a material fact or omit 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; provided, however, that the representations
-------- -------
and warranties contained in this paragraph 3 shall not apply to (a)
statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
furnished to the company in writing by you expressly for use. in the
Registration Statement or the Prospectus or (b) the Statement of
Eligibility and Qualification (Form T-1) of the Trustee.
4. Independent Accountants of the Company. Coopers & Lybrand are independent
--------------------------------------
public accountants with respect to the Company and its consolidated
Subsidiaries as required by the Securities Act, the Exchange Act and the
respective rules and regulations of the Commission thereunder.
5. Financial Statements. The financial statements incorporated by reference
---------------------
in the Registration Statement and the Prospectus present fairly the
consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates specified and the consolidated results of
their operations for the periods specified; such financial statements were
prepared in conformity with generally accepted
<PAGE>
accounting principles applied on a consistent basis during the periods
involved, except as indicated therein or in the notes thereto; and the
supporting schedules included in the Registration Statement present fairly
the information required to be stated therein.
6. No Material Changes. Since the date as of which information is given in
-------------------
the Prospectus, except as otherwise stated therein or contemplated thereby:
(i) there has been no material adverse change in the business, operations
or condition, financial or otherwise, of the company and its Subsidiaries
considered as one enterprise, or in the earnings or the ability to continue
to conduct business in the usual and ordinary course of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business; (ii) there has been no material transaction
entered into by the Company or any of its Subsidiaries other than
transactions in the ordinary course of business or transactions which are
not material in relation to the Company and its Subsidiaries considered as
one enterprise; and there have not been any changes in the capital stock
(other than issuances of Common Stock upon exercises of options and stock
appreciation rights and upon earn-outs of performance shares) or any
material increases in the long term debt of the Company or any of its
Subsidiaries.
7. Governmental Consent. Other than such as have already been obtained or
--------------------
made or which will be made at or prior to the Exchange Date in connection
with the Registration Statement, the Prospectus and the Indenture, no
consent, approval or authorization of, or declaration or filing with, any
governmental authority on the part of the company is required for the valid
execution and delivery of the Agreement or the Indenture or performance
thereunder or the valid offer, issue, sale and delivery of the Notes
pursuant to the Agreement and the Indenture, provided that the Company
--------
makes no representation or warranty as to any consents, approvals,
authorizations, declarations or filings required under laws regulating
insurance companies as such.
8. Capitalization. The Company has an authorized capitalization as set forth
--------------
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and nonassessable.
All capitalized terms used herein, unless otherwise defined herein, shall
have the meanings set forth in the Agreement.
IN WITNESS WHEREOF, the Company has caused this certificate to be executed by it
duly authorized [title] this ____ day of______, 199.
MILLIPORE CORPORATION
By:
[Title]
<PAGE>
EXHIBIT F
Opinion of General Counsel of the Company
To the effect that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Massachusetts
and with power and authority (corporate and other) to own properties and to
carry on its business as described in the Prospectus;
(ii) laws of, each jurisdiction in which the character of the property
owned or leased by it or the nature of the business transacted by it makes such
qualification necessary and, where failure so to qualify would materially
adversely affect the business or assets of the Company;
(iii) to the best of such counsels knowledge, there are no legal or
government proceedings pending to which the company or of its Subsidiaries is a
party or which any property of the any or any of its Subsidiaries is the
subject, other than as forth in the Prospectus and other litigation or
governmental proceedings incident to the kind of business conducted by the
Company, and its Subsidiaries, which individually and in the aggregate are not
material to the Company and its Subsidiaries; and to the best of such counsels
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) neither the Company nor any of its Subsidiaries is in violation of
its charter or by-laws or in default in the performance or observance of any
material obligation, agreement, or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract, indenture, loan
agreement or lease to which it or any of them is party or by which it or any
of them or their properties is bound, which violation or default would
materially adversely affect the conduct of the business, operations, financial
condition or income of the Company and its Subsidiaries considered as one
enterprise; and the execution and delivery of the Indenture and the Public
Notes, the incurrence of the obligations set forth therein, the consummation of
the transactions contemplated thereby and by (S)5 of the Agreement and the
compliance by the Company and its Subsidiaries with the terms, conditions and
provisions thereof will not conflict with, constitute a breach of or a default
under, result in the creation or imposition of any lien pursuant to or result
in any violation of the existing provisions of, the charter or by-laws of the
Company or any of its Subsidiaries or any bond, debenture, note or other
evidence or indebtedness known to such counsel or any contract, indenture,
mortgage, loan agreement or lease known to such counsel to which the Company or
any of its Subsidiaries is a party or by which it or any of them or their
properties is bound or any law, rule, regulation, judgement, decree or award
known to such counsel;
<PAGE>
(v) there is no action, suit or proceeding known to such counsel before or
by any court or governmental agency or body, domestic or foreign, now pending or
threatened against or affecting the Company or any of its Subsidiaries which,
either alone or in the aggregate, might reasonably be expected to materially
adversely affect the conduct of the business, operations, financial condition or
income of the Company and its Subsidiaries considered as one enterprise, the
consummation of the transactions contemplated by (S)5 of the Agreement or the
compliance by the Company with the terms, conditions and provisions of the
Public Notes and the Indenture.
(vi) the Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and used and are fully paid and nonassessable;
<PAGE>
EXHIBIT G
Opinion of Ropes & Gray
To the effect that:
(i) the Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) the Company has all corporate power and authority necessary to enter
into and perform under the Indenture and to issue, sell and deliver the Public
Notes and to carry out the terms of the Agreement, the Indenture and the Public
Notes;
(iii) the Public Notes delivered on the Exchange Date are in proper form
under the Indenture; the issuance and sale of the Public Notes has been duly
and validly authorized by all necessary corporate action on the part of the
Company, the Public Notes delivered on the Exchange Date (assuming due
authentication the Trustee) have been duly and validly executed, authenticated
and delivered in accordance with the Agreement and the Indenture and constitute
the legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms and entitled to the benefits provided by
the indenture, except (a) that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
relating to creditors' rights generally and (b) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject
to table defenses and to the discretion of the court before which any
proceedings therefor may be brought; and the Public Notes and the Indenture
conform to the descriptions thereof in the Prospectus;
(iv) the Indenture has been duly authorized, executed and delivered by
the Company and (assuming due authorization and a valid execution and delivery
thereof by the Trustee) constitutes Valid and legally binding instrument of the
Company, enforceable against the Company in accordance with its terms, except
(a) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other laws now or thereafter in effect relating to
creditors' rights generally and (b) that the remedies of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought; the Public Note Resolutions have been duly adopted by
the Board of Directors of the Company; and the Indenture complies with and has
been qualified under the Trust Indenture Act;
<PAGE>
(v) no consent, approval, authorization, order, registration or
qualification of or with any Massachusetts or federal court or any Massachusetts
or federal regulatory authority or other Massachusetts or federal governmental
agency or body having jurisdiction over the Company or any of its subsidiaries
or their properties is required for the issue and sale of the Public Notes or
the consummation of the other transactions contemplated by the Agreement or the
Indenture, except such as have been obtained under the Securities Act and the
Trust Indenture Act and such as may be required under state securities laws of
any state other than Massachusetts;
(vi) the Registration Statement has become effective under the Securities
Act, and based upon the procedures set forth in Rules (S)6(b) and 6(f) of the
rules and regulations under the Securities Act, to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no Proceedings therefor have been instituted or threatened by the Commission;
(vii) the Registration Statement and the Prospectus as amended or
supplemented and any further amendments and supplements thereto made by the
Company at or prior to the Exchange Date (other than the Statement of
Eligibility and Qualification under the Trust Indenture Act (Form T-1) of the
Trustee and the financial statements and data and related schedules and other
financial or statistical data included or incorporated therein, as to which such
counsel need express no opinion) comply as to form in all material respects with
the requirements of the Securities Act and the Trust Indenture Act and the
published rules and regulations of the Commission thereunder; such counsel has
no reason to believe that, as of the effective date of the Registration
Statement, either the Registration Statement or the Prospectus (other than the
financial statements and data and related schedules and other financial or
statistical data included or incorporated therein and other than the information
furnished by you to the Company in writing expressly for use in the Registration
Statement or the Prospectus as specified in (S)4.3 of the Agreement, as to which
such counsel need express no opinion) 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 there not misleading or that, as of the
Exchange Date, either the Registration Statement or the Prospectus, in each case
as supplemented by any supplement to the Prospectus (other than the Statement of
Eligibility and Qualification under the Trust Indenture Act (Form T-1) of the
Trustee and the financial statements and data and related schedules and other
financial or statistical data include or incorporated therein and other than the
information furnished by you to the Company in writing expressly for use in the
Registration Statement or the Prospectus as specified in (S)4.3 of the
Agreement, as to which such counsel need express no opinion) contains an untrue
statement of a material factor omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
<PAGE>
EXHIBIT H
---------
LETTER FROM COOPERS & LYBRAND
To the effect that:
(i) They are independent public accountants with respect to the Company
and its Subsidiaries within the meaning of the securities Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules examined by them and included or
incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act or the Exchange Act, as applicable, and the
related published rules and regulations thereunder; and, to the extent that
such procedures have been performed at such time, they have made a review in
accordance with standards established by the American Institute of Certified
Public Accountants of the selected consolidated financial data of the Company
for the periods specified in such letter, as indicated in their reports
thereon;
(iii) The unaudited selected consolidated financial data with respect to
the consolidated results of operations and financial position of the Company
for the five most recent fiscal years incorporated by reference in the
Prospectus and included or Incorporated by reference in Item 6 of the
Company's annual report on Form 10-K for the most recent fiscal year agrees
with the corresponding amounts (after restatement where applicable) in audited
consolidated financial statements for such five fiscal years which were
included or incorporated by reference in Company's annual reports on Form 10-K
for such fiscal years;
(iv) On the basis of limited procedures, not constituting examination in
accordance with generally accepted auditing standards, consisting of a reading
of the other information referred to below, inspection of the minute books of
the Company and its Subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus, inquiries
of officials of the Company and its Subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be specified
in such letter, nothing came to their attention that caused them to believe
that:
(A) as of a specified date not more than five days prior to the
date of such letter, there have been any Changes in the consolidated
capital stock (other than issuances of capital stock upon the exercise of
options and stock appreciation rights, upon earn-outs of performance
shares, upon conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included or
incorporated by reference in the Prospectus, or the issuance of
<PAGE>
shares of common stock under the Company's contingent compensation plan) or
any increases in the consolidated long-term debt, long-term lease
obligations and other contractual obligations (except for increases which
in the aggregate are less than 5% of the assets of the Company and its
Subsidiaries and any increases in the sum of notes payable), current
installments of long-term debt and short-term debt of the company and its
consolidated subsidiaries (except for increases which in the aggregate are
lets than 5% of the assets of the Company and its Subsidiaries), or as of
the end of the latest period for which financial statements are available,
there have been any decreases in consolidated net current assets or
shareholders' equity or any increases in total current liabilities, in each
case-as compared with amounts shown on the latest balance sheet included or
incorporated by reference in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(v) In addition to the examination referred to in their report(s) included
or incorporated by reference in the Prospectus and the limited procedures,
inspections of minute books, Inquiries and other procedures referred to in
paragraphs (ii), (iii) and (iv) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by you, including without limitation, the ratio
of earnings to fixed charges set forth in the Prospectus, which are derived from
the general accounting records of the Company and its Subsidiaries, which appear
in the Prospectus (excluding documents incorporated reference), or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by you
or in documents incorporated by reference in the Prospectus specified by you,
are compared certain of such amounts, percentages and financial information with
the accounting records of the Company and its subsidiaries and have found them
to be in agreement.
<PAGE>
EXHIBIT 10.14
FORM OF LETTER AGREEMENT WITH DIRECTORS RELATING TO THE
DEFERRAL OF DIRECTORS FEES AND CONVERSION INTO PHANTOM
STOCK UNITS
<PAGE>
Dear:
This letter will serve to confirm our agreement with respect to the deferral of
your Director's Fees (including the annual retainer, meeting fees and any other
sums to be paid to you for service as a Director).
1. Millipore Corporation ("Millipore" or the "Corporation") will on
________________, establish in your name a book reserve (the "Deferred
Compensation Account"). During the continuance of your serving as a Director,
Millipore will make the following credits to your Deferred Compensation Account:
(a) On May 1, ____ and each May 1 thereafter for so long as you shall
serve as a Director of Millipore the amount equal to your annual
retainer payable on the date of the Annual Meeting of Stockholders.
(b) On the first day of January, April, July, and October of each
year, commencing _______________, an amount equal to all fees which
would otherwise be payable to you in consideration of your attendance
at any and all meetings of the Board of Directors of Millipore or any
Committee thereof (regular or special on which you serve) which took
place in the prior three (3) month period.
(c) There shall also be credited to your Deferred Compensation
Account on May 1 of each year any and all retainers to which you may
in the future be entitled should you serve as a Chairman of a
Committee of the Board of Directors of Millipore.
2. On the first business day of January, April, July, and October of each
year, commencing _____________, the amount in your Deferred Compensation Account
will be converted into the whole number of phantom stock units based on the
market price of Millipore Common Stock on said date (the "Purchased Units") and
credited to your Account. No fractional phantom stock units will be credited.
In accordance with the provisions of the Millipore Dividend Reinvestment
Plan ("MDRP"), dividends declared on Millipore Common Stock shall also be
credited to your Deferred Compensation Account in the form of Purchased Units.
3. Title to and beneficial ownership of all Purchased Units, cash and
other assets which may from time to time be credited to your Deferred
Compensation Account shall at all times remain in the Corporation and you and
your designated beneficiary shall not have any proprietary interest therein.
4. The Purchased Units and the cash amount credited to your Deferred
Compensation will be paid to you in cash as follows:
<PAGE>
(a) Upon retirement from the Board in ten (10) annual installments
(rounded to the nearest whole Unit) due on the first day of each year
starting with the year subsequent to retirement. The amount of each annual
cash installment shall be calculated based upon a fraction the numerator of
which is the then current market value of the Purchased Units to which you
would otherwise be entitled if your Deferred Compensation Account contained
actual shares of Millipore Common Stock (rather than Purchased Units) and
the denominator of which is the number of annual installments then
remaining under the Agreement.
(b) If you should die after retirement and before the ten (10) annual
installments are completed, the undistributed Purchased Units will continue
to be paid in installments to your designated beneficiary in the same
manner as set forth in subparagraph (a) above; and if your designated
beneficiary shall die before a total of ten (10) such annual installments
are completed, then the unpaid balance will be paid in a lump sum to the
estate of such designated beneficiary based upon the current market value
of the Purchased Units on such beneficiary's date of death.
(c) If you should die before retirement from the Board, Millipore shall
make one lump sum payment of the cash value of the Purchased Units to your
designated beneficiary as soon as practicable based upon the market value
of the Purchased Units on your date of death, unless Millipore shall have
previously received written directions from you to make ten (10) annual
payments to your designated beneficiary in the manner set forth in (a)
above.
(d) You may, of course, change your designated beneficiary at any time by
giving Millipore written notice thereof and, if you fail to designate a
beneficiary, all amounts payable under 4(b) and 4(c) shall be paid to your
estate.
5. You may at any time on written notice, terminate this agreement as to
the deferral of all fees to be earned subsequent to said notice of termination;
however, all Purchased Units and any amounts in your Deferred Compensation
Account shall remain therein and be paid to you in accordance with the
provisions of paragraph 4 hereof.
6. Nothing contained herein shall create a trust or escrow account of any
kind between you and Millipore. All Purchased Units and all funds which are
subject to this Agreement shall continue for all purposes to be part of the
general funds of Millipore.
7. This Agreement shall be binding upon Millipore and its successors and
assigns. Your interest in your Deferred Compensation Account may not be
assigned, pledged or hypothecated.
<PAGE>
Your signature in the space provided below constitutes your acceptance of, and
willingness to be bound by, the foregoing.
Very truly yours,
MILLIPORE CORPORATION
By:__________________________
Vice President
Agreed to and accepted this _____ day of __________________, _____.
____________________________ Social Security
Number:______________________
Beneficiary:____________________
<PAGE>
EXHIBIT 10.15
1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, AS AMENDED
<PAGE>
MILLIPORE CORPORATION
1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
-------------------------------------------------
1. PURPOSE
-------
The purpose of the 1989 Stock Option Plan for Non-Employee Directors (the
"Plan") is to advance the interests of Millipore Corporation (the "Company") by
enhancing the ability of the Company to attract and retain non-employee
directors who are in a position to make significant contributions to the success
of the Company and to reward directors for such contributions through ownership
of shares of the Company's common stock (the "Stock").
2. ADMINISTRATION
--------------
The Plan shall be administered by the Board Organization, Nominating and
Public Policy Committee of the Board of Directors (the "Board") of the Company
(the "Committee") which shall be appointed by the Board to serve at its
pleasure. The Committee shall have authority, not inconsistent with the express
provisions of the Plan, (a) to grant options in accordance with the Plan to such
directors as are eligible to receive options; (b) to prescribe the form or forms
of instruments evidencing options and any other instruments required under the
Plan and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations of the
Committee shall be conclusive and shall bind all parties. Subject to Section 8,
the Committee shall also have the authority, both generally and in particular
instances, to waive compliance by a director with any obligation to be performed
by him or her under an option and to waive any condition or provision of an
option.
A majority of the members of the Committee shall constitute a quorum, and
all determinations of the Committee shall be made by a majority of its members.
Any determination of the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by a majority of its members.
All members of the Committee shall be "disinterested persons" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934.
<PAGE>
3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall become effective on December 15, 1989, the date on which
the Plan is approved by the Board of Directors of the Company; provided,
however, that any options granted pursuant to the Plan prior to shareholder
approval thereof shall be subject to the later approval thereof by the
shareholders of the Company. No option shall be granted under the Plan after
the completion of ten years from the date on which the Plan was adopted by the
Board (the "Termination Date"), but options previously granted may extend beyond
that date.
4. SHARES SUBJECT TO THE PLAN
--------------------------
(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
-----------------
the aggregate number of shares of Stock that may be delivered upon the exercise
of options granted under the Plan shall be 100,000. If any option granted under
the Plan terminates without having been exercised in full, the number of shares
of Stock as to which such option was not exercised shall be available for future
grants within the limits set forth in this Section 4(a).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
-----------------------
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
-----------------
combination of shares, recapitalization or other change in the Company's capital
stock, the number and kind of shares of stock or securities of the Company
subject to options then outstanding or subsequently granted under the Plan, the
maximum number of shares or securities that may be delivered under the Plan, the
exercise price, and other relevant provisions shall be appropriately adjusted by
the Committee, whose determination shall be binding on all persons.
The Committee may also adjust the number of shares subject to
outstanding options, the exercise price of outstanding options and the terms of
outstanding options, to take into consideration material changes in accounting
practices or principles, consolidations or mergers (except those described in
Section 6(i), acquisitions or dispositions of stock or property or any other
event if it is determined by the Committee that such adjustment is appropriate
to avoid distortion in the operation of the Plan.
5. ELIGIBILITY FOR OPTIONS
-----------------------
Directors eligible to receive options under the Plan ("Eligible
Directors") shall be any director who (i) is not an employee of the Company, and
(ii) is not a holder of more than 5% of the outstanding shares of the Stock or a
person who is in control of such holder.
<PAGE>
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) Number of Options. Eligible Directors who are directors on the date
------------------
of adoption of the Plan shall be awarded options covering 2,000 shares of Stock
on that date. Each newly elected Eligible Director shall be awarded options
covering 2,000 shares of Stock on the date of his or her first election.
Following the initial grants, each Eligible Director shall be awarded
options covering 1,000 shares of Stock for each year of service at the first
Directors' Meeting following the Annual Meeting of Shareholders, following his
or her initial grant and each anniversary thereof, provided such individual is
then an Eligible Director. Each grant made prior to shareholder approval of
this Plan shall be subject to shareholder approval, and no such option shall be
exercisable prior to that time.
(b) Exercise Price. The exercise price of each option shall be 100% of
---------------
the fair market value per share of the Stock at the time the option is granted
but not less, in the case of an original issue of authorized stock, then par
value per share. The "fair market value" shall be defined as the closing price
for Millipore stock on the New York Stock Exchange on the composite tape on the
last business day prior to the date on which the option was granted, or if no
sale of the stock shall have been made on the New York Stock Exchange on that
day, on the next preceding day on which there was a sale of such stock.
(c) Duration of Options. The latest date on which an option may be
--------------------
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date the option was granted.
(d) Exercise of Options.
--------------------
(1) Each option shall first become exercisable upon the completion of one
year from the date of grant, at which time the option shall be exercisable
to the extent of 25% of the shares covered thereby. It shall become
exercisable as to an additional 25% of the shares covered thereby on
subsequent anniversaries of the date of grant, so that it shall be
exercisable in full after the fourth anniversary.
(2) Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (a) the
option certificate and any other documents required by the Committee and
(b) payment in full for the number of shares for which the option is
exercised.
(3) If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock
pursuant to such exercise
<PAGE>
until the Company is satisfied as to the authority of the person or
persons exercising the option.
The Company may, either in the instrument evidencing the option or in a
written instrument delivered at any time subsequent to the granting of the
option, provide for an optionee a special exercise period which will apply
if an Eligible Director's services as a director terminate due to
retirement at normal retirement age (as defined in the Corporation's By-
laws) or he or she ceases to perform services as a director earlier with
the consent of the Company. The special exercise period will begin on his
or her termination and will end on the earlier of up to the fifth
anniversary of his or her termination or the earlier expiration date of
the option. During such period the option will be exercisable to the
extent it would have been exercisable had the Eligible Director continued
to perform services as a director for the Company. Any question whether
or not an Eligible Director has retired or ceased to perform services as a
director shall be determined by the Committee, and its determination shall
be final.
(4) If an Eligible Director dies while performing services for the Company
or during a special exercise period provided under this section, his or
her option may be exercised in accordance with Section 6(g) below.
Notwithstanding the provisions of the preceding paragraph the Company
shall have the right, but shall not be required to repurchase from any
Eligible Director who ceases to render services as a director without the
consent and approval of the Company, within six (6) months of the exercise
of any options, the shares of the Company's Common Stock so purchased by
such Eligible Director at their original purchase (or exercise) price.
(f) Payment for and Delivery of Stock. Stock purchased under the Plan
----------------------------------
shall be paid for as follows: (i) in cash or by certified check, bank draft or
money order payable to the order of the Company, (ii) through the delivery of
shares of Stock having a fair market value on the last business day preceding
the date of exercise equal to the purchase price or (iii) by a combination of
cash and Stock as provided in clauses (i) and (ii) above.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him under the
Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
<PAGE>
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(f) Nontransferability of Options. No option may be transferred other
------------------------------
than by will or by the laws of descent and distribution, and during a director's
lifetime an option may be exercised only by him or her.
(g) Death. Should an Eligible Director die while a director of the
------
Company, or within a special exercise period provided to him or her under
Section 6(d)(4), any option held by him or her at death may be exercised by his
or her estate, or by the person or persons designated in his or her last will
and testament, as follows: In the case of death while an Eligible Director, each
option will be exercisable until the earlier of the first anniversary of his or
death and the original expiration date of the option to the extent the option
was exercisable by the optionee at the time of death. In the case of death
during a special exercise period, each option will be exercisable during the
remainder of such period to the extent it would have been exercisable had the
director lived.
(h) Other Termination of Status of Director. If a director's service with
----------------------------------------
the Company terminates for any reason other than as provided in paragraphs
6(d)(4) and 6(g) above, all options held by the director shall terminate
immediately.
(i) Mergers, etc. In the event of a consolidation or merger in which the
-------------
Company is not the surviving Corporation or which results in the acquisition of
substantially all the Company's outstanding Stock by a single person or entity
or by a group of persons and/or entities acting in concert, or in the event of
the sale or transfer of substantially all the Company's assets, all outstanding
options shall thereupon terminate, provided that at least 20 days prior to the
effective date of any such merger, consolidation or sale of assets, the Board
shall either (i) make exercisable, immediately prior to consummation of such
merger, consolidation or sale of assets, that portion of all outstanding options
determined by multiplying the total number of shares covered by each option by a
fraction (not greater than one) (A) the numerator of which is the number of full
months elapsed after the date of grant and prior to such event, and (B) the
denominator of which is the number of months between the date of grant and the
date on which the option would have first become exercisable in full, and
rounding the resulting number of shares to the nearest whole number, or (ii) if
there is a surviving or acquiring corporation, arrange, subject to consummation
of the merger, consolidation or sale of assets, to have that corporation or an
affiliate of that corporation grant replacement options.
7. ASSOCIATION RIGHTS.
-------------------
Neither the adoption of the Plan nor the grant of options shall confer
upon any Eligible Director the right to continued association with the Company
or affect in any way the right of the Company to terminate its association with
a director. Except as specifically provided by the Committee in any particular
case, the loss of existing or potential profit in options granted under this
Plan shall not constitute an element of
<PAGE>
damages in the event of termination of any agreement or arrangement with an
option holder even if the termination is in violation of an obligation of the
Company to such person under that agreement or arrangement.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION.
---------------------------------------------------------------
Neither adoption of the Plan nor the grant of options to a director shall
affect the Company's right to grant to such director options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which stock may be issued to
directors.
The Committee may at any time discontinue granting options under the Plan.
The Committee may at any time or times amend the Plan for the purpose of
satisfying any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of options, provided that (except to the
extent expressly required or permitted hereinabove), no such amendment shall,
without the approval of the shareholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) increase the number of
options granted to Eligible Directors, (c) amend the definition of Eligible
Director so as to enlarge the group of directors eligible to receive options
under the Plan, (d) reduce the price at which options may be granted, (e) change
or extend the times at which options may be granted, or (f) amend the provisions
of this Section 8, and no such amendment shall adversely affect the rights of
any director (without his or consent) under any option previously granted.
<PAGE>
MILLIPORE CORPORATION 1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
-----------------------------------------------------------------------
AMENDMENT 1
-----------
WHEREAS, Millipore Corporation (the "Company") has had in effect since
1989, the Millipore Corporation 1989 Stock Option Plan for Non-Employee
Directors (the "1989 Plan") under which the grant to non-employee directors of
stock options to purchase Millipore Common Stock is authorized.
WHEREAS, the Company now desires to amend the 1989 Plan to provide
automatically for a Special Exercise Period (as defined in the 1989 Plan) with
respect to stock options granted on and after December 1, 1997;
WHEREAS, pursuant to Section 8 of the 1989 Plan, the Management Development
and Compensation Committee of the Board of Directors (the "Committee") has
reserved the right, subject to the provisions thereof, to amend the 1989 Plan in
whole or in part;
NOW, THEREFORE, the 1989 Plan is hereby amended, as follows:
By amending Section 6(d)(3) Terms and Conditions of Options - Exercise of
---------------------------------------------
Options - to delete the present language in its entirety and to substitute in
- -------
lieu thereof the following:
(3) If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver stock pursuant
to such exercise until the Company is satisfied as to the authority of the
person or persons exercising the option.
The Company may, either in the instrument evidencing the option or in
a written instrument delivered at any time subsequent to the granting of the
option provide for an optionee a special exercise period which will apply if an
Eligible Director's services as a director terminate due to retirement at age 70
or such other age as the Board of Directors may determine from time to time, or
he or she ceases to perform services as a director earlier with the consent of
the Company ("Special Exercise Period"). The Special Exercise Period will begin
on his or her termination and will end on the earlier of up to the fifth
anniversary of his or her termination or the earlier expiration date of the
option. During such period the option will be exercisable to the extent it
would have been exercisable had the Eligible Director continued to perform
services as a director.
<PAGE>
With respect to stock options granted on or after December 1, 1997,
each optionee shall be provided the Special Exercise Period without further
consent of the Company if an optionee's services as a director terminate due to
retirement at age 70 or such other age as the Board of Directors may determine
from time to time.
If an Eligible Director dies while performing services for the Company
or during a Special Exercise Period provided under this section, his or her
option may be exercised in accordance with Section 6(g) below.
Notwithstanding the provisions of the preceding paragraph the Company
shall have the right, but shall not be required to repurchase from any Eligible
Director who ceases to render services as a director without the consent and
approval of the Company, within six (6) months of the exercise of any options,
the shares of the Company's Common Stock so purchased by such Eligible Director
at their original purchase (or exercise) price.
<PAGE>
EXHIBIT 10.16
COMMERCIAL LEASE AGREEMENT BETWEEN EBP 3, LTD.
AND MILLIPORE CORPORATION WITH RESPECT TO PREMISES
LOCATED IN ALLEN, TEXAS
<PAGE>
LEASE AGREEMENT
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This Lease Agreement (this "LEASE") is entered into by EBP 3, LTD., a Texas
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limited partnership ("LANDLORD"), and MILLIPORE CORPORATION, a Massachusetts
corporation ("TENANT").
1. PREMISES, TERM, AND BUILDING SHELL.
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(a) Landlord leases to Tenant, and Tenant leases from Landlord, the
real property described on Exhibit A-1 (the "LAND"), which includes the
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approximately 178,013 square foot building depicted on Exhibit A-2 (the
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"BUILDING") being constructed on the Land, subject to the terms and conditions
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in this Lease. The term "PREMISES" means the Land, Building, and related
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improvements.
(b) The Lease term shall be 120 months (the "TERM", which defined
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term shall include all renewals and extensions of the Term), beginning on the
earlier of (1) the date Tenant begins conducting business in the Premises and
(2) June 1, 1998 (the "COMMENCEMENT DATE"); however, if Tenant is delayed in
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substantially completing the interior improvements in the Building because the
shell of the Building (the "BUILDING SHELL") was not in a dried-in condition
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sufficient to allow Tenant to begin its interior tenant improvement work on
February 1, 1998, then the Commencement Date will be delayed until the earlier
of: (A) June 1, 1998, plus the number of days obtained by performing the
following calculation:
X - Y; where,
X = the number of days after February 1, 1998, that the Building Shell was
not in such a dried-in condition; and
Y = the number of days of delay in achieving such a dried-in condition
caused by a Tenant Party;
or (B) the date Tenant begins conducting business in the Premises. If the
Commencement Date is not the first day of a calendar month, then the Term shall
end on the last day of the 120-month period that begins on the first day of the
first full calendar month of the Term. Within ten days after either party's
requests therefor, Landlord and Tenant will execute an agreement setting forth
the Commencement Date.
(c) Landlord shall construct the Building Shell in accordance with
Exhibit B. By occupying the Premises, Tenant shall have accepted the Premises
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in their condition, subject to completion of any unperformed items necessary to
complete the Building Shell as provided in Exhibit B. Notwithstanding anything
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in this Lease to the contrary, if the Building Shell is not substantially
completed by May 1, 1998, plus the number of days of delay in achieving
substantial completion caused by force majeure
<PAGE>
events described in Section 23.(c) and the number of days of delay in achieving
substantial completion of the Building Shell caused by a Tenant Party (the
"TERMINATION ELECTION DATE"), then Tenant may terminate this Lease by,
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delivering written notice thereof to Landlord before the earlier of the date the
Building Shell is substantially completed or ten days after the Termination
Election Date.
2. BASE RENT, SECURITY DEPOSIT AND ADDITIONAL RENT,
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(a) Tenant shall pay to Landlord "BASE RENT", in advance, without
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demand, deduction or set off (except as herein provided), equal to the following
amounts for the following periods of time:
Time Period Monthly Base Rent
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1 through 60 $67,793.29
61 through end of initial Term $78,029.03
The first monthly installment of Base Rent shall be due on the date hereof;
thereafter, monthly installments of Base Rent shall be due on the first day of
each calendar month following the Commencement Date. If the Term begins on a day
other than the first day of a month or ends on a day other than the last day of
a month, the Base Rent and additional rent under Section 2.(c) for such partial
month shall be prorated.
(b) Tenant shall deposit with Landlord on the date hereof $67,793.28
(the "SECURITY DEPOSIT"), which shall be held by Landlord to secure Tenant's
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obligations under this Lease; however, the Security Deposit is not an advance
rental deposit or a measure of Landlord's damages for an Event of Default
(defined below). Landlord may use any portion of the Security Deposit to
satisfy Tenant's unperformed obligations hereunder, without prejudice to any of
Landlord's other remedies. If so used, Tenant shall pay Landlord an amount that
will restore the Security Deposit to its original amount upon request. In
connection with any waiver of a Tenant default or modification of this Lease,
Landlord may require that Tenant provide Landlord with an additional amount to
be held as part of the Security Deposit. The unused portion of the Security
Deposit plus 5% per annum thereon (compounded annually) will be returned to
Tenant within a reasonable time after the end of the Term (not to exceed 30
days), provided that Tenant has fully and timely performed its obligations
hereunder throughout the Term.
(c) Tenant shall pay, as additional rent, all costs incurred in
operating, managing, and maintaining the Premises (collectively, "OPERATING
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EXPENSES" including the following items: (1) Taxes (defined below); (2) the cost
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of insurance; (3) the cost of repairs and replacement of the items described in
Section 4.(b), management fees (which shall not exceed 3% of the gross rent) and
related out-of-pocket expenses of the manager, landscape maintenance and
replacement, security service (if provided), sewer service (if provided), and
trash service (if provided); (4) the cost of dues, assessments, and other
charges applicable to the Premises payable to any property or community owner
association under restrictive covenants or deed restrictions to which the
Premises are
<PAGE>
subject that affect all property subject thereto in a similar manner; and (5)
alterations, additions, and improvements relating to the items described in
Section 4.(b) made by Landlord to comply with Law (defined below). Additional
rent wider this Section 2.(c) shall be payable by Tenant to Landlord in monthly
installments equal to 1/12 of Landlord's good faith estimate of annual Operating
Expenses. The initial monthly payments are based upon Landlord's good faith
estimate of the Operating Expenses for the year in question, and shall be
increased or decreased annually to reflect the projected actual Operating
Expenses for that year.
Within 90 days after each calendar year or as soon thereafter as is
reasonably practicable, Landlord shall deliver to Tenant a statement setting
forth the actual Operating Expenses for such year (an "ANNUAL OPERATING EXPENSE
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STATEMENT". Each Annual Operating Expense Statement shall set forth a line item
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detail comparing the actual Operating Expenses for such calendar year to the
Operating Expenses for the preceding calendar year, the estimated payments paid
by Tenant toward Operating Expenses during the calendar year for which such
statement was prepared and an estimate of Tenant's obligation for Operating
Expenses for the next calendar year. If Tenant's total payments in respect of
Operating Expenses for any year are less than the Operating Expenses for that
year, Tenant shall pay the difference to Landlord within 30 days after
Landlord's request therefor; if such payments are more than the Operating
Expenses, Landlord shall pay to Tenant such excess within 30 days after Landlord
delivers to Tenant the applicable Annual Operating Expense Statement. Operating
Expenses shall not include the following: (A) any costs for interest,
amortization, or other payments on loans to Landlord; (B) federal income taxes
imposed on or measured by the income of Landlord from the operation of the
Premises; (C) rents under ground leases; (D) costs incurred in selling,
syndicating, financing, mortgaging, or hypothecating any of Landlord's interests
in the Premises; (E) costs incurred by Landlord to repair any damage to the
Building to the extent Landlord is reimbursed by insurance proceeds therefor;
(F) items which Landlord is obligated to perform under Section 4.(a); (G) costs
arising from latent defects in the Building Shell and other improvements
initially installed in the Premises pursuant to the Shell Plans; and (H) costs
incurred for services performed by an affiliate of either Landlord or its
building manager to the extent the cost thereof exceeds market rates for
comparable services. There shall be no duplication of costs for reimbursements
in calculating Operating Expenses. The amounts of the initial monthly Base Rent
and Operating Expenses (and the part thereof attributable to Taxes) are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Base Rent (Section 2.(a)).......................................$67,793.28
Operating Expenses, excluding Taxes (Section 2.(c)).............$ 5,192.05
Taxes (Sections 2.(c) and 3.(a))............................... $10,384.09
Total initial monthly payment.................................. $83,369.42
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</TABLE>
The first monthly installment of additional rent under this Section 2.(c) shall
be due on the date hereof, thereafter, monthly installments of such additional
rent shall be due on the first day of each calendar month following the
Commencement Date.
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(d) If any payment required of Tenant under this Lease for Base Rent
and Operating Expenses is not paid by the Delinquent Payment Date (defined
below), Landlord may charge Tenant a fee equal to 5% of the delinquent payment
to reimburse Landlord for its cost and inconvenience incurred as a consequence
of Tenant's delinquency. "DELINQUENT PAYMENT DATE" means, with respect to each
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payment of Base Rent and Operating Expenses due from Tenant under this Lease,
the fifth day after Landlord delivers to Tenant written notice that the payment
in question has not been paid when due; however, if Landlord has previously
notified Tenant that Tenant has failed to pay rent when due twice during the 12-
month period preceding the delinquent payment in question, then the Delinquent
Payment Date for that payment shall mean the day after that payment was due.
(e) All payments and reimbursements required to be made by Tenant
under this Lease shall constitute "RENT" (herein so called) and shall be payable
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without demand, deduction or set off (except as expressly set forth herein).
(f) INSPECTION RIGHT. After giving Landlord 30-days' prior written
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notice thereof, Tenant may inspect or audit Landlord's records relating to
Operating Expenses for any periods of time within two years before the audit or
inspection; however, no audit or inspection shall extend to periods of time
before the Commencement Date. Tenant's audit or inspection shall be conducted
only during business hours reasonably designated by Landlord. Tenant shall pay
the cost of such audit or inspection, including a reasonable amount to reimburse
Landlord for its out-of-pocket costs allocable to the inspection or audit,
unless the total Operating Expenses charged to Tenant for the time period in
question is determined to be in error, and, as a result thereof, Tenant paid to
Landlord $3,000 more than the actual Operating Expenses due for such time
period, in which case Landlord shall pay the audit cost. Tenant may not conduct
an inspection or have an audit performed more than once during any calendar
year. If such inspection or audit reveals that an error was made in the
Operating Expenses previously charged to Tenant, then Landlord shall refund to
Tenant any overpayment of any such costs, or Tenant shall pay to Landlord any
underpayment of any such costs, as the case may be, within 30 days after
notification thereof. Tenant shall maintain the results of each such audit or
inspection confidential and shall not be permitted to use any third party to
perform such audit or inspection, other than an independent firm of certified
public accountants reasonably acceptable to Landlord which agrees with Landlord
in writing to maintain the results of such audit or inspection confidential.
(g) When calculating Operating Expenses, Landlord shall take into
account all abatements (including, without limitation, tax abatements),
exemptions, and discounts, such that Tenant shall only be obligated to pay the
actual Operating Expenses. Landlord shall cooperate with Tenant in obtaining tax
abatements, discounts, and exemptions, provided that Tenant reimburses Landlord
for all out-of-pocket costs incurred by Landlord in connection therewith.
<PAGE>
3. TAXES.
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(a) Landlord shall pay all taxes, assessments and governmental
charges whether federal, state, county, or municipal and whether they are
imposed by taxing or management districts or authorities presently existing or
hereafter created (collectively, "TAXES") that accrue against the Premises. If,
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during the Term, there is levied, assessed or imposed on Landlord a capital levy
or other tax directly on the rent or a franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon rent, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based, shall
be included within the term "Taxes".
(b) Tenant shall (1) before delinquency pay all taxes levied or
assessed against any personal property, fixtures or alterations placed in the
Premises and (2) upon the request of Landlord, deliver to Landlord receipts from
the applicable taxing authority or other evidence acceptable to Landlord to
verify that such taxes have been paid. If any such taxes are levied or assessed
against Landlord or Landlord's property and (A) Landlord pays them or (B) the
assessed value of Landlord's property is increased thereby and Landlord pays the
increased taxes, then Tenant shall pay to Landlord such taxes within ten days
after Landlord's request therefor.
4. LANDLORD'S MAINTENANCE,
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(a) This Lease is intended to be a net lease. Accordingly, Landlord's
maintenance obligations are limited to maintenance of the Building's roof,
foundation piers, structural slab, and structural members of the exterior walls
(collectively, "BUILDING'S STRUCTURE"); painting of exterior walls; and caulking
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of tilt panels and windows; however, Landlord shall not be responsible (1) for
any such work until Tenant delivers to Landlord written notice of the need
therefor or (2) for alterations to the Building's Structure required by Law
because of Tenant's specific use of or particular activity (e.g., a specific
type of research and development) conducted in the Premises (which alterations
shall be performed by Tenant) as opposed to alterations required by Law in
general for office, warehouse, manufacturing and research and development use.
Landlord shall promptly make all such repairs after it has received notice of
the need therefor. The Building's Structure does not include windows (other
than caulking thereof) or components thereof (including flashing, etc.), glass
or plate glass, doors, special store fronts or office entries, all of which
shall be maintained by Tenant. Landlord's liability for any defects, repairs,
replacement or maintenance for which Landlord is responsible hereunder shall be
limited to the cost of performing such work.
(b) Additionally, Landlord shall maintain the parking areas,
driveways, alleys and grounds surrounding the Premises in a clean and sanitary
condition, consistent with the operation of a first-class
office/warehouse/research/manufacturing building, including prompt maintenance,
repairs and replacements of (1) any drill or spur track servicing the Premises,
(2) the exterior portions of the Premises, (3) sprinkler systems and sewage
lines, and (4) any other items normally associated with the foregoing. All
costs
<PAGE>
incurred by Landlord in connection therewith (other than the painting of
exterior walls and caulking of tilt walls) shall be Operating Expenses.
Notwithstanding the foregoing, Landlord shall have no responsibility for
maintaining any portion of Tenant's Operational Areas (defined below), such
areas shall be under the sole dominion and control of Tenant.
5. TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS.
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(a) Tenant shall maintain all parts of the Premises (except for
maintenance work which Landlord is expressly responsible for under Section
4.(a)) in good condition and promptly make all necessary repairs and
replacements to the Premises. Tenant shall repair and pay for any damage caused
by a Tenant Party (defined below), to the extent Landlord is not reimbursed
therefor by insurance proceeds.
(b) Tenant shall maintain the hot water equipment and the heating,
air condition, and ventilation equipment and system (the "HVAC SYSTEM") in good
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repair and condition and in accordance with Law and with such equipment
manufacturers' suggested operation/maintenance service program; such obligation
shall include replacement of all equipment necessary to maintain such equipment
and system in good working order. At least 14 days before the end of the Term,
Tenant shall deliver to Landlord a certificate from an engineer reasonably
acceptable to Landlord certifying that the hot water equipment and the HVAC
System are then in good repair and working order.
(c) Tenant shall be responsible for all pest control in the Premises.
6. ALTERATIONS. Except as provided below, Tenant shall not make any
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alterations, additions or improvements to the Premises without the prior written
consent of Landlord which shall not be unreasonably withheld. Landlord may not
withhold its consent to any alteration, addition or improvement unless, in
Landlord's reasonable determination, the installation or use of such item would
violate Law, would cause the Premises or the use thereof to be in violation of
Law, would alter or adversely affect the Building's Structure, or would increase
Landlord's obligations under Section 4.(a) (unless Tenant agrees to pay all
additional costs incurred in connection therewith or as a result thereof).
Landlord shall not be required to notify Tenant of whether it consents to any
alteration, addition or improvements until it (a) has received plans and
specifications therefor which are sufficiently detailed to allow construction of
the work depicted thereon to be performed in a good and workmanlike manner, and
(b) has had a reasonable opportunity to review them (not to exceed ten business
days). If the alteration, addition or improvement will affect the Building's
Structure, HVAC System, life-safety, or mechanical, electrical, or plumbing
systems, then the plans and specifications therefor must be prepared by a
licensed engineer reasonably acceptable to Landlord. Landlord's approval of any
plans and specifications shall not be a representation that the plans or the
work depicted thereon will comply with Law or be adequate for any purpose, belt
shall merely be Landlord's consent to performance of the work. Upon completion
of any alteration, addition, or improvement, Tenant shall deliver to Landlord
accurate, reproducible as built plans therefor. Unless Landlord specifies in
writing otherwise and
<PAGE>
except as provided in Section 16, all alterations, additions, and improvements
shall be Landlord's property when installed in the Premises. All work performed
by a Tenant Party in the Premises (including that relating to the installations,
repair, replacement, or removal of any item) shall be performed in accordance
with Law, in a good and workmanlike manner, and so as not to damage the
Building's Structure.
Notwithstanding the foregoing, after the initial tenant improvements
have been installed by Tenant in the Premises and a certificate of occupancy has
been issued therefor, Tenant shall not be required to obtain Landlord's consent
for repainting, recarpeting, or other alterations totalling less than $50,000 in
any single instance or series of related alterations performed within a six-
month period, provided that such alterations do not alter or adversely affect
the Building's Structure. Tenant shall pay to Landlord or its designated agent
a construction management fee in connection with the design and installation of
the initial tenant improvements installed in the Premises by Tenant equal to
$25,000; such payment shall be made on or before the Commencement Date. Tenant
shall not be entitled to occupy the Premises unless Tenant has obtained and
delivered to Landlord a copy of the certificate of occupancy therefor.
7. SIGNS. Provided that the maintenance thereof complies with all
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Laws, and Tenant has received all approvals, consents, and permits required by
Law therefor, Tenant may install and maintain one monument sign on the Premises
and one sign on each of the two exterior facade panels placed on the Building by
Landlord. Landlord shall pay for the cost of placing the exterior facade panels
on the Building, and Tenant shall bear all other costs in connection with all
signs maintained at the Premises (including the cost of the signage to be placed
on the Building's sign panel). Each sign's design, color scheme, location,
material composition, and method of installation must be approved by Landlord.
Tenant shall maintain such signs in a good, clean, and safe condition in
accordance with all Laws. Tenant shall repair all damage caused by the
installation, use, maintenance, and removal of the signs and, upon their
removal, restore the Premises where such signs were located to their condition
immediately before the installation thereof (ordinary wear and tear excepted,
other than any discoloration caused thereby). Within ten days after the earlier
of (A) termination of Tenant's right to possess the Premises or (B) the end of
the Term, Tenant shall remove the signs and perform all restoration work as
provided above. If Tenant fails to do so within such ten-day period, Landlord
may, without compensation to Tenant, perform such work and dispose of the signs
in any manner it deems appropriate or deem such signs abandoned and, after
removing Tenant's logo therefrom, use such signs; Tenant shall pay to Landlord
all reasonable costs incurred in connection therewith within 30 days after
Landlord's request therefor.
8. UTILITIES. Tenant shall obtain and pay for all water, gas,
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electricity, heat, telephone, sewer, sprinkler charges and other utilities and
services used at the Premises, together with any taxes, penalties, surcharges,
maintenance charges, and the like pertaining to the Tenant's use of the
Premises. If Tenant fails to pay for such amounts, Landlord may do so, in which
case, Tenant shall reimburse Landlord therefor within ten
<PAGE>
days after Landlord's request. Landlord shall not be liable for any interruption
or failure of utility service to the Premises.
Notwithstanding the foregoing, if Tenant is prevented from making
reasonable use of the Premises for more than three consecutive days because of
the unavailability of any such service and such unavailability was primarily
caused by Landlord's negligence or willful misconduct, then Tenant shall be
entitled to a reasonable abatement of rent for each consecutive day after the
expiration of such three-day period that Tenant is so prevented from making
reasonable use of the Premises.
9. INSURANCE; SELF-INSURANCE.
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(a) Tenant shall maintain (1) workers' compensation insurance (with a
mutual waiver of subrogation endorsement reasonably acceptable to Landlord) and
commercial general liability insurance (with contractual liability endorsement),
including personal injury and property damage in the amount of $5,000,000 per
occurrence and (2) fire and extended coverage insurance covering (A) the
replacement cost of all alterations, additions, partitions and improvements
installed in the Premises, (B) the replacement cost of all of Tenant's personal
property in the Premises, and (C) loss of profits in the event of an insured
peril damaging the Premises. Such policies shall (i) name Landlord, Landlord's
agents, and their respective affiliates (defined below), as additional insureds
(and as loss payees on the fire and extended coverage insurance), (ii) be issued
by an insurance company acceptable to Landlord with a minimum AM Best rating of
A:X or better and licensed to do business in Texas, (iii) provide that such
insurance may not be cancelled unless 30 days' prior written notice is first
given to Landlord, (iv) be delivered to Landlord by Tenant before the
Commencement Date and at least 30 days before each renewal thereof (or
certificates thereof or other evidence thereof reasonably acceptable to Landlord
may be delivered), and (v) provide primary coverage to Landlord when any policy
issued to Landlord is similar or duplicate in coverage, in which case Landlord's
policy shall be excess over Tenant's policies.
(b) SELF-INSURANCE. Tenant may provide self-insurance in lieu of the
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insurance required in Section 9.(a)(2), whether by the establishment of an
insurance fund or reserve to be held and applied to make good losses from
casualties, or otherwise, which conforms to the practice of large corporations
maintaining systems of self-insurance. As a condition to establishing a self-
insurance plan in lieu of the insurance provided in Section 9.(a)(2), Tenant
shall deliver to Landlord the following: (1) a certificate of an independent
actuary or other independent, qualified person reasonably acceptable to Landlord
stating that the self-insurance plan is adequate to provide the protection of
the insurance policies described in Section 9.(a)(2) and (2) a balance sheet as
of the end of the most recent quarter of the then-current fiscal year of Tenant
(or, if the first quarter in such fiscal year has not expired, the last quarter
of the previous fiscal year), prepared by a national firm of certified public
accountants (reasonably acceptable to Landlord) in accordance with generally
accepted accounting principles consistently applied ("GAAP"), accompanied by
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such accounting firm's unqualified opinion that the tangible net worth of Tenant
exceeds
<PAGE>
$100,000,000. Thereafter, Tenant shall deliver to Tenant as soon as available
(and in any event within 45 days) after the end of each fiscal year, a balance
sheet for such fiscal year, prepared by a national firm of certified public
accountants (reasonably acceptable to Landlord) in accordance with GAAP,
accompanied by such accounting firm's unqualified opinion that the tangible net
worth of Tenant exceeds $100,000,000. If any time Tenant's tangible net worth is
less than $100,000,000, Tenant shall be required to immediately obtain and
maintain the insurance provided in Section 9.(a)(2). "TANGIBLE NET WORTH" means
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the excess of total assets over total liabilities (in each case, determined in
accordance with GAAP) excluding from the determination of total assets all
assets which would be classified as intangible assets under GAAP, including
limitation, goodwill, licenses, patents, trademarks, trade names, copyrights,
and franchises.
(c) CASUALTY INSURANCE. Landlord shall maintain insurance insuring
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the Building Shell against the perils included in the Special Causes of Loss
form including, but not limited to, fire, lightning, extended coverage,
vandalism and malicious mischief in an amount not less than 80% of the
replacement cost thereof. Landlord has the option, but not the obligation, to
insure the Premises for loss caused by earthquake or flood. Such insurance shall
be for the sole benefit of Landlord and under its sole control. Landlord shall
not be obligated to insure furniture, equipment, machinery, goods or supplies of
Tenant which Tenant may keep or maintain at the Premises or any leasehold
improvements, additions or alterations in the Premises.
10. CASUALTY DAMAGE.
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(a) Tenant immediately shall give written notice to Landlord of any
damage to the Premises. Within 30 days after Landlord has notice of the damage
in question, Landlord shall deliver to Tenant its good faith estimate of the
time necessary to complete Landlord's work with respect to the damage in
question (the "DAMAGE ESTIMATE"). If the Premises are totally destroyed by an
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insured peril, or so damaged by an insured peril that, in Landlord's good faith
estimation, rebuilding or repairs cannot be substantially completed within nine
months after the date of Landlord's actual knowledge of such damage, then either
Landlord or (if a Tenant Party did not cause such damage) Tenant may terminate
this Lease by delivering to Landlord written notice thereof within 15 days after
Landlord delivers to Tenant the Damage Estimate, in which case, the rent shall
be abated during the unexpired portion of this Lease, effective upon the date
such damage occurred, and Tenant shall pay to Landlord the amount of the
deductible applicable to such damage. Time is of the essence with respect to the
delivery of such notices.
(b) Subject to Section 10.(c), if this Lease is not terminated under
Section 10.(a), then Landlord shall restore the Premises to substantially its
previous condition, except that Landlord shall not be required to rebuild,
repair or replace any part of the partitions, fixtures, additions and other
improvements or personal property required to be covered by tenant's insurance
under Section 9. If the Premises are untenantable, in whole or in part, during
the period beginning on the date such damage occurred and ending on the date of
substantial completion of Landlord's repair or restoration work plus a
<PAGE>
reasonable period of time to allow Tenant to install its fixtures and equipment
in the Premises (not to exceed 30 days) (the "REPAIR PERIOD"), then the rent for
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such period shall he reduced to such extent as may be fair and reasonable under
the circumstances (even if a Tenant Party caused such damage) and the Term shall
be extended by the number of days in the Repair Period.
(c) If the Premises are destroyed or substantially damaged by any
peril not covered by the insurance maintained by Landlord or any Landlord's
Mortgagee (defined below) requires that insurance proceeds be applied to the
indebtedness secured by its Mortgage (defined below) or to the Primary Lease
(defined below) obligations. Landlord may terminate this Lease by delivering
written notice of termination to Tenant within 30 days after such destruction or
damage or such requirement is made known by any such Landlord's Mortgagee, as
applicable, whereupon all rights and obligations hereunder shall cease and
terminate, except for any liabilities of Tenant which accrued before this Lease
is terminated.
11. LIABILITY, INDEMNIFICATION, WAIVER OF SUBROGATION AND NEGLIGENCE.
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(a) Subject to Section 11.(b), Tenant shall indemnify, defend, and
hold harmless Landlord, its successors, assigns, agents, employees, contractors,
partners, directors, officers and affiliates (collectively, the "INDEMNIFIED
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PARTIES") from and against all fines, suits, losses, costs, liabilities, claims,
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demands, actions and judgements of every kind or character (1 ) recovered from
or asserted against any of the Indemnified Parties on account of any Loss
(defined below) to the extent that any such Loss arises out of or is caused by a
Tenant Party or any other person entering upon the Premises under or with a
Tenant Party's express or implied invitation or permission, (2) arising from or
out of the occupancy or use by a Tenant Party or arising from or out of any
occurrence in the Premises, howsoever caused, or (3) suffered by, recovered from
or asserted against any of the Indemnified Parties by the employees, agents,
contractors, or invitees of a Tenant Party. However, such indemnification of the
Indemnified Parties by Tenant shall not be applicable if such loss, damage, or
injury is caused by the negligence or willful misconduct of Landlord or any of
its agents, contractors, or employees. Subject to Section 11.(b) and Section
29, Landlord shall indemnify, defend, and hold harmless Tenant, its successors,
assigns, agents, employees, contractors, partners, directors, officers, and
affiliates from and against all fines, suits, losses, costs, liabilities,
claims, demands, actions and judgements of every kind and character caused by
the negligence or willful misconduct of Landlord or any of its duly authorized
agents or employees. "LOSS" means any injury to or death of any person or
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persons or the damage to or theft, destruction, loss, or loss of use of any
property or inconvenience.
(b) Landlord and Tenant each waives any claim it might have against
the other for any damage to or theft, destruction, loss, or loss of use of any
property, to the extent the same is insured against under any insurance policy
maintained by it that covers the Premises, Landlord's or Tenant's fixtures,
personal property, leasehold improvements,
<PAGE>
or business, or is required to be insured against by the waiving party under the
terms hereof, REGARDLESS OF WHETHER THE NEGLIGENCE OR FAULT OF THE OTHER PARTY
CAUSED SUCH LOSS; HOWEVER, LANDLORD'S WAIVER SHALL NOT APPLY TO ANY DEDUCTIBLE
AMOUNTS MAINTAINED BY LANDLORD UNDER ITS INSURANCE. Each party shall cause its
insurance carrier to endorse all applicable policies waiving the carrier's
rights of recovery under subrogation or otherwise against the other party.
12. USE.
----
(a) The Premises shall be used only for general office use
(corporate, administrative, and professional), research and development use, and
manufacturing use and for such other lawful purposes as may be incidental
thereto; however, no retail sales may be made from the Premises. Tenant shall
not use the Premises to receive, store or handle any product, material or
merchandise that is explosive or highly inflammable or hazardous, except as
permitted under Section 25. Outside storage is prohibited, except as provided in
Section 29. Subject to Section 4.(a), Tenant shall be solely responsible for
complying with all Laws applicable to the rise, occupancy, and condition of the
Premises. Tenant shall not permit any objectionable or unpleasant odors, smoke,
dust, gas, light, noise or vibrations to emanate from the Premises; nor take any
other action that would constitute a nuisance or would disturb, unreasonably
interfere with, or endanger Landlord or any other person; nor permit the
Premises to be used for any purpose or in any manner that would (1) void the
insurance thereon, (2) increase the insurance risk, or (3) cause the
disallowance of any sprinkler credits. Tenant shall pay to Landlord on demand
any increase in the cost of any insurance on the Premises incurred by Landlord,
which is caused by Tenant's use of the Premises or because Tenant vacates the
Premises.
(b) Tenant and its employees and invitees shall have the exclusive
right to use all parking areas associated with the Premises, but Landlord shall
not be responsible for enforcing Tenant's parking rights against third parties.
Landlord, however, will provide Tenant with any documents it requests which
demonstrate Tenant's exclusive right to all parking areas associated with the
Premises. Landlord shall provide a minimum of 595 parking spaces at the
Premises.
13. INSPECTION. Landlord and Landlord's agents and representatives may
-----------
enter the Premises during business hours to inspect the Premises; to make such
repairs as may be required or permitted under this Lease; to perform any
unperformed obligations of Tenant hereunder; and to show the Premises to
prospective purchasers, mortgagees, ground lessors, and (during the last 12
months of the Term) tenants. If such entrance is not in the case of an
emergency, such entrance shall be prohibited unless Tenant is provided with
reasonable notice (which may be given orally) of such entrance and such entrance
shall be done in such a way as to minimize interference with Tenant's business
to the extent reasonably practicable. During the last 12 months of the Term,
Landlord may erect a sign on the Premises indicating that the Premises are
available. Tenant shall notify Landlord in writing of its intention to vacate
the Premises at least 60 days before Tenant will vacate the Premises; such
notice shall specify the date on which Tenant intends to
<PAGE>
vacate the Premises (the "VACATION DATE"). At least 30 days before the Vacation
-------------
Date, Tenant shall arrange to meet with Landlord for a joint inspection of the
Premises. After such inspection, the parties will agree on what Tenant must
perform based on Tenant's obligations as set forth in Sections 5 and 16 of this
Lease. If tenant refuses to participate in such inspection, then Landlord may
conduct such inspection and Landlord's determination of the work Tenant is
required to perform before the Vacation Date shall be conclusive. If Tenant
fails to perform such work before the Vacation Date, then Landlord may perform
such work at Tenant's cost. Tenant shall pay all costs incurred by Landlord in
performing such work within ten days after Landlord's request therefor.
14. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) Tenant shall not, without the prior written consent of Landlord
(which shall not be unreasonably withheld as provided in Section 31), (1)
assign, transfer, or encumber this Lease or any estate or interest herein,
whether directly or by operation of law, (2) permit any other entity to become
Tenant hereunder by merger, consolidation, or other reorganization (except as
provided below), (3) if Tenant is an entity other than a corporation whose stock
is publicly traded, permit the transfer of an ownership interest in Tenant so as
to result in a change in the current control of Tenant, (4) sublet any portion
of the Premises, (5) grant any license, concession, or other right of occupancy
of any portion of the Premises, or (6) permit the use of the Premises by any
parties other than Tenant (any of the events listed in Sections 14.(a)(1)
through 14.(a)(6) being a "TRANSFER"). It shall not be unreasonable for
--------
Landlord to withhold its consent to any transferee which intends to use
Hazardous Substances at the Premises. If Tenant requests Landlord's consent to
a Transfer, then Tenant shall provide Landlord with a written description of all
terms and conditions of the proposed Transfer, copies of the proposed
documentation, and the following information about the proposed transferee: name
and address; reasonably satisfactory information about its business and business
history; its proposed use of the Premises; banking, financial, and other credit
information; and general references sufficient to enable Landlord to determine
the proposed transferee's creditworthiness and character. Tenant shall
reimburse Landlord for its reasonable attorneys' fees and other expenses
incurred in connection with considering any request for its consent to a
Transfer. If Landlord consents to a proposed Transfer, then the proposed
transferee shall deliver to Landlord a written agreement whereby it expressly
assumes the Tenant's obligations hereunder (however, any transferee of less than
all of the space in the Premises shall be liable only for obligations under this
Lease that are properly allocable to the space subject to the Transfer, and only
to the extent of the rent it has agreed to pay Tenant therefor). Landlord's
consent to a Transfer shall not release Tenant from performing its obligations
under this Lease, but rather Tenant and its transferee shall be jointly and
severally liable therefor. Landlord's consent to any Transfer shall not waive
Landlord's rights as to any subsequent Transfers. If an Event of Default occurs
while the Premises or any part thereof are subject to a Transfer, then Landlord,
in addition to its other remedies, may collect directly from such transferee all
rents becoming due to Tenant and apply such rents against Tenant's rent
obligations. Tenant authorizes its transferees to make payments of rent
directly to Landlord upon receipt of notice from Landlord to do so.
<PAGE>
(b) If no Event of Default exists, all compensation received by
Tenant for or in connection with a Transfer in respect of the interval in
question that exceeds the Base Rent and Operating Expenses allocable to the
portion of the Premises covered thereby for the same interval shall be payable
as follows:
(1) first, to Tenant until Tenant has received an amount equal
to all actual, third-party, out-of-pocket costs incurred by Tenant in
connection with such Transfer (including brokerage commissions, attorneys'
fees and expenses, tenant-finish-work, other tenant inducements, and
advertisement costs); and
(2) thereafter, 50% to Landlord and 50% to Tenant.
If an Event of Default exists, all such excess compensation shall be payable to
Landlord. Tenant shall hold all amounts it receives which are payable to
Landlord in trust and shall deliver all such amounts to Landlord within five
days after Tenant's receipt thereof.
(c) Notwithstanding the foregoing, Tenant may Transfer all or part of
its interest in this Lease or all or part of the Premises (a "PERMITTED
---------
TRANSFER") to the following types of entities (a "PERMITTED TRANSFEREE") without
--------------------
the written consent of Landlord:
(1) an affiliate of Tenant;
(2) any corporation in which or with which Tenant, or its
corporate successors or assigns, is merged or consolidated, in accordance
with applicable statutory provisions governing merger and consolidation of
corporations, so long as (A) Tenant's obligations hereunder are assumed by
the corporation surviving such merger or created by such consolidation; and
(B) the tangible net worth of the surviving or created corporation is not
less than $100,000,000; or
(3) any corporation acquiring all or substantially all of
Tenant's assets if such corporation's tangible net worth after such
acquisition is not less than $100,000,000.
Tenant shall promptly notify Landlord of any such Permitted Transfer.
15. CONDEMNATION. If a material portion of the Premises is permanently
-------------
taken for any public or quasi-public use by right of eminent domain or private
purchase in lieu thereof (a "TAKING"), such that Tenant is unable to use the
------
Premises for the purpose for which they were leased to Tenant, either party may
terminate this Lease by delivering to the other written notice thereof within 30
days after the Taking, in which case rent shall be abated during the unexpired
portion of the Term, effective on the date of such Taking. If (a) less than a
material portion of the Premises are subject to a Taking or (b) a material
portion of the Premises are subject to a Taking, but the Taking does not prevent
or
<PAGE>
materially interfere with Tenant's use of the Premises for the purpose for which
they were leased to Tenant, then neither party may terminate this Lease, but the
rent payable during the unexpired portion of the Term shall be reduced to such
extent as may be fair and reasonable under the circumstances. All compensation
awarded for any Taking shall be the property of Landlord and Tenant assigns any
interest it may have in any such award to Landlord; however, Landlord shall have
no interest in any award made to Tenant for loss of business or goodwill, for
the taking of Tenant's trade fixtures, or for relocation expenses, if a separate
award for such items is made to Tenant.
16. SURRENDER OF PREMISES, HOLDING OVER.
------------------------------------
(a) No act by Landlord shall be an acceptance of a surrender of the
Premises, and no agreement to accept a surrender of the Premises shall be valid
unless it is in writing and signed by Landlord. At the end of the Term or the
termination of Tenant's right to possess the Premises, Tenant shall (1) deliver
to Landlord the Premises with all improvements located thereon in good repair
and condition, reasonable wear and tear (subject however to Tenant's maintenance
obligations) excepted, and with the HVAC System and hot water equipment, light
and light fixtures (including ballasts), and overhead doors and related
equipment in good working order, (2) deliver to Landlord all keys to the
Premises, and (3) remove all signage placed on the Premises by or at Tenant's
request. All fixtures, alterations, additions, and improvements (whether
temporary or permanent) shall be Landlord's property and shall remain on the
Premises except as provided below. Tenant may remove all trade fixtures
(including the clean room, ultra-pure gas farm area, and ultrapure water farm
area), furniture, and personal property placed in the Premises by Tenant (but
Tenant shall not remove any such item which was paid for, in whole or in part,
by Landlord). Additionally, if the Term has not been cancelled in accordance
with Section 27 hereof, Tenant shall remove such alterations, additions,
improvements, fixtures, equipment, wiring, cabling, furniture, and other
property as Landlord may request, provided such request is made within two
months after the end of the Term. All items not so removed shall, at the option
of Landlord, be deemed abandoned by Tenant and may be appropriated, sold,
stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant
and without any obligation to account for such items and Tenant shall pay for
the costs incurred by Landlord in connection therewith. All work required of
Tenant under this Section 16.(a) shall be coordinated with Landlord and be done
in a good and workmanlike manner, in accordance with all Laws, and so as not to
damage the Premises. Tenant shall, at its expense, repair all damage caused by
any work performed by Tenant under this Section 16.(a).
(b) If Tenant falls to vacate the Premises at the end of the Term,
then Tenant shall be a Tenant at will and Tenant shall pay, in addition to the
other rent due hereunder, a daily base rental equal to 150% of the daily Base
Rent payable during the last month of the Term, even if Landlord consents to
such holdover, unless Landlord agrees otherwise in writing. Additionally Tenant
shall defend, indemnify, and hold harmless Landlord from any damage, liability
and expense (including attorneys' fees and expenses) incurred because of such
holding over. No payments of money by Tenant to Landlord
<PAGE>
after the Term shall reinstate, continue or extend the Term, and no extension of
the Term shall be valid unless it is in writing and signed by Landlord and
Tenant.
17. QUIET ENJOYMENT. Provided Tenant has fully performed its obligations
---------------
under this Lease, Tenant shall peaceably and quietly hold and enjoy the Premises
for the Term, without hindrance from Landlord or any party claiming by, through,
or under Landlord, but not otherwise.
18. EVENTS OF DEFAULT. Each of the following events shall constitute an
-----------------
"EVENTS OF DEFAULT" under this Lease:
-----------------
(a) Tenant's failure to pay rent when due and the continuance of such
failure for a period of ten days after Landlord has delivered to Tenant written
notice thereof.
(b) The filing of a petition by or against Tenant or any guarantor of
Tenant's obligations hereunder (1) in any bankruptcy or other insolvency
proceeding; (2) seeking any relief under any debtor relief Law; (3) for the
appointment of a liquidator, receiver, trustee, custodian, or similar official
for all or substantially all of Tenant's property or for Tenant's interest in
this Lease; or (4) for reorganization or modification of Tenant's capital
structure (however, if any such petition is filed against Tenant, then the
filing of such petition shall not constitute an Event of Default, unless it is
not dismissed within 120 days after the filing thereof).
(c) Tenant fails to discharge any lien placed upon the Premises in
violation of Section 22 within 20 days after Tenant has received written notice
of any such lien or encumbrance is filed against the Premises.
(d) Tenant fails to comply with any term, provision, or covenant of
this Lease (other than those listed in this Section 18) and such failure
continues for 30 days after written notice thereof to Tenant; however, if such
failure cannot be cured within such 30-day period and Tenant begins to cure such
failure within such 30-day period and thereafter diligently pursues such cure to
completion, such failure shall not be an Event of Default unless it is not cured
within 180 day after Landlord initially delivered to Tenant written notice of
the failure in question. Landlord may not terminate this Lease or terminate
Tenant's right to possess the Premises because of a default under this Section
18.(d) unless such default is material.
19. REMEDIES.
--------
(a) Upon any Event of Default, Landlord may, in addition to all other
rights and remedies afforded Landlord hereunder or by Law, take any of the
following actions:
<PAGE>
(1) Terminate this Lease by giving Tenant written notice
thereof, in which event, Tenant shall pay to Landlord the sum of (A) all
rent accrued hereunder through the date of termination, (B) all amounts due
under Section 19.(b), and (C) an amount equal to (i) the total rent that
Tenant would have been required to pay for the remainder of the Term
discounted to present value at a per annum rate equal to the rate of
interest set forth for 26-week U.S. governmental bills sold at a discount
from face value in units of $10,000 to $1,000,000 as published on the date
this Lease is terminated by The Wall Street Journal, Southwest Edition, in
its listing of "Money Rates" under the heading "Treasury Bills" (or, if no
such rate is published, the "Discount Rate" as published on such date under
the by "Money Rates"" listing), minus (ii) the then present fair rental
value of the Premises for such period, similarly discounted; or
(2) Terminate Tenant's right to possess the Premises without
terminating this Lease by giving written notice thereof to Tenant, in which
event Tenant shall pay to Landlord (A) all rent and other amounts accrued
hereunder to the date of termination of possession, (B) all amounts due
from time to time under Section 19.(b), and (C) all rent and other sums
required hereunder to be paid by Tenant during the remainder of the Term,
diminished by any net sums thereafter received by Landlord through
reletting the Premises during such period. Landlord shall use reasonable
efforts to relet the Premises on such terms and conditions as Landlord may
determine (including a term different than the Term concessions, and
alterations to, and improvement of, the Premises); however, Landlord shall
not be obligated to relet the Premises before leasing other portions of the
business park of which the Building is a part. Landlord shall not be
liable for, nor shall Tenant's obligations hereunder be diminished because
of, Landlord's failure to relet the Premises or to collect rent due for
such reletting. Tenant shall not be entitled to the excess of any
consideration obtained by reletting over the rent due hereunder. Reentry
by Landlord in the Premises shall not affect Tenant's obligations hereunder
for the unexpired Term; rather, Landlord may, from time to time, bring
action against Tenant to collect amounts due by Tenant, without the
necessity of Landlord's waiting until the expiration of the Term. Unless
Landlord delivers written notice to Tenant expressly stating that it has
elected to terminate this Lease, all actions taken by Landlord to exclude
or dispossess Tenant of the Premises shall be deemed to be taken under this
Section 19.(a)(2). If Landlord elects to proceed under this Section
19.(a)(2), it may at any time elect to terminate this Lease under Section
19.(a)(1).
Additionally Landlord may perform Tenant's unperformed obligations hereunder
and, without notice, Landlord may alter locks or other security devices at the
Premises to deprive Tenant of access thereto, and Landlord shall not be required
to provide a new key or right of access to Tenant.
(b) Tenant shall pay to Landlord all costs incurred by Landlord
(including court costs and reasonable attorneys' fees and expenses) in (1)
obtaining possession of the Premises, (2) removing and storing Tenant's or any
other occupant's
<PAGE>
property, (3) repairing, restoring, altering, remodelling, or otherwise putting
the Premises into condition acceptable to a new tenant, (4) if Tenant is
dispossessed of the Premises and this Lease is not terminated, reletting all or
any part of the Premises (including brokerage commissions, cost of tenant finish
work, and other costs incidental to such reletting), (5) performing Tenant's
obligations which Tenant failed to perform, and (6) enforcing, or advising
Landlord of, its rights, remedies, and recourses. Landlord's acceptance of rent
following an Event of Default shall not waive Landlord's rights regarding such
Event of Default. Landlord's receipt of rent with knowledge of any default by
Tenant hereunder shall not be a waiver of such default, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made unless
set forth in writing and signed by Landlord. No waiver by Landlord of any
violation or breach of any of the terms contained herein shall waive Landlord's
rights regarding any future violation of such term or violation of any other
term. If Landlord repossesses the Premises pursuant to the authority herein
granted, then Landlord shall have the right to (A) keep in place and use or (B)
remove and store, at Tenant's expense, all of the furniture, fixtures, equipment
and other property in the Premises, including that which is owned by or leased
to Tenant at all times before any foreclosure thereon by Landlord or
repossession thereof by any lessor thereof or third party having a lien thereon.
Landlord may relinquish possession of all or any portion of such furniture,
fixtures, equipment and other property to any person (a "CLAIMANT") who presents
--------
to Landlord a copy of any instrument represented by Claimant to have been
executed by Tenant (or any predecessor of Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity or legality of the instrument. Landlord may, at
its option and without prejudice to or waiver of any rights it may have, (i)
escort Tenant to the Premises to retrieve any personal belongings of Tenant
and/or its employees or (ii) obtain a list from Tenant of the personal property
of Tenant and/or its employees, and make such property available to Tenant
and/or Tenant's employees; however, Tenant first shall pay in cash all costs and
estimated expenses to be incurred in connection with the removal of such
property and making it available. The rights of Landlord herein stated are in
addition to any and all other rights that Landlord has or may hereafter have at
Law or in equity, and Tenant agrees that the rights herein granted Landlord are
commercially reasonable.
20. LANDLORD'S DEFAULT. Except as provided below in this Section 20,
------------------
Tenant's exclusive remedy for Landlord's failure to perform its obligations
under this Lease shall be limited to damages, injunctive relief, or specific
performance; in each case, Landlord's liability or obligations with respect to
any such remedy shall be limited as provided in the last paragraph of this
Section 20. Landlord shall be in default under this Lease if Landlord fails to
perform any of its obligations hereunder within 30 days after written notice
from Tenant specifying such failure; however, if such failure cannot reasonably
be cured within such 30-day period, but Landlord commences to cure such failure
within such 30-day period, thereafter diligently pursues the curing thereof to
completion, and such failure is cured within 180 days after Tenant first
delivered to Landlord written notice thereof, then Landlord shall not be in
default hereunder or liable for damages therefor. Unless Landlord falls to so
cure such default after such notice,
<PAGE>
Tenant shall not have any remedy or cause of action by reason thereof. If
Landlord fails to perform its obligations within the time periods specified in
the previous sentences of this Section 20, and such failure adversely affects
Tenant's use of the Premises, then Tenant may perform such obligations and
Landlord shall reimburse Tenant all actual third-party, out-of-pocket costs
incurred by Tenant in connection with performing such obligations (other than
those which would constitute an Operating Expense had Landlord performed such
work, in which case, Landlord shall not be obligated to reimburse Tenant
therefor) within 30 days after Tenant delivers to Landlord written demand
therefor, accompanied by invoices substantiating Tenant's claim. If Landlord
fails to pay such amount within such 30-day period, Tenant may offset against
its obligation to pay Base Rent such costs, unless Landlord is in good faith
disputing such claim, in which case, Tenant may offset the amount of such claim
which is not in dispute. If Landlord is disputing Tenant's claim for any amounts
due under this Section 20, Tenant may initiate the arbitration proceedings
provided herein by delivering to Landlord written notice thereof (an
"ARBITRATION NOTICE"). If Tenant delivers an Arbitration Notice, Landlord and
------------------
Tenant shall, within five days after the delivery of such notice, jointly
appoint an arbitrator with at least five-years' real estate experience who has
not performed substantial work for either party during the previous five-year
period. If the parties cannot agree upon such arbitrator within such five-day
period, then either Landlord or Tenant may request that the Dallas office of the
American Arbitration Association (the "AAA") appoint an arbitrator meeting the
---
qualifications specified in the previous sentence. The arbitrator selected by
the AAA shall be binding on Landlord and Tenant. The arbitrator shall thereafter
resolve the dispute within 15 days after his appointment, based on evidence
submitted to him by Landlord and Tenant and such other evidence as he may
request. However, the arbitrator shall conduct such proceedings as expeditiously
and inexpensively as possible and, in connection therewith, may establish such
rules for the proceedings as he deems necessary, which will be binding on all
parties to the arbitration proceeding. Accordingly, the arbitrator may (1)
dispense with any formal rules of evidence and allow hearsay testimony so as to
limit the number of witnesses required, (2) limit the time for presentation of
any party's case as well as the amount of information or number of witnesses to
be presented in connection with any hearing, and (3) impose any other rules
which the arbitrator believes are appropriate to resolve the dispute as quickly
and inexpensively as possible. The arbitrator's decision shall be binding on the
parties. The non-prevailing party shall pay all costs of the arbitration,
including all costs incurred by the prevailing party (including attorneys' fees
and expenses).
Tenant's right to perform the work under this Section 20 is subject
to the following conditions: (A) all such work shall be performed in a good and
workmanlike manner, in accordance with Law, and in a manner so as not to affect
any existing warranties with respect to the Building's Structure; (B) all such
work shall be performed in a manner so as not to alter any portion of the
Building's Structure (except for necessary alterations required to comply with
Law), unless Landlord otherwise consents thereto (if such work would alter any
portion of the Building's Structure, all such work shall be performed in
accordance with plans and specifications approved by Landlord [which approval
shall not be unreasonably withheld], whose approval shall be deemed
<PAGE>
given if Landlord fails to disapprove any submitted plans and specifications
within ten business days after their submission to Landlord); (C) all such work
shall be performed by contractors which maintain commercial liability insurance
on an occurrence basis in an amount not less than $1,000,000 per occurrence
naming Landlord as an additional insured; and (D) Tenant delivers to Landlord
"as-built" plans of the work performed by Tenant. If Landlord defaults in its
obligations under Section 4.(b) (after the expiration of any applicable cure
periods) and Tenant performs and pays for such obligations, there shall be
excluded from the calculation of Operating Expense the management fees payable
during the period such default existed.
Any recourse against Landlord under this Lease shall be limited to
Landlord's interest in the Premises and rents derived therefrom, and neither
Landlord nor Landlord's owners shall have any personal liability therefor.
Nothing in this Lease shall preclude Tenant from seeking injunctive relief. The
obligations of Landlord under this Lease will be binding upon Landlord only for
obligations accruing during the period of its ownership of the Premises and not
thereafter.
21. MORTGAGES.
---------
(a) Subject to the last sentence of this Section 21.(a), this Lease
shall be subordinate to any deed of trust, mortgage or other security
instrument (a "MORTGAGE"), and any ground lease, master lease, or primary lease
--------
(a "PRIMARY LEASE") that now or hereafter covers any portion of the Premises
-------------
(the mortgagee under any Mortgage or the lessor under any Primary Lease is
referred to herein as "LANDLORD'S MORTGAGEE") and to increases, renewals,
--------------------
modifications, consolidations, replacements, and extensions thereof. However,
any Landlord's Mortgagee may elect to subordinate its Mortgage or Primary Lease
(as the case may be) to this Lease by delivering written notice thereof to
Tenant. Except as provided in the last sentence of this Section 21.(a), no
further instrument shall be required to effect such subordination; however,
Tenant shall from time to time within ten days after request therefor, execute
any instruments that may be required by any Landlord's Mortgagee to evidence
the subordination of this Lease to any such Mortgage or Primary Lease.
Landlord hereby represents and warrants to Tenant that the Premises is not
currently encumbered by a Mortgage or a Primary Lease. As a condition to the
subordination of this Lease to a Mortgage or a Primary Lease, the Landlord's
Mortgagee, shall execute and deliver to Tenant a commercially reasonable non-
disturbance, subordination, and attornment agreement.
(b) Tenant shall attorn to any party succeeding to Landlord's
interest in the Premises, whether by purchase, foreclosure, deed in lieu of
foreclosure, power of sale, termination of lease, or otherwise, upon such
party's request, and shall execute such agreements confirming such attornment
as such party may reasonably request. Tenant shall not seek to enforce any
remedy it may have for any default on the part of Landlord without first giving
written notice by certified mail, return receipt requested, specifying the
default in reasonable detail to any Landlord's Mortgagee whose address has been
<PAGE>
given to Tenant, and affording such Landlord's Mortgagee a reasonable
opportunity to perform Landlord's obligations hereunder.
(c) Notwithstanding any such attornment or subordination of a
Mortgage or Primary Lease to this Lease, the Landlord's Mortgagee shall not be
liable for any acts of any previous landlord (but the Landlord's Mortgagee shall
be subject to the offset rights of Tenant under Section 20) and shall not be
bound by any amendment to which it did not consent in writing nor any payment of
rent made more than one month in advance.
22. ENCUMBRANCES. Tenant has no authority, express or implied, to create
------------
or place any lien or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind Landlord's property or the interest of Landlord or Tenant in
the Premises or to charge the rent for any claim in favor of any person dealing
with Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant shall pay or cause to be paid all sums due for
any labor performed or materials furnished in connection with any work performed
on the Premises by or at the request of Tenant. Tenant shall give Landlord
immediate written notice of the placing of any lien or encumbrance against the
Premises.
23. MISCELLANEOUS.
-------------
(a) Words of any gender used in this Lease shall include any other
gender, and words in the singular shall include the plural, unless the context
otherwise requires. The captions inserted in this Lease are for convenience
only and in no way affect the interpretation of this Lease. The following terms
shall have the following meanings: "LAWS" shall mean all federal, state, and
----
local laws, rules, and regulations; all court orders, governmental directives,
and governmental orders; and all restrictive covenants affecting the Property,
and "LAW" shall mean any of the foregoing; "AFFILIATE" shall mean any person or
--- ---------
entity which, directly or indirectly, controls, is controlled by, or is under
common control with the party in question; "TENANT PARTY" shall include Tenant,
------------
any assignees claiming by, through, or under Tenant, any subtenants claiming by,
through, or under Tenant, and any of their respective agents, contractors,
employees, and invitees; and "INCLUDING" shall mean including, without
---------
limitation. The normal rule of construction that any ambiguities be resolved
against the drafting party shall not apply to the interpretation of this Lease
or any exhibits or amendments hereto.
(b) Landlord may transfer and assign, in whole or in part, its rights
and obligations in the Building and property that are the subject to this Lease,
in which case Landlord shall have no liability hereunder for any obligations
arising from and after the transfer or assignment and Tenant shall attorn to
such transferee, provided that the transferee assumes the obligations of
Landlord hereunder in writing (including the return of the Security Deposit).
Each party shall furnish to the other, promptly upon demand, a corporate
resolution, proof of due authorization by partners, or other appropriate
documentation evidencing the due authorization of such party to enter into this
Lease.
<PAGE>
(c) Except for the payment of rent and the maintenance of insurance,
whenever a period of time is herein prescribed for action to be taken by
Landlord or Tenant, such party shall not be liable or responsible for, and
there shall be excluded from the computation for any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or materials,
war, Laws or any other causes of any kind whatsoever which are beyond the
control of the party in question.
(d) Tenant shall, from time to time, within 20 days after request of
Landlord, deliver to Landlord, or Landlord's designee, a certificate of
occupancy for the Premises, financial statements for itself and any guarantor
of its obligations hereunder, evidence reasonably satisfactory to Landlord that
Tenant has performed its obligations under this Lease (including evidence of
the payment of the Security Deposit), and an estoppel certificate stating that
this Lease is in full effect, the date to which rent has been paid, the
unexpired Term and such other factual matters pertaining to this Lease as may
be reasonably requested by Landlord. Tenant's obligation to furnish the above-
described items in a timely fashion is a material inducement for Landlord's
execution of this Lease.
(e) This Lease constitutes the entire agreement of the Landlord
(including all exhibits attached hereto which are incorporated herein) and
Tenant with respect to the subject matter of this Lease, and contains all of
the covenants and agreements of Landlord and Tenant with respect thereto.
Landlord and Tenant each acknowledge that no representations, inducements,
promises or agreements, oral or written, have been made by Landlord or Tenant,
or anyone acting on behalf of Landlord or Tenant, which are not contained
herein, and any prior agreements, promises, negotiations, or representations
riot expressly set forth in this Lease are of no effect. This Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
(f) All obligations of either party hereunder not fully performed by
the end of the Term shall survive, including all payment obligations of either
party and all of Tenant's obligations concerning the condition and repair of
the Premises. After Tenant has satisfied its obligations under the Lease,
Landlord shall promptly return the Security Deposit with interest to the Tenant
as specified in Section 2.(b).
(g) If any provision of this Lease is illegal, invalid or
unenforceable, then the remainder of this Lease shall not be affected thereby,
and in lieu of each such provision, there shall be added, as a part of this
Lease, a provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
(h) All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on
which all parties hereto have executed this Lease.
(i) Landlord and Tenant each warrant to the other that it has not
dealt with any broker or agent in connection with this Lease, other than
Trammell Crow Dallas
<PAGE>
Industrial, Ltd. and CB Commercial Real Estate Group, Inc., whose commissions
shall be paid by Landlord. Tenant and Landlord shall each indemnify the other
against all costs, attorneys' fees, and other liabilities for commissions or
other compensation claimed by any other broker or agent claiming the same by,
through, or under the indemnifying party.
(j) If and when included within the term "Tenant", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying an individual at a specific address within the continental United
States for the receipt of notices and payments to Tenant. All parties included
within the terms "Landlord" and "Tenant", respectively, shall be bound by
notices given in accordance with the provisions of Section 24 to the same effect
as if each had received such notice,
(k) The terms and conditions of this Lease are confidential and
neither Landlord nor Tenant shall disclose the terms of this Lease to any third
party except as may be required by Law or to enforce its rights hereunder.
(l) Each of Landlord and Tenant shall pay interest on all past-due
amounts owing from it to the other from the date due until paid at the maximum
lawful rate. In no event, however, shall the charges permitted under this
Section 23.(1) or elsewhere in this Lease, to the extent they are considered to
he interest under applicable Law, exceed the maximum lawful rate of interest.
24. NOTICES. Each provision of this instrument or of any applicable Laws
-------
and other requirements with reference to the sending, mailing or delivering of
notice or the making of any payment hereunder shall be deemed to be complied
with when and if the following steps are taken:
(a) All rent shall be payable to Landlord at the address for Landlord
set forth below or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith. Tenant's obligation to
pay rent shall not be deemed satisfied until such rent has been actually
received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address set forth below, or at such other
address within the continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
(c) Any written notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered upon the earlier to occur of
(1) tender of delivery (in the case of a hand-delivered notice), (2) deposit in
the United States Mail, postage prepaid, Certified Mail, or (3) receipt by
facsimile transmission, in each case, addressed to the parties hereto at the
respective addresses set out below, or at such other address as they have
theretofore specified by written notice delivered in accordance
<PAGE>
herewith. If Landlord has attempted to deliver notice to Tenant at Tenant's
address reflected on Landlord's books but such notice was returned or acceptance
thereof was refused, then Landlord may post such notice in or on the Premises,
which notice shall be deemed delivered to Tenant upon the posting thereof
25. HAZARDOUS WASTE. The term "HAZARDOUS SUBSTANCES", as used in this
--------------- --------------------
Lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any
other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any "ENVIRONMENTAL LAW" which term shall
-----------------
mean any Law relating to health, pollution, or protection of the environment.
Tenant hereby agrees that (a) no activity will be conducted on the Premises that
will produce any Hazardous Substances, except for such activities that are part
of the ordinary course of Tenant's business activities (the "PERMITTED
---------
ACTIVITIES") provided such Permitted Activities are conducted in accordance with
- ----------
all Environmental Laws; (b) the Premises will not be used in any manner for the
storage of any Hazardous Substances except for storage of such materials that
are used in the ordinary course of Tenant's business (the "PERMITTED MATERIALS")
-------------------
provided such Permitted Materials are properly stored in a manner and location
satisfying all Environmental Laws; (c) no portion of the Premises will be used
as a landfill or a dump; (d) Tenant will not install any underground tanks of
any type; (e) Tenant will not allow any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time may
constitute a public or private nuisance; and (f) Tenant will not permit any
Hazardous Substances to be brought onto the Premises, except for the Permitted
Materials, and if so brought or found located thereon, the same shall be
immediately removed by Tenant, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental Laws.
If at any time during or after the Term, the Premises are found to be so
contaminated or subject to such conditions, Tenant shall defend, indemnify and
hold Landlord harmless from all claims, demands, actions, liabilities, costs,
expenses, damages and obligations of any nature arising from or as a result of
the use of the Premises by a Tenant Party. Tenant will maintain on the Premises
a list of all materials stored at the Premises for which a material safety data
sheet (an "MSDS") was issued by the producers or manufacturers thereof, together
----
with copies of the MSDS's for such materials, and shall deliver such list and
MSDS copies to Landlord upon Landlord's request therefor. Except for Landlord
Hazardous Substances (defined below), Tenant shall remove all Permitted
Materials and other Hazardous Substances from the Premises in a manner
acceptable to Landlord before the earlier of the date Tenant vacates the
Premises and the date Tenant's right to possess the Premises ends. Landlord may
enter the Premises and conduct environmental inspections and tests therein as it
may require from time to time, provided that Landlord shall use reasonable
efforts to minimize the interference with Tenant's business. Such inspections
and tests shall be conducted at Landlord's expense, unless they reveal the
presence of Hazardous Substances (other than Permitted Materials and Landlord
Hazardous Substances) or that Tenant has not complied with the requirements set
forth in this Section 25, in which case Tenant shall reimburse Landlord for the
cost thereof within ten days after Landlord's request therefor.
<PAGE>
Notwithstanding the foregoing, within 30 days after Tenant vacates the
Premises, Tenant shall, at its expense, deliver to Landlord a Phase 1
environmental report prepared by a reputable environmental engineer reasonably
acceptable to Landlord (and, if such report indicates the need for a Phase 11
report or other reports, such additional reports prepared by such an engineer)
indicating that no Hazardous Substances exist on the Property. If any such
report reveals that any hazardous Substances (other than Landlord Hazardous
Substances) exist on the Property, Tenant shall remove all such substances in a
manner acceptable to Landlord in its sole discretion.
Landlord shall be responsible for all Hazardous Substances located on
the Property on the Commencement Date which were not placed on the property by a
Tenant Party and all Hazardous Substances placed on the Premises by Landlord or
its agents, contractors or employees (collectively, "LANDLORD HAZARDOUS
------------------
SUBSTANCES"). Additionally, if Tenant is prohibited from using the Premises for
- ----------
three consecutive business days because of the presence of any Landlord
Hazardous Substances which could reasonably be expected to pose a health risk to
the occupants of the Premises and Tenant ceases using the Premises as a result
thereof, then Tenant's obligation to pay Base Rent and Operating Expenses shall
be abated until such time as Tenant may reasonably use the Premises.
26. LANDLORD'S LIEN. Landlord hereby waives its statutory landlord's lien
---------------
against Tenant's property in the Premises.
27. TENANT'S CANCELLATION RIGHT. Provided that no Event of Default exists
---------------------------
when Tenant delivers the Cancellation Notice or on the cancellation date,
Tenant may cancel this Lease effective as of the last day of any calendar month
after the 60th full calendar month of the Term by delivering to Landlord at
least nine months before the cancellation date (a) written notice thereof and
(b) the Cancellation Fee (defined below). The "CANCELLATION FEE" shall equal
----------------
the sum of $1,866,000 plus the amount that would be outstanding on a
hypothetical loan on the cancellation date assuming (1) an original principal
balance equal to the Leasing Costs (defined below), (2) an interest rate of 11
% per annum, (3) the loan is payable in equal monthly installments of principal
and interest, beginning on the first day of the first full calendar month of
the Term and ending on the first day of the last scheduled month of the Term
(assuming the Lease had not been terminated), and (4) all payments were made
before the cancellation date. The term "LEASING COSTS" shall mean all costs
-------------
incurred by Landlord in leasing the space to Tenant for leasing commissions and
attorneys' fees and expenses. As a condition to the effectiveness of Tenant's
cancellation right, Tenant shall pay to Landlord prior to the cancellation date
any past-due amounts then outstanding under the Lease. If Tenant fails timely
to deliver the Cancellation Fee or the cancellation notice or is otherwise
unable to exercise this cancellation option, then Tenant's right to cancel this
Lease under this Section 27 shall expire; time is of the essence with respect
thereto.
<PAGE>
28. SECURITY SERVICE. Landlord shall have no obligation whatsoever to
----------------
provide security services to the Premises; however, Tenant may provide such
services at its sole expense, in which case, Tenant shall defend, indemnify,
and hold harmless Landlord from any liability arising in connection with the
provision of such security service.
29. TENANT'S OPERATIONAL AREAS. In connection with its use of the
--------------------------
Premises and subject to compliance with Section 25 hereof, Tenant may install,
operate and maintain an ultrapure gas farm area, an ultra-pure water farm area,
a barrel storage/hazardous waste area, and mechanical area ("TENANT'S
--------
OPERATIONAL AREAS") on the exterior of the Premises at a location reasonably
-----------------
acceptable to Landlord, provided that the installation, maintenance, use, and
operation thereof complies with all Laws, and Tenant receives all approvals,
consents, and permits required under Law before the installation, maintenance,
use and operation thereof. Before beginning the installation of any such item,
Tenant shall deliver to Landlord final plans and specifications therefor
prepared by an engineer reasonably approved by Landlord setting forth in detail
the design, location, size and method of installation for Landlord's review and
approval (which shall not be unreasonably withheld), together with evidence
reasonably satisfactory to Landlord that all Laws have been satisfied.
Landlord's approval of any such plans and specifications shall not constitute a
representation or warranty by Landlord that such plans and specifications
comply with Law; such compliance shall be the sole responsibility of Tenant.
Upon approval of the plans and specifications therefor and the size and
location thereof, Tenant may install the Tenant Operational Areas provided that
such work is coordinated with Landlord and is performed in a good and
workmanlike manner, in accordance with Law and the plans and specifications
therefor and in a manner so as not to damage the Premises; thereafter, Tenant
shall use, maintain, and operate the Tenant Operational Areas in a good, clean,
and safe condition and in accordance with all Laws. Tenant shall repair all
damage caused by the installation, use, maintenance, operation, or removal of
the Tenant Operational Areas and, upon its removal, restore the portions of the
Premises where they were located to their condition immediately before the
installation thereof. If Tenant fails to do so within 30 days after Landlord's
request, Landlord may perform such work and Tenant shall pay to Landlord all
reasonable costs incurred in connection therewith within 30 days after
Landlord's written request therefor. Tenant shall immediately remove from the
area surrounding the Tenant Operational Areas any spills or other leaks of
fluid or Hazardous Substances. Additionally, Tenant shall ensure that the
Tenant Operational Areas are properly exhausted at all times so no odors
emanate therefrom. The Tenant Operational Areas shall be installed, used,
maintained, operated, and removed at Tenant's risk and expense and Tenant shall
maintain insurance in respect thereof reasonably satisfactory to Landlord,
listing Landlord, as an additional insured. IT IS THE INTENTION OF THE PARTIES
THAT TENANT BEAR ALL RISKS RELATING TO THE INSTALLATION, USE, MAINTENANCE,
OPERATION, AND REMOVAL OF THE TENANT OPERATIONAL AREAS; THEREFORE, TENANT SHALL
DEFEND, INDEMNIFY, AND HOLD HARMLESS LANDLORD, ITS AGENTS, AND THEIR RESPECTIVE
AFFILIATES FROM ALL LOSSES, CLAIMS, COSTS, AND LIABILITIES ARISING IN
CONNECTION WITH OR RELATING TO THE INSTALLATION, MAINTENANCE, USE, OPERATION,
AND REMOVAL OF THE TENANT OPERATIONAL
<PAGE>
AREAS, INCLUDING, WITHOUT LIMITATION, THAT ARISING FROM LANDLORD'S NEGLIGENCE
(OTHER THAN ITS SOLE OR GROSS NEGLIGENCE), SPECIFICALLY INCLUDING SITUATIONS
WHERE LANDLORD OR ITS CONTRACTORS, AGENTS, OR EMPLOYEES ARE JOINTLY,
CONCURRENTLY OR COMPARATIVELY NEGLIGENT WITH A TENANT PARTY (UNLESS THE ACTS OF
LANDLORD OR ITS AGENTS, CONTRACTORS, OR EMPLOYEES ARE FOUND TO HAVE CONTRIBUTED
TO MORE THAN 30% OF THE LIABILITY IN QUESTION).
30. LANDLORD'S BANKRUPTCY. In the event that the obligations of Landlord
---------------------
under this Lease are not performed during the pendency of a bankruptcy or
insolvency proceeding involving the Landlord as the debtor, or following the
rejection of this Lease by Landlord in accordance with Section 365 of the United
States Bankruptcy Code, then notwithstanding any provision of this Lease to the
contrary, Tenant shall have the right to set off against rents next due and
owing under this Lease (a) any and all damages caused by such non-performance of
Landlord's obligations under this Lease by Landlord, debtor-in-possession, or
the bankruptcy trustee, and (b) any and all damages caused by the non-
performance of Landlord's obligations under this Lease following any rejection
of this Lease by Landlord in accordance with Section 365 of the United States
Bankruptcy Code.
31. CONSENT. If either party's consent is required hereunder for the other
-------
party to take any action, then the party whose consent is required (the
"CONSENTING PARTY") shall not unreasonably withhold such consent, regardless of
----------------
whether the provision addressing such matter specifically states that Landlord's
consent is not to be unreasonably withheld. If the Consenting Party fails to
respond to a request for its consent or approval within ten business days after
it has received a written request therefor, together with all information
reasonably necessary for it to make an informed decision regarding the matter in
question, then such party's consent shall be deemed granted. If the Consenting
Party refuses to give its consent to the matter in question, then it shall
specify in reasonable detail the reasons therefor.
32. COUNTERPARTS; FACSIMILE SIGNATURES. Landlord and Tenant may execute
----------------------------------
this Lease in any number of counterparts with the same effect as if they had
signed the same document. Execution of this Lease may be effected by facsimile
transmission.
33. EMERGENCY REPAIRS BY TENANT. Tenant may make repairs to the
---------------------------
Building's Structure in case of an emergency to avoid imminent damage to
property or injury to persons, without Landlord's prior written consent;
however, any such work shall be limited to the extent necessary to alleviate
such imminent risk of damage and injury and is done in accordance with Law and
in a good and workmanlike manner so as not to affect any insurance coverages
applicable thereto. Before making any such repairs, Tenant shall notify
Landlord of the damage necessitating the repair in question and afford Landlord
a reasonable opportunity to perform such work (taking into account the exigency
of the situation). If Tenant makes any repairs under this Section 33 that
Landlord would otherwise have been required to pay for under Section 4.(a), then
Landlord shall reimburse
<PAGE>
to Tenant the costs of such repairs within 30 days after Tenant delivers to
Landlord written evidence substantiating all such costs.
Executed by Tenant on December 18, 1997.
TENANT: MILLIPORE CORPORATION, a Massachusetts corporation
By: /s/ J. Edward Lary
---------------------------------------------
J. Edward Lary, Vice President
Address: 80 Ashby Road
Bedford, Massachusetts 07130
Telephone: (781) 533-5516
Fax: (781) 533-3120
Executed by Landlord on December 19th, 1997.
LANDLORD: EBP 3, LTD., a Texas limited partnership
By: MIT Unsecured, Inc., a California corporation, its
general partner
By: /s/ Timothy B. Keith
---------------------------------------------
Timothy B. Keith, Vice President
Address: c/o Bob Dobbin
455 Market St #1700
San Francisco, CA 94105
Telephone: 415-228-3900
Fax: 415-284-2840
w/or copy to:
1445 Ross Avenue
49th Floor
Dallas, TX 75202
Telephone: 214-978-8512
Fax: 214-855-6792
<PAGE>
EXHIBIT A-1
[Description of the Land]
<PAGE>
EXHIBIT A-2
[Depiction of the Building]
<PAGE>
EXHIBIT B
---------
1. CONSTRUCTION OF IMPROVEMENTS. Landlord shall diligently construct the
----------------------------
Building Shell in accordance with the plans and specifications prepared by the
architect of record, Merriman & Associates, dated August 22, 1997, and last
revised November 6, 1997, and minor change orders thereto (the "SHELL PLANS"),
-----------
in a good and workmanlike manner using materials specified in the Shell Plans
and in compliance with Law (defined below). The Building Shell is referred to
as the "IMPROVEMENTS" Landlord assumes no liability for special, consequential,
------------
or incidental damages of any kind whatsoever in connection with the design or
construction of the Improvements, AND MAKES NO REPRESENTATIONS, WARRANTIES, OR
GUARANTIES REGARDING THE SAME, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
OF HABITABILITY, EXCEPT AS EXPRESSLY SET FORTH HEREIN. Landlord represents and
warrants to Tenant that upon completion of the Building Shell the exterior
portions of the Premises shall comply with Title III of the American
Disabilities Act of 1990, the Texas Elimination of Architectural Barriers Act,
and all rules and regulations and guidelines promulgated under either of such
acts, as amended from time to time (the "DISABILITIES ACTS"), shall comply with
-----------------
all other Laws, and shall not contain any asbestos-containing materials. If the
foregoing representation and warranty is incorrect, then Landlord shall pay to
Tenant all additional costs incurred by Tenant in constructing alterations,
additions and improvements which Tenant incurred because the Building Shell was
not constructed in compliance with Law or contained asbestos containing
materials.
2. SUBSTANTIAL COMPLETION. "SUBSTANTIAL COMPLETION" shall occur when the
---------------------- ----------------------
Improvements are substantially completed as certified by the architect preparing
the Shell Plans utilizing AIA document G704, Certificate of Substantial
Completion. Substantial Completion shall have occurred even though minor
details of construction, decoration, landscaping, and mechanical adjustments
remain to be completed by Landlord. When the Certificate of Substantial
Completion is issued, Landlord and the architect shall prepare a punch list of
incomplete, minor, detail items and Landlord shall rise all reasonable efforts
to complete such items within 30 days after the Certificate of Substantial
Completion is issued, except as to such items that, by their nature, will take a
longer period to complete as set forth in the punch list. The "TARGET DATE" for
-----------
Substantial Completion of the Improvements is February 1, 1998. If the actual
date of Substantial Completion is delayed beyond the Target Date because of
events beyond Landlord's reasonable control, including matters of the type
described in Section 23.(c), then Landlord shall have no liability therefor and
the date for Substantial Completion shall be extended by the period of any such
delay. If Substantial Completion is delayed because of any acts of a Tenant
Party, then the Commencement Date shall not be extended, but rather shall start
on the date on which it would have occurred but for such event. Except if
Tenant terminates this Lease under Section 1.(b), this Lease shall remain in
full effect notwithstanding any delay in Substantial Completion.
<PAGE>
3. EARLY ENTRY BY TENANT. Tenant may enter the Shell Building before
---------------------
Substantial Completion with Landlord's prior consent (which shall not be
unreasonably withheld) to perform work therein, provided that (a) Landlord is
given prior written notice of any such entry, (b) such entry shall be
coordinated with Landlord and shall not interfere with Landlord's work, (c)
Tenant shall deliver to Landlord evidence that the insurance required under
Section 9 of this Lease has been obtained, and (d) Tenant shall pay all utility
charges reasonably allocable to Tenant by Landlord in connection with such early
entry. Tenant shall conduct its activities therein so as not to interfere with
Landlord's construction activities, and shall do so at its risk and expense.
If, in Landlord's judgement, Tenant's activities therein interfere with
Landlord's construction activities, Landlord may terminate Tenant's right to
enter the Premises before Substantial Completion. After Substantial Completion,
Tenant may enter into the Premises to construct and install the initial tenant
improvements therein. Any such entry shall be on the terms of this Lease, but
no rent shall accrue in respect of Base Rent or, except as provided above with
respect to utilities, Operating Expenses during the period that Tenant so enters
the Premises before the Commencement Date.
<PAGE>
EXHIBIT C
---------
EXTENSION OPTIONS
1. OPTION. Provided no Event of Default exists when Tenant delivers such
------
notice, Tenant may renew this Lease as to all of the Premises for two additional
period of five years each on the same terms provided in this Lease (except as
set forth below). On or before the commencement date of the extended Term in
question, Landlord and Tenant shall execute an amendment to this Lease extending
the Term on the same terms provided in this Lease, except as follows:
(a) The Base Rent payable for each month during the extended Term in
question shall be the Fair Market Rental Rate determined in accordance with
paragraph 2 below;
(b) Tenant shall have no further renewal options unless expressly
granted by Landlord in writing (other than those that have not been exercised
hereunder); and
(c) Landlord shall lease to Tenant the Premises in their then-current
condition, and Landlord shall not provide to Tenant any allowances (e.g., moving
allowance, construction allowance, and the like) or other tenant inducements,
Tenant's rights under this Exhibit shall terminate if (1) this Lease
expires or is cancelled or this Lease or Tenant's right to possession of the
Premises is terminated or (2) Tenant fails timely to exercise its option under
this Exhibit, time being of the essence with respect to Tenant's exercise
thereof. Tenant's rights under this Exhibit are personal to Tenant and may only
be exercised by Tenant or a Permitted Transferee occupying the entire Premises
at the time the option provided herein is exercised.
2. EXERCISE OF OPTION. Tenant shall elect whether to extend the Term by
------------------
delivering to Landlord written notice thereof (the "ELECTION NOTICE") not sooner
---------------
than 15 nor later than 9 months before the expiration of the Term. If Tenant
fails to deliver the Election Notice at least 9 months before the end of the
Term, Tenant's rights under this Exhibit shall terminate; time being of the
essence with respect to such delivery. Within 30 days after Landlord receives
the Election Notice, Landlord shall deliver to Tenant its assessment of the Fair
Market Rental Rate ("LANDLORD'S ASSESSMENT"). If Tenant disagrees with
---------------------
Landlord's Assessment, it shall deliver to Landlord written notice thereof (an
"OBJECTION NOTICE") within 30 days after Landlord delivers to Tenant Landlord's
----------------
Assessment; otherwise, Landlord's Assessment shall be the Base Rent for the
extended Term. If Tenant timely delivers an Objection Notice, Landlord and
Tenant shall meet to attempt to determine the prevailing rental rate for the
extended Term. If Tenant and Landlord are unable to agree on such prevailing
rental rate within 15 days after Tenant delivers to Landlord the Objection
Notice, Landlord and Tenant shall jointly appoint an
<PAGE>
independent real estate appraiser with at least five-years' commercial real
estate experience in the vicinity of the Premises and submit to the appraiser
its assessment of the prevailing rental rate for the extended Term, together
with the data used to support such assessment. If Landlord and Tenant are unable
to agree on an appraiser within five days after such 15-day period, then either
party may request that the Dallas office of the American Arbitration Association
appoint such appraiser, which appointment shall be binding on Landlord and
Tenant. Within 20 days after its selection, the appraiser shall select the
assessment closest to his determination of the Fair Market Rental Rate for the
extended Term, which assessment shall be the Base Rent for the extended Term.
Landlord and Tenant shall share equally the cost of the appraiser. The term
"FAIR MARKET RENTAL RATE" shall mean the market rental rate for the time period
-----------------------
such determination is being made for space in comparable office/warehouse/
research/manufacturing buildings in the vicinity of the Building of comparable
condition for space of equivalent quality, size, utility, and location. Such
determination shall take into account all relevant factors, including length of
term, credit standing of Tenant, market concessions and other factors (but shall
not include the value of then-existing improvements that Tenant is entitled to
remove at the end of the Term).
<PAGE>
EXHIBIT A-1
Legal Description
BEING a 13.894 acre tract out of the Rufus Sewell Survey, Abstract No. 875,
Collin County, Texas; said tract being part of Lot 1, Block 1, Enterprises
Addition No. 2, an addition to the City of Allen, Texas according to the plat
recorded in Cabinet G, Page 457 of the Plat Records of Collin County, Texas;
said 13.894 acre tract being more particularly described as follows:
COMMENCING, at a 1/2-inch iron rod found at the intersection of the south
right-of-way line of Bethany Drive (a 110-foot wide right-of-way) and the east
right-of-way line of Enterprise Boulevard (a 60-foot wide right-of-way); said
point being the northwest corner of said Lot 1, Block 1;
THENCE, South 20 degrees, 33 minutes, 10 seconds East, along the said east
line of Enterprise Boulevard and the west line of said Lot 1, a distance of
153.71 feet to a 1/2-Inch iron rod found at the beginning of a curve to
the right whose center bears South 69 degrees, 26 minutes, 50 seconds West,
a distance of 180.00 feet from said point;
THENCE, in a southerly direction continuing along the said east line of
Enterprise Boulevard and said curve to the right, through a central angle
of 34 degrees, 36 minutes, 10 seconds, an arc distance of 108.71 feet to a
1/2-inch iron rod found at the end of said curve;
THENCE, South 14 degrees, 03 minutes, 00 seconds West, continuing along the
said east line of said Enterprise Boulevard, a distance of 511.09 feet to a
1/2-inch iron rod found at an angle point;
THENCE, South 11 degrees, 30 minutes, 00 seconds West, continuing along the
said east line of Enterprise Boulevard, a distance of 315.97 feet to a
1/2-inch iron rod with "Pacheco Koch" cap set at the POINT OF BEGINNING;
THENCE, South 68 degrees, 03 minutes, 17 seconds East, departing the said east
line of Enterprise Boulevard and the west line of said Lot 1, a distance of
684.35 feet to a 1/2-inch iron rod with "Pacheco Koch" cap set for corner in
the west right-of-way line of Southern Pacific Railroad (a 100-foot wide
railroad right-of-way) and the east line of said Lot 1;
THENCE, South 22 degrees, 08 minutes, 57 seconds West, along the said west line
of Southern Pacific Railroad and the east line of said Lot 1, a distance of
180.01 feet to a 1/2-inch iron rod found at the beginning of a curve to the
right whose center bears North 68 degrees, 05 minutes, 56 seconds West, a
distance of 2814.79 feet from said point;
<PAGE>
THENCE, in a southwesterly direction along the said west line of Southern
Pacific Railroad and said curve to the right, through a central angle of 19
degrees, 11 minutes, 30 seconds, an arc distance of 942.84 feet to a 1/2-inch
iron rod with "Pacheco Koch" cap set for corner;
THENCE, North 78 degrees, 30 minutes, 00 seconds West, departing the said west
line of Southern Pacific Railroad and the east line of said Lot 1, a distance
of 318.84 feet to a 1/2-inch iron rod with "Pacheco Koch" cap set for corner
in the said east line of Enterprise Boulevard and the west line of said Lot 1;
said point being on a curve to the left whose center bears North 77 degrees, 49
minutes, 24 seconds West, a distance of 320.00 feet from said point;
THENCE, in a northeasterly direction along the said east line of Enterprise
Boulevard and said curve to the left, through a central angle of 00 degrees, 40
minutes, 36 seconds, an arc distance of 3.78 feet to a 1/2-inch iron rod found
at the end of said curve;
THENCE, North 11 degrees, 30 minutes, 00 seconds East, continuing along the
said east line of Enterprise Boulevard, a distance of 1179.06 feet to the POINT
OF BEGINNING;
CONTAINING, 605,203 square feet of 13.894 acres of land, more or less.
<PAGE>
EXHIBIT A-2
[Diagram]
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF MILLIPORE CORPORATION
<PAGE>
Exhibit 21
SUBSIDIARIES OF MILLIPORE CORPORATION
Pursuant to Item 601, Paragraph 21, clause (ii) of Regulation S-K, the following
list excludes subsidiaries who conduct no business operations or which have no
significant assets.
COMPANY NAME JURISDICTION OF ORGANIZATION
- ------------ ----------------------------
Millipore Asia Ltd. Delaware
Millipore Korea Ltd. Korea
Millipore Singapore, Pte. Ltd. Singapore
Millipore Cidra, Inc. Delaware
Millipore Intertech, (V.I.), Inc. U.S. Virgin Is.
Millipore (Canada) Ltd. Canada
Millipore S.A. de C.V. Mexico
Millipore GesmbH Austria
Millipore Kft Hungary
Millipore S.R.O. Czech Republic
Millipore Investment Holdings Ltd. Delaware
Millipore International Holding Company B.V. Netherlands
Millipore Japan Company L.L.C. Delaware
Nihon Millipore Limited Japan
Millipore S.A./N.V. Belgium
Millipore (U.K.) Ltd. United Kingdom
Millipore S.A. France
Millipore Ireland B.V. Netherlands
Millipore Dublin International Finance Company Ireland
Millipore GmbH West Germany
Millipore S.p.A. Italy
Millipore A.B. Sweden
Millipore AS Norway
Millipore A.G. Switzerland
Millipore A/S Denmark
Millipore Australia Pty. Ltd. Australia
Millipore Iberica S.A. Spain
Millipore I.E.C., Ltda. Brazil
Millipore OY Finland
Millipore B.V. The Netherlands
Millipore China Ltd. Hong Kong
Millipore Pacific Limited Delaware
Millipore (Suzhou) Filter Company Limited Peoples Republic of China
Millicorp, Inc. Delaware
Minerva Insurance Co. Ltd. Bermuda
Vermeer Ireland
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Millipore Corporation on Form S-8 (File Nos. 2-91432, 2-72124, 2-85698, 2-97280,
33-37319, 33-37323, 33-59005, 33-10801, 33-11-790), on Form S-3 (File Nos. 2-
84252, 33-9706, 33-22196, 33-47213, and 333-23025) and on Form S-4 (File Nos.
33-58117) of our report dated January 20, 1999, except for Note B, for which the
date is February 5, 1999, on our audits of the consolidated financial statements
of Millipore Corporation as of December 31, 1998 and 1997, and for the years
ended December 31, 1998, 1997, and 1996, which report is incorporated by
reference in this Annual Report on Form 10-K.
Boston, Massachusetts
March 16, 1999
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors and
Officers of Millipore Corporation (the "Corporation"), do hereby constitute and
appoint C. William Zadel, Jeffrey Rudin and Francis J. Lunger and each of them
individually, their true and lawful attorneys and agents to execute on behalf of
the Corporation the Form 10-K Annual Report of the Corporation for the fiscal
year ended December 31, 1998, and all such additional instruments related
thereto which such attorneys and agents may deem to be necessary and desirable
to enable the Corporation to comply with the requirements of the Securities
Exchange Act of 1934, as amended, and any regulations, orders, or other
requirements of the United States Securities and Exchange Commission thereunder
in connection with the preparation and filing of said Form 10-K Annual Report,
including specifically, but without limitation of the foregoing, power and
authority to sign the names of each of such Directors and Officers on his
behalf, as such Director or Officer, as indicated below to the said Form 10-K
Annual Report or documents filed or to be filed as a part of or in connection
with such Form 10-K Annual Report; and each of the undersigned hereby ratifies
and confirms all that said attorneys and agents shall do or cause to be done by
virtue thereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ C. William Zadel Chairman, President February 11, 1999
- --------------------
C. William Zadel Chief Executive Officer
Officer and Director
/s/ Charles D. Baker Director February 11, 1999
- --------------------
Charles D. Baker
/s/ Robert C. Bishop Director February 11, 1999
- --------------------
Robert C. Bishop
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Samuel C. Butler Director February 11, 1999
- --------------------
Samuel C. Butler
/s/ Robert E. Caldwell Director February 11, 1999
- ----------------------
Robert E. Caldwell
/s/ Maureen A. Hendricks Director February 11, 1999
- ------------------------
Maureen A. Hendricks
/s/ Mark Hoffman Director February 11, 1999
- ----------------
Mark Hoffman
/s/ Elaine L. Chao Director February 11, 1999
- ------------------
Elaine L. Chao
/s/ Thomas O. Pyle Director February 11, 1999
- ------------------
Thomas O. Pyle
/s/John F. Reno Director February 11, 1999
- ---------------
John F. Reno
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 36,022
<SECURITIES> 0
<RECEIVABLES> 157,407
<ALLOWANCES> 3,149
<INVENTORY> 107,241
<CURRENT-ASSETS> 304,752
<PP&E> 425,675
<DEPRECIATION> 188,261
<TOTAL-ASSETS> 762,440
<CURRENT-LIABILITIES> 298,681
<BONDS> 0
0
0
<COMMON> 56,989
<OTHER-SE> 79,920
<TOTAL-LIABILITY-AND-EQUITY> 762,440
<SALES> 699,307
<TOTAL-REVENUES> 699,307
<CGS> 364,467
<TOTAL-COSTS> 364,467
<OTHER-EXPENSES> 335,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,474
<INCOME-PRETAX> 8,544
<INCOME-TAX> (1,320)
<INCOME-CONTINUING> 9,864
<DISCONTINUED> 5,847
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,017
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
