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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-14991
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LIFE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-0431300
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8717 GROVEMONT CIRCLE, GAITHERSBURG, MD 20877
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (301) 840-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of each class)
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
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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 this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 23, 1996 was $192,820,193.
The number of shares of common stock, par value $.01 per share outstanding as of
February 23, 1996 was 15,208,103.
Documents Incorporated By Reference
Portions of the registrant's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on April 16, 1996 are incorporated by reference in
Part III of this Report.
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As used herein, the terms "LTI" and the "Company" shall mean Life Technologies,
Inc. and its subsidiaries unless the context otherwise indicates and the term
"Proxy Statement" shall mean the definitive Proxy Statement for the Company's
Annual Meeting of Stockholders to be held on April 16, 1996.
PART I
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ITEM 1. BUSINESS
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GENERAL
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LTI, originally incorporated in Ohio in 1915 and reincorporated in Delaware in
1986, develops, manufactures and supplies more than 3,000 products used in life
sciences research and commercial manufacture of genetically engineered products.
The Company's products include sera, other cell growth media, biochemicals and
enzymes and other biological products necessary for recombinant DNA procedures.
These and related products and services provided by the Company are used in
cellular biochemistry and molecular biology research and in the production of
genetically engineered pharmaceuticals such as interferons, interleukins and
tissue plasminogen activator ("t-PA").
The Company's products are sold to more than 20,000 customers, including
research laboratories and pharmaceutical and biotechnology companies. The
Company sells its products principally through its own direct sales organization
which is supplemented by a network of distributors.
The Company's research and development activity is aimed at maintaining a
leadership position in providing research tools to the life sciences research
market and enhancing its market position as a supplier of products used to
manufacture genetically engineered pharmaceuticals and other materials.
The Company's activities have focused on the following areas:
- PRODUCTS FOR LIFE SCIENCES RESEARCH
CELL CULTURE PRODUCTS - The Company is a leading supplier of sera and
other cell and tissue culture media used by life sciences researchers to
grow cells under laboratory conditions.
CELL AND MOLECULAR BIOLOGY PRODUCTS - The Company is a leading supplier of
enzymes, nucleic acids, reagent systems, biochemicals and other products
used by life sciences researchers to identify, isolate and manipulate the
metabolic processes and genetic material of living organisms.
- PRODUCTS FOR COMMERCIAL PROCESSES USING GENETICALLY ENGINEERED CELLS
The Company is a leading supplier of sera, cell culture media and reagents
used for the commercial production of pharmaceuticals and other materials
made by genetically engineered cells.
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MARKETS
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The Company serves two principal markets: life sciences research and commercial
manufacture of genetically engineered products.
The life sciences research market consists of laboratories generally associated
with universities, medical research centers, government institutions such as the
National Institutes of Health, and other research institutions as well as
biotechnology, pharmaceutical, energy, agricultural and chemical companies.
Life sciences researchers require special biochemical research tools capable of
performing precise functions in a given experimental procedure. The Company
serves two principal disciplines of the life sciences research market: cellular
biochemistry and molecular biology.
Cellular biochemistry involves the study of the genetic functioning and
biochemical composition of cells as well as their proliferation,
differentiation, growth and death. The understanding gained from such study has
broad application in the field of developmental biology and is important in the
study of carcinogenesis, virology, immunology, vaccine design and production and
agriculture. To grow the cells required for research, researchers use cell or
tissue culture media which simulate under laboratory conditions (in vitro) the
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environment which surrounds such cells naturally (in vivo) and which facilitate
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their growth.
Molecular biology involves the study of the genetic information systems of
living organisms. The genetic material of living organisms consists of long,
double-stranded molecules of DNA (deoxyribonucleic acid). DNA contains the
information required for the production of proteins by means of RNA (ribonucleic
acid), a single-stranded molecule similar in structure to DNA. Proteins have
many different functional properties and include antibodies, certain hormones
and enzymes. Many researchers study the various steps of gene expression from
DNA to RNA to protein products, and the impact of these proteins on cellular
function. Other researchers are interested in manipulating the DNA-RNA system
in order to modify its functioning. Through techniques that are commonly termed
"genetic engineering" or "gene-splicing," the researcher modifies an organism's
naturally occurring DNA to produce a desired protein not usually produced by the
organism, or to produce a naturally produced protein at an increased rate.
The Company also serves industries which apply genetic engineering to the
commercial production of otherwise rare or difficult to obtain substances with
potential for significant utility. For example, in the biotechnology industry,
these substances include interferons, interleukins, t-PA and monoclonal
antibodies. The manufacturers of these materials require larger quantities of
the same sera and other cell growth media that are also purchased in smaller
quantities as research tools. Some of these new substances are manufactured in
full scale production facilities, while others are being manufactured on a pre-
production basis. Other industries involved in the commercial production of
genetically engineered products include the pharmaceutical, food processing and
agricultural industries. The Company is increasingly expanding its activities
into related new markets for its products. These include genetic and identity
testing, cell therapy and tissue engineering involving cell culture media and
plant biotechnology applications.
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PRODUCTS
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The Company is a major supplier of cell culture products used to maintain living
cells for study in the laboratory. The Company's cell culture products consist
of bovine serum, liquid and dry-powdered culture media, balanced salt solutions,
other animal sera and plant tissue culture media. The Company also produces and
markets a line of products to assist the researcher in analyzing cellular
functions in mammals and other multicell organisms, including the growth and
differentiation of cells and their immunological response. Sales of fetal
bovine serum ("FBS"), a major product of the Company, accounted for 16% of the
Company's net sales in 1995 and 18% of the Company's net sales in 1994 and 1993.
The Company is a major supplier of products used as research tools by molecular
biologists, including restriction enzymes, DNA and RNA modifying enzymes,
specialty reagents, research apparatus, nucleic acids, molecular biology systems
and custom oligonucleotides.
GEOGRAPHIC INFORMATION
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Information regarding geographic operations and sales required by this item is
contained in the Financial Notes entitled "Geographic Data" on page F-19 of this
1995 Annual Report on Form 10-K.
SALES AND MARKETING
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At December 31, 1995, the Company had approximately 129 employees worldwide who
were employed in direct field sales. Most of the Company's products are sold
throughout the world by its own sales employees, and the remaining products are
sold through agents or distributors.
RESEARCH AND DEVELOPMENT
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The Company believes that a strong research and product development effort is
important to its future growth. The Company's investment in research and
development was $15.9 million in 1995, $15.0 million in 1994 and $14.5 million
in 1993. An explanation of the changes in research and development expense for
the above periods is contained under the caption "Research and Development
("R&D") Expenses" in Management's Discussion and Analysis of Financial Condition
and Results of Operations provided under Part II, Item 7 on page 11 of this 1995
Annual Report on Form 10-K.
The Company conducts most of its research and development activities at its own
facilities using its own personnel. At December 31, 1995, the Company had
approximately 107 employees principally engaged in research and development. The
Company's scientific staff is augmented by advisory relationships with a number
of scientists.
The Company's research and development activities are aimed at providing new
products for its current product lines and developing new applications for its
products.
COMPETITION
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Only one company is known to compete with the Company in all its major product
lines, but in each product line competition is offered by a number of companies,
including companies substantially larger and with greater financial resources
than LTI. In the Company's view, competitive position in its markets is
determined by product quality, technical support, price, breadth of product
line, timely product development and speed of delivery.
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PATENTS AND LICENSES
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The Company has a number of patents and has pending applications for additional
U.S. patents and corresponding foreign filings. The Company believes that
because of the rapid pace of technological change in the field of biotechnology,
the degree of protection which a patent provides is uncertain and of less
significance than factors such as the knowledge and experience of the Company's
management and personnel and their ability to define, enhance and market new
products. In addition, the Company obtains nondisclosure and confidentiality
agreements from all its employees believed to have access to proprietary
information.
The Company has obtained rights to products and technologies under a number of
license agreements with universities and others. In 1995, approximately 11% of
the Company's net sales were related to products which were licensed from others
or which incorporated technologies licensed from others. The Company intends to
continue its current strategy of seeking licenses to technologies and products
from sources around the world. The Company does not believe that any single
product or technology licensed from others is material to its business as a
whole.
CUSTOMERS
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LTI has no single customer for its products which it deems to be material to its
business as a whole. However, many of the Company's customers receive funding
for their research either directly or indirectly from the federal government in
the United States and from government agencies in various countries throughout
the world.
SUPPLIERS
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The Company buys materials for its products from many suppliers, including
certain affiliate joint ventures, and is generally not dependent on any one
supplier or group of suppliers. Raw materials, other than FBS, purchased from
others are generally readily available at competitive prices from a number of
suppliers. Although there is a well-established market for FBS, one of the
Company's major products, its price is unstable, and its supply could be limited
because the availability of slaughtered cattle tends to be cyclical. The
Company acquires raw FBS products from various suppliers including an affiliate
joint venture. Some of these suppliers provide a major portion of the FBS
available from a specific geographic region, although no single supplier
provides a majority of the total FBS available to the Company.
The Company believes it maintains a quantity of FBS inventory adequate to insure
reasonable customer service levels while guarding against normal volatility in
the supply of FBS available to the Company. FBS inventory quantities can
fluctuate significantly as the Company balances varying customer demand for FBS
against fluctuating supplies of FBS available to the Company. The Company
believes it will be able to continue to acquire FBS in quantities sufficient to
meet its customer's requirements.
GOVERNMENT REGULATION
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Certain of the Company's cell culture products are subject to regulation under
the Federal Food, Drug and Cosmetic Act with respect to testing, safety,
efficacy, marketing, labeling and other matters. In addition, the Company's
manufacturing facilities for the production of cell culture products are subject
to periodic inspection primarily by the U.S. Food and Drug Administration
("FDA") and other product-oriented federal agencies and various state and local
authorities. Such facilities are believed to be in compliance
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with the requirements of the FDA's current Good Manufacturing Practices and
other federal, state and local regulations.
The federal government oversees certain recombinant DNA research activities
through the National Institutes of Health Guidelines for research involving
recombinant DNA molecules (the "NIH Guidelines"). The NIH Guidelines prohibit
or restrict certain recombinant DNA experiments, set forth levels of biological
and physical containment of recombinant DNA molecules to be met for various
types of research and require that institutional biosafety committees approve
certain experiments before they are initiated. The NIH Guidelines now exempt
most of the experiments conducted by the Company. The Company, however,
voluntarily complies with the NIH Guidelines for its molecular and cell biology
experiments. Compliance with the NIH Guidelines has not had, and the Company
does not believe it will have in the future, a material effect on the capital
expenditures, earnings or competitive position of the Company.
The Company has an Institutional Biosafety Committee, which has been approved
and certified by the NIH Office of Recombinant DNA Activities, to oversee its
laboratory practices concerning biological agents. Through training, practices,
equipment and facilities, LTI follows the NIH Guidelines' hazard classification
system recommendations for handling bacterial and viral agents, with
capabilities through biosafety level three.
In addition to the foregoing, the Company is subject to other federal, state and
local laws and ordinances applicable to its business, including the Occupational
Safety and Health Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act and various statutes and regulations applicable to the
use of radioactive materials.
EMPLOYEES
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At December 31, 1995, the Company had approximately 1,354 full-time and 59 part-
time employees, approximately 517 of whom were employed outside the United
States. Fewer than 10 employees are covered by a collective bargaining
agreement. Management believes that its relations with its employees are good.
ITEM 2. PROPERTIES
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The Company owns or leases the following principal properties, each of which
contains manufacturing, storage, laboratory or office facilities:
Location
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Gaithersburg, Maryland (Leased)
Paisley, Scotland (Owned and leased)
Grand Island, New York (Owned and leased)
Frederick, Maryland (Leased)
Auckland, New Zealand (Owned and leased)
The Company owns or leases certain other properties throughout the world in
addition to the principal properties listed. The terms of the leases for
properties to which the Company is a party range in expiration dates from 1996
to 2012, and some are renewable.
Many of the Company's plants have been constructed, renovated, or expanded one
or more times during the past ten years. The Company is currently using
substantially all of its space and considers the facilities to be in a
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condition suitable for their current uses. Because of expected growth in the
business and due to the increasing requirements of customers or regulatory
agencies, the Company may need to acquire additional space or upgrade and
enhance existing space during the next five years.
Over the past several years, the Company has undertaken a facilities upgrade and
improvement program. The initial focus of this program, now largely completed,
was the Company's manufacturing facilities in the U.S., Scotland and New
Zealand. Over the next few years, the Company is expecting to focus on upgrading
and improving its research and development and distribution facilities around
the world as well as its headquarters and administrative facilities in
Gaithersburg, Maryland. The Company currently believes it may spend
approximately $70 million for property, plant and equipment from 1996 through
1998, of which $40-45 million would be for facilities modernization. A major
component of the facilities improvement program over the next several years will
be for facilities now being constructed, and to be constructed, on the Company's
recently acquired corporate R&D and administrative offices site in Gaithersburg.
The Company expects to spend approximately $25-30 million in 1996 through 1998
for these facilities.
Additional information regarding the Company's properties is contained in the
Financial Notes entitled "Property, Plant and Equipment" and "Leases" on pages
F-9 and F-10, respectively, of this 1995 Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
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The Company is not involved in any pending or threatened legal proceedings
(other than ordinary routine litigation incidental to its business) which the
Company believes will have a material adverse effect on the Company's financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
EXECUTIVE OFFICERS OF THE REGISTRANT
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The Board of Directors elects all executive officers of the Company. Each
executive officer holds his or her office until the earlier of his or her death,
resignation, removal from office or the election or appointment of his or her
successor. No family relationships exist among any of the Company's executive
officers, directors or persons nominated to serve as such. The positions held
and period during which the executive officers have served in those positions
are set forth below:
J. STARK THOMPSON, PH.D. (age: 54; years of service: 7) was elected President
and Chief Executive Officer of the Company in August 1988 and became a director
of the Company in September 1988. Prior to joining the Company, he had been
with E.I. DuPont de Nemours & Company ("DuPont") for 21 years. From June to
August 1988, he had been Director of Sales and Marketing, North America,
Diagnostics Division of DuPont. He was Director of the Diagnostics Systems
Division between 1985 and June 1988. Prior thereto, he had been Business
Director of the Diagnostic Systems Division from 1984 to 1985 with worldwide
sales and marketing responsibility for the Division. Prior thereto, he had been
Manager of DuPont's Instrument System Division and was responsible for general
management of that Division.
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THOMAS M. COUTTS (age: 51; years of service: 26) was elected Senior Vice
President and General Manager, European Division, effective March 1, 1989. Prior
thereto, he had been Vice President of Life Technologies, Europe, since prior to
1987.
JOHN V. COOPER, (age 44; years of service: 4) was elected Vice President and
General Manager, America's Research Products Division, effective April 13, 1993.
Prior to joining the Company, he had been a Worldwide Business Manager in
Printed Circuit Materials for DuPont since prior to 1987.
BRIAN D. GRAVES (age: 54; years of service: 14) was elected Vice President and
General Manager, U.S. Industrial Bioproducts Division, effective July 1, 1990.
Prior thereto, he had been Vice President of Sales and Marketing, U.S. Research
Products Division, for the Company since prior to 1987.
JOHN LEFFLER, PH.D., (age: 55, years of service: 3) was elected Vice President,
Manufacturing, effective April 11, 1995. Prior to joining the Company, he
worked for Dupont for 28 years in various director and management positions.
TIMOTHY E. PIERCE, PH.D. (age: 54; years of service: 5) was elected Vice
President and General Manager, Asia Pacific Division, effective September 18,
1990. Prior to joining the Company, he had been General Manager, Asia Pacific,
for Technicon Instruments Corporation since prior to 1987.
JOSEPH C. STOKES, JR. (age: 48; years of service: 7) was elected Vice President,
Finance, Secretary and Treasurer, effective March 1, 1989. Prior thereto, he
had been Treasurer of The Dexter Corporation, an affiliate of the Company, since
prior to 1987.
ROSEMARY J. VERSTEEGEN, PH.D., (age: 47; years of service: 14) was elected a
Vice President of the Company on April 16, 1991. Since 1982 she held several
managerial positions with the Company. Prior thereto, she worked for Litton
Industries as a staff scientist.
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
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The Company's Common Stock is traded on The Nasdaq Stock Market under the
symbol: LTEK. The high and low sales prices for the Company's Common Stock for
each quarter of 1994 and 1995 as reported by The Nasdaq Stock Market are
contained in the Financial Notes entitled "Quarterly Financial Information" on
page F-18 of this 1995 Annual Report on Form 10-K.
The number of holders of record of the Company's Common Stock at February 23,
1996 was 572. At February 23, 1996, The Dexter Corporation owned approximately
53.7% of the outstanding Common Stock of the Company.
The Company's Board of Directors has declared a $.05 per share dividend in each
quarter of the previous three years and expects to consider the declaration and
payment of quarterly dividends based on future operating results.
ITEM 6. SELECTED FINANCIAL DATA
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This information has been derived from, and should be read in conjunction with,
the related consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this 1995 Annual Report on Form 10-K.
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SELECTED FINANCIAL DATA
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(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
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1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Revenues $272,299 $235,262 $205,616 $197,640 $171,339
Research & development
expenses 15,871 15,000 14,463 13,892 12,974
Restructuring charges - - 420 - 1,200
Operating income 33,823 27,506 25,638 24,540 18,855
Investment income, net of
interest expense 791 585 381 492 1,272
Net income 22,277 18,207 16,560 15,487 12,125
Capital expenditures $ 11,159 $ 12,123 $ 7,230 $ 16,424 $ 9,406
Return on average
stockholders' equity 15.7% 15.2% 16.0% 16.6% 11.4%
Average shares outstanding
including dilutive common
stock equivalents 15,286 15,071 15,091 15,079 14,838
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AT DECEMBER 31
Cash & cash
equivalents $ 23,201 $ 13,246 $ 7,927 $ 7,652 $ 5,748
Working capital 96,761 71,255 60,228 51,924 54,764
Total assets 208,744 171,747 145,790 130,049 116,381
Long-term debt 1,451 - - - -
Stockholders' equity 153,925 130,129 110,000 96,680 90,409
Per share $ 10.14 $ 8.69 $ 7.36 $ 6.48 $ 6.09
Shares outstanding 15,182 14,981 14,951 14,925 14,857
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PER SHARE
Net income:
Primary $ 1.46 $ 1.21 $ 1.10 $ 1.03 $ .82
Fully diluted 1.45 1.20 1.10 1.03 .81
Cash dividends declared .20 .20 .20 .20 3.65
Market price:
High 27 1/2 20 1/4 26 23 1/4 29
Low 17 1/2 15 15 3/4 15 3/4 13 3/4
Close 27 1/4 19 1/2 18 1/2 21 3/4 17 1/2
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</TABLE>
Dividends - Prior to 1991, the Company retained its earnings for use in the
business. On February 26, 1991, the Board of Directors of the Company declared
a special cash dividend of $3.50 per share payable in March 1991. The Board has
declared quarterly dividends of $0.05 per share in each quarter since the
special dividend.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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This information should be read in conjunction with the related consolidated
financial statements and notes thereto contained elsewhere in this 1995 Annual
Report on Form 10-K.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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GENERAL
The Company develops, manufactures, and sells cell and molecular biology
products and cell culture products under the GIBCOBRL brand name. Cell and
molecular biology products are used by scientists to identify, isolate, and
manipulate the metabolic processes and genetic material of living organisms.
Cell culture products include cell and tissue culture media, reagents, fetal
bovine serum ("FBS"), a major product of the Company, and other animal sera.
These products are used by scientists to grow cells under laboratory conditions
and are also used for the commercial manufacture of pharmaceuticals and other
life sciences products.
RESULTS OF OPERATIONS
REVENUES
The major product line components of net sales for 1995, 1994 and 1993 compare
as follows:
<TABLE>
<CAPTION>
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(amounts in thousands) 1995 1994 1993
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<S> <C> <C> <C>
Cell and molecular biology $115,278 $ 94,034 $ 79,302
Cell culture 156,954 141,161 125,647
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Net sales $272,232 $235,195 $204,949
==========================================================
</TABLE>
Net sales for 1995 were $272.2 million, an increase of $37.0 million, or 16%,
over 1994. Sales of products other than FBS increased $28.5 million, or 15%,
over 1994 sales levels. FBS sales were $0.2 million lower in 1995 when compared
with 1994. Lower unit sales of FBS lowered 1995 net sales by $2.1 million while
higher unit selling prices increased net sales by $1.9 million when compared
with net sales in 1994. Changes in currency exchange rates increased 1995 net
sales by $8.7 million when compared with 1994.
Net sales for 1994 were $235.2 million, an increase of $30.2 million, or 15%,
over 1993. Sales of products other than FBS increased $23.4 million, or 14%,
over 1993 sales levels. FBS sales were $4.8 million higher in 1994 than in
1993. Higher unit sales of FBS increased 1994 net sales by $6.5 million while
lower unit selling prices reduced net sales by $1.7 million when compared with
1993. Currency exchange rate changes increased 1994 net sales by $2.0 million
when compared with 1993.
FBS represented 16% of net sales in 1995 and 18% in 1994 and 1993.
Royalty income was $0.1 million, $0.1 million and $0.7 million in 1995, 1994 and
1993, respectively. Royalty income represents licensing fees paid to the
Company for technologies developed from research efforts undertaken for the
Company's discontinued molecular diagnostics product line.
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COST OF SALES - GROSS MARGIN
Gross margins were 50.1% of net sales in 1995 compared with 47.3% in 1994. Gross
margins improved in 1995 as the Company consolidated the gross margins of its
Japanese subsidiary and because the Company reported higher gross margins in
markets it served directly in 1995 where these markets were served by
distributors for a substantial portion of 1994.
Gross margins were 47.3% of net sales in 1994 compared with 50.3% in 1993. Gross
margins declined in the 1994 period principally due to lower FBS gross margins
and higher royalty expense in the 1994 period. FBS gross margins were lower
because of a decline in unit selling prices and an increase in unit costs.
MARKETING AND ADMINISTRATIVE EXPENSES
Marketing and administrative expenses were 31.9% of net sales in 1995, 29.2% of
net sales in 1994 and 30.8% of net sales in 1993. Marketing and administrative
expenses, expressed as a percentage of sales, increased in 1995 compared with
1994 largely because the Company consolidated the results of its Japanese
subsidiary beginning in September of 1995 and because 1995 included a full year
of expenses for new sales offices opened in 1994.
RESEARCH AND DEVELOPMENT ("R&D") EXPENSES
Research and development expenses were $15.9 million in 1995, $15.0 million in
1994 and $14.5 million in 1993. R&D expenses in 1995, 1994 and 1993 were
primarily directed toward developing new products and business solutions for the
Company's customers in the life sciences research and industrial bioprocessing
areas and toward improving production processes.
Research and development expenses represented 5.8%, 6.4% and 7.1% of net sales
in 1995, 1994 and 1993, respectively.
RESTRUCTURING
In the fourth quarter of 1993, more closely the Company restructured its
European operations to align expenses more closely with expected sales levels.
Also in the fourth quarter of 1993, the Company completed the restructuring of
its North American FBS collection operations with the disposition of an FBS
collection subsidiary. The restructuring charge of $0.4 million in the fourth
quarter of 1993 includes severance costs for ten employees who left the Company
as a result of the European restructuring, costs related to closing a
distribution center in Europe and costs related to the FBS restructuring.
OPERATING INCOME
Operating income for 1995 was $33.8 million, an increase of $6.3 million, or
23%, compared with 1994. The percentage increase in operating income was
greater than the percentage increase in net sales when comparing 1995 with 1994
largely because gross margins increased at a faster rate than marketing and
administrative expenses. Changes in currency exchange rates used to translate
non-U.S. earnings to U.S. dollars increased operating income in 1995 by $1.5
million when compared with 1994.
Operating income for 1994 was $27.5 million, an increase of $1.9 million, or 7%,
compared with 1993. Higher net sales in 1994 compared with 1993 were the
primary reason for the increase in operating income. The percentage increase
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in operating income was less than the percentage increase in net sales as gross
margins were lower in 1994 compared with 1993. Changes in currency exchange
rates used to translate non-U.S. earnings to U.S. dollars increased operating
income in 1994 by $0.4 million when compared with 1993.
OTHER INCOME AND EXPENSES
Investment income was $0.9 million in 1995, $0.6 million in 1994 and $0.4
million in 1993. Investment income in 1995, 1994 and 1993 included $0.2
million, $0.3 million and $0.2 million, respectively, related to an interest
bearing note received upon the disposition of the Company's molecular
diagnostics product line in late 1990. The increase in investment income was
largely attributable to higher investment balances. Other income includes
equity income from the Company's Japanese joint venture of $0.5 million in 1995,
$0.7 million in 1994 and $0.5 million in 1993.
INCOME TAXES
Income taxes were 34.8% of pre-tax income in 1995, compared with 36% in 1994 and
1993.
MINORITY INTERESTS
Income attributed to minority interest investors was $0.5 million in 1995 and
$0.1 million in 1994. The increase is principally for minority interests in the
net income of the Company's Japanese subsidiary.
NET INCOME
Net income for 1995 was $22.3 million, an increase of 22% over 1994's net income
of $18.2 million. Earnings per share were $1.46 in 1995, representing a 21%
increase over the $1.21 per share earnings reported in 1994.
Net income for 1994 was $18.2 million, an increase of 10% over net income in
1993 of $16.6 million. Earnings per share were $1.21 in 1994, up 10% compared
with earnings per share of $1.10 in 1993.
LOOKING AHEAD
The Company expects to concentrate on its core cell and molecular biology and
cell culture product lines in 1996, including its recently launched custom
primers business. Future trends in the Company's markets may be affected by
government funding for life sciences research, the number of new products
developed and introduced by the Company's customers, and changes in technology
and scientific discoveries. The political debate in the United States and other
countries with respect to reducing government budget deficits may ultimately
lead to lower increases in, or levels of, government funding for research.
Prior to the final outcome of these debates, research funding may periodically
be delayed or reduced, especially in the U.S., as government budget
appropriation measures are delayed during budget negotiations.
Changes in currency exchange rates, the supply and price of FBS, the global
economic situation and the availability of well-trained employees throughout the
world are factors that could have a significant effect on the Company in 1996.
Significant strengthening of the U.S. dollar against non-U.S. currencies,
especially European and Japanese currencies, could have a negative impact on the
Company's results. Volatility in the FBS market will continue to have a
significant impact on the Company's results. The market volatility of FBS and
the increasing demand for alternative media provide strong
12
<PAGE>
incentive to develop products and technologies which are not dependent on animal
sera raw materials.
The Company will actively continue to seek out highly motivated and well-
educated individuals to become employees of the Company.
Heightened worldwide safety and environmental concerns are likely to lead to
increased regulation in these areas. The Company is committed to promoting the
safety and health of its employees and the environment and will remain pro-
active in complying with federal, state and local regulations.
LIQUIDITY AND CAPITAL RESOURCES
1995 CASH FLOWS
The Company generated $21.4 million in cash from operations during 1995. Net
income after adjustments for depreciation and amortization was the principal
source of cash from operations in 1995. Working capital changes in 1995, net of
business acquisitions, related principally to sales increases. The acquisition
of a controlling interest in the Company's Japanese joint venture, which
resulted in the consolidation of that entity's financial results, increased
working capital by $9.9 million at the date of acquisition.
The Company paid $12.3 million in cash for property, plant and equipment in
1995. Capital spending in 1995 was for new and replacement machinery and
equipment and management information systems related to the Company's ongoing
business operations and for facilities expansion and modernization programs,
including the Company's new corporate R&D center in Maryland. The Company used
$0.8 million in 1995 for the acquisition of new businesses and to acquire a
controlling interest in its Japanese joint venture.
The Company's balance sheet included $3.4 million of debt at the end of 1995.
This debt was included in the financial statements of the Company's Japanese
subsidiary and appears as debt of the Company as a result of the acquisition of
a controlling interest in the subsidiary in 1995. The amount outstanding is
owed to the minority shareholder and to local Japanese banks. Apart from the
debt consolidated with its Japanese subsidiary, the Company did not incur any
other debt during 1995, and there was no other debt outstanding at December 31,
1995. The Company currently has unused lines of credit with two commercial
banks totaling $21.5 million and a short-term revolving credit facility with The
Dexter Corporation, an affiliate of the Company, in the amount of $8 million.
Capital expenditures in 1996 are expected to range from $25-30 million. The
Company expects to spend approximately $15 million in 1996 for its new corporate
R&D center in Maryland and another $5 million for other facilities upgrades and
improvements elsewhere around the world. The balance of expected 1996 capital
spending is anticipated to be for new and replacement machinery, equipment and
management information systems.
In January 1996, the Company purchased approximately 75% of the outstanding
common stock of Custom Primers, Inc., a California-based producer of
oligonecleotides, for $7.1 million in cash, increasing the Company's ownership
to 100%. The purchase agreement provides for an additional $4.4 million in
earn-out contingencies based on sales of oligonucleotides over the next five
years.
13
<PAGE>
The Company believes it will be able to generate sufficient cash from its
operations and its existing credit lines to meet its anticipated working capital
and capital expenditure requirements in 1996.
The Board of Directors intends to consider the declaration and payment of
quarterly dividends in the future based on the operating performance of the
Company.
The Company is actively evaluating licensing possibilities, as well as
acquisition candidates which complement the Company's core cell and molecular
biology and cell culture product lines. The Company may fund these transactions
using cash from operations, debt, equity, or other sources.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The Financial Statements and Supplementary Data appear on pages F-1 through F-19
of this 1995 Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
Information regarding directors of the Company and compliance by the directors
and officers of the Company with certain reporting requirements pursuant to
Section 16(a) of the Securities Exchange Act of 1934 is contained under the
caption "Proposal No. 1 - Election of Directors" in the Company's Proxy
Statement, which is incorporated herein by reference. Information regarding
executive officers of the Company is included in Part I hereof, under the
caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information required by this item is contained under the caption "Executive
Compensation" in the Company's Proxy Statement, which is incorporated herein by
reference (except for the "Report of the Compensation and Organization Committee
and Stock Option Committee on Executive Compensation" and the "Performance
Graph").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information required by this item is contained under the caption "Beneficial
Ownership of Common Stock" in the Company's Proxy Statement, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this item is contained under the caption "Proposal
No. 1 - Election of Directors" and under the headings "Certain Relationships and
Related Transactions", "Compensation Committee Interlocks and Insider
Participation" and "Compensation of Directors" of the Company's Proxy Statement,
which is incorporated herein by reference.
14
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a) (1) Financial Statements:
a. Report of Independent Accountants
b. Consolidated Statement of Income for the
years ended December 31, 1995, 1994 and 1993
c. Consolidated Balance Sheet as of December 31,
1995 and 1994
d. Consolidated Statement of Cash Flows for the
years ended December 31, 1995, 1994 and 1993
e. Consolidated Statement of Changes in
Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993
f. Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules:
None.
All schedules have been omitted because they are not required, not
applicable, or the information required to be set forth therein is
included in the Company's consolidated financial statements.
(a) (3) Exhibits:
Exhibit numbers 10(A),(B),(C),(D),(E),(F),(G),(H),(I),(J),(K),(L), (M)
and (N) are management contracts, compensatory plans or arrangements.
3(A) Certificate of Incorporation of the Registrant including
Amendment to Certificate of Incorporation dated April 17, 1987,
previously filed as Exhibit 3(A) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992, which
is incorporated herein by reference.
3(B) By-laws of the Registrant as amended and restated on April
16, 1991, previously filed as Exhibit 3(B) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1991, which is incorporated herein by reference.
4(A) Instruments defining the rights of security holders, including
indentures.
Registrant by this filing agrees, upon request, to file with
the Securities and Exchange Commission the instruments defining
the rights of holders of its long-term debt where the total
amount of securities authorized thereunder does not exceed 10%
of the total assets of registrant and its subsidiaries on a
consolidated basis.
15
<PAGE>
10(A) 1984 Stock Option Plan, previously filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8, No. 33-21807,
dated May 12, 1988, which is incorporated herein by reference.
10(B) Executive Supplemental Retirement Plan, previously filed as
Exhibit 10(B) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990, SEC file no. 0-14991,
which is incorporated herein by reference.
10(C) Executive Deferred Compensation Benefit Plan, previously filed
as Exhibit 10.8 to the Registrant's Registration Statement on
Form S-1, No. 33-7993, dated October 1, 1986, which is
incorporated herein by reference.
10(D) Employment Agreement dated June 23, 1989, between the
Registrant and Dr. J. Stark Thompson regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(K) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989, SEC
file no. 0-14991, which is incorporated herein by reference.
10(E) Employment Agreement dated June 23, 1989, between the
Registrant and Joseph C. Stokes, Jr. regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(E) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992, SEC
file no. 0-14991, which is incorporated herein by reference.
10(F) Employment Agreement dated June 23, 1989, between the
Registrant and Thomas M. Coutts regarding certain severance
benefits in the event of termination of employment following a
change of control, as defined in the agreement, previously
filed as Exhibit 10(F) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992, SEC file
no. 0-14991, which is incorporated herein by reference.
10(G) Employment Agreement dated September 11, 1989, between the
Registrant and George E. Lowke, Ph.D. regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(G) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992, SEC
file no. 0-14991, which is incorporated herein by reference.
10(H) Employment Agreement dated April 13, 1993, between the
Registrant and John V. Cooper regarding certain severance
benefits in the event of termination of employment following a
change of control, as defined in the agreement, previously
filed as Exhibit 10(H) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, SEC file
no. 0-14991, which is incorporated herein by reference.
16
<PAGE>
10(I) Executive Deferred Compensation Benefit Plan, previously filed
as Exhibit 10(H) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991, SEC file no. 0-14991,
which is incorporated herein by reference.
10(J) Employment agreement dated July 1, 1990, between the Registrant
and Brian D. Graves regarding certain severance benefits in the
event of termination of employment following a change of
control, as defined in the agreement, previously filed as
Exhibit 10(J) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992, SEC file no. 0-14991,
which is incorporated herein by reference.
10(K) 1991 Stock Option Plan, previously filed as Exhibit 4 to the
Registrant's Registration Statement on Form S-8 No. 33-956,
dated May 9, 1991, which is incorporated herein by reference.
10(L) 1995 Stock Option Plan, previously filed as Exhibit 4 to the
Registrant's Registration Statement on Form S-8 No. 33-59741,
dated June 1, 1995, which is incorporated herein by reference.
10(M) Employment Agreement dated April 11, 1995, between the
Registrant and John E. Leffler regarding certain severance
benefits in the event of termination of employment following a
change of control, as defined in the agreement.
10(N) Employment Agreement dated September 1, 1990, between the
Registrant and Timothy E. Pierce regarding certain severance
benefits in the event of termination of employment following a
change of control, as defined in the agreement.
11 Statement re: computation of per share earnings.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
Exhibits other than those incorporated herein by reference have been
included in copies of this Form 10-K filed with the Securities and
Exchange Commission. The Registrant agrees that it will furnish,
without charge, a copy of any such exhibits to each stockholder of the
Registrant upon the written request therefor to the Registrant.
(b) Reports on Form 8-K.
None.
(c) Exhibits
See (a) (3) above.
(d) Financial Statement Schedules
See (a) (2) above.
17
<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 February 14, 1996 LIFE TECHNOLOGIES, INC.
(Registrant)
By /s/ Joseph C. Stokes, Jr.
----------------------------------------
Joseph C. Stokes, Jr.
Vice President, Finance,
Secretary and Treasurer
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 capacities indicated.
/s/ Thomas H. Adams, Ph.D. /s/ Donald C. Sutherland
- ------------------------------------ ----------------------------------------
Thomas H. Adams, Ph.D. Donald C. Sutherland
Director Director
/s/ Frederick R. Adler /s/ J. Stark Thompson, Ph.D.
- ------------------------------------ ----------------------------------------
Frederick R. Adler J. Stark Thompson, Ph.D.
Director President and Chief Executive Officer
(Principal Executive Officer)
/s/ Richard Axel, M.D., Ph.D. /s/ K. Grahame Walker
- ----------------------------- ----------------------------------------
Richard Axel, M.D., Ph.D. K. Grahame Walker
Director Chairman of the Board of Directors
/s/ Kathleen Burdett /s/ Iain C. Wylie
- ----------------------------------- ----------------------------------------
Kathleen Burdett Iain C. Wylie
Director Director
/s/ Betsy Z. Cohen /s/ Joseph C. Stokes, Jr.
- ----------------------------------- -------------------------
Betsy Z. Cohen Joseph C. Stokes, Jr.
Director Vice President, Finance
Secretary and Treasurer
(Principal Financial Officer)
/s/ C. Eric Winzer
----------------------------------------
Paul A. Marks, M.D. C. Eric Winzer
Director Controller
(Principal Accounting Officer)
/s/ Jerry E. Robertson, Ph.D.
- -----------------------------
Jerry E. Robertson, Ph.D.
Director
18
<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.
LIFE TECHNOLOGIES, INC.
(Registrant)
By
----------------------------------------
Joseph C. Stokes, Jr.
Vice President, Finance,
Secretary and Treasurer
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 capacities indicated.
- --------------------------------------------------------------------------------
Thomas H. Adams, Ph.D. Donald C. Sutherland
Director Director
- --------------------------------------------------------------------------------
Frederick R. Adler J. Stark Thompson, Ph.D.
Director President and Chief Executive Officer
(Principal Executive Officer)
- --------------------------------------------------------------------------------
Richard Axel, M.D., Ph.D. K. Grahame Walker
Director Chairman of the Board of Directors
- --------------------------------------------------------------------------------
Kathleen Burdett Iain C. Wylie
Director Director
- --------------------------------------------------------------------------------
Betsy Z. Cohen Joseph C. Stokes, Jr.
Director Vice President, Finance
Secretary and Treasurer
(Principal Financial Officer)
- --------------------------------------------------------------------------------
Paul A. Marks, M.D. C. Eric Winzer
Director Controller
(Principal Accounting Officer)
- --------------------------------------
Jerry E. Robertson, Ph.D.
Director
19
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Financial Statements: Page
<S> <C>
Index to Financial Statements and Schedules F-1
Report of Independent Accountants F-2
Consolidated Statement of Income for the
years ended December 31, 1995, 1994 and 1993 F-3
Consolidated Balance Sheet as of December 31,
1995 and 1994 F-4
Consolidated Statement of Cash Flows for the
years ended December 31, 1995, 1994 and 1993 F-5
Consolidated Statement of Changes in F-6
Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements F-7
</TABLE>
Financial Statement Schedules:
None.
All schedules have been omitted because they are not
required, not applicable, or the information required to be set forth
therein is included in the Company's 1995 consolidated financial
statements.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Life Technologies, Inc.
We have audited the consolidated financial statements of Life Technologies, Inc.
and its subsidiaries listed in Item 14(a) of this Form 10-K. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Life Technologies,
Inc. and its subsidiaries as of December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Rockville, MD
January 22, 1996
F-2
<PAGE>
Life Technologies, Inc.
Consolidated Statement of Income
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993
===================================================================
<S> <C> <C> <C>
Revenues:
Net sales $272,232 $235,195 $204,949
Net royalties 67 67 667
- ------------------------------------------------------------------
Total revenues 272,299 235,262 205,616
- ------------------------------------------------------------------
Expenses:
Cost of sales 135,784 123,988 101,874
Marketing and administrative 86,821 68,768 63,221
Research and development 15,871 15,000 14,463
Restructuring - - 420
- ------------------------------------------------------------------
Total expenses 238,476 207,756 179,978
- ------------------------------------------------------------------
Operating income 33,823 27,506 25,638
- ------------------------------------------------------------------
Other income (expense):
Investment income 867 615 425
Interest expense (76) (30) (44)
Other, net 329 534 (144)
- ------------------------------------------------------------------
Total other income 1,120 1,119 237
- ------------------------------------------------------------------
Income before income taxes 34,943 28,625 25,875
Income taxes 12,160 10,305 9,315
- ------------------------------------------------------------------
Income before minority interests 22,783 18,320 16,560
Minority interests (506) (113) -
- ------------------------------------------------------------------
Net income $ 22,277 $ 18,207 $ 16,560
==================================================================
Average shares outstanding 15,286 15,071 15,091
- ------------------------------------------------------------------
Primary net income per share $1.46 $1.21 $1.10
- ------------------------------------------------------------------
Dividends declared per share $.20 $.20 $.20
==================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
Life Technologies, Inc.
Consolidated Balance Sheet
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1995 1994
======================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 23,201 $ 13,246
Accounts receivable, net 48,722 36,163
Inventories:
FIFO 67,106 58,705
LIFO reserve (6,261) (5,995)
- ---------------------------------------------------------------------
Total inventory 60,845 52,710
Prepaid expenses 3,697 1,974
Current deferred tax assets 5,557 3,475
- ---------------------------------------------------------------------
Total current assets 142,022 107,568
Property, plant and equipment, net 51,861 48,043
Investments and other assets 8,671 9,796
Excess of cost over net assets of businesses
acquired, net 6,190 6,340
- ---------------------------------------------------------------------
Total assets $208,744 $171,747
=====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,934 $ -
Accounts payable 15,102 14,358
Dividends payable 759 749
Accrued and deferred income taxes 13,645 11,750
Accrued liabilities and expenses 13,821 9,456
- ---------------------------------------------------------------------
Total current liabilities 45,261 36,313
Long-term debt 1,451 -
Deferred income taxes 2,421 1,871
Deferred items 3,334 2,893
Minority interests 2,352 541
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, one million
shares authorized, none issued
Common stock, $.01 par value, 50 million
shares authorized, issued and outstanding
15,181,939 in 1995 and
14,980,799 in 1994 152 150
Additional paid-in capital 45,995 42,561
Retained earnings 108,444 89,184
Currency exchange effects (666) (1,766)
- ---------------------------------------------------------------------
Total stockholders' equity 153,925 130,129
- ---------------------------------------------------------------------
Total liabilities and stockholders' equity $208,744 $171,747
=====================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
Life Technologies, Inc.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
(amounts in thousands)
- --------------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993
==========================================================================
<S> <C> <C> <C>
CASH INFLOWS (OUTFLOWS)
Operations:
Net income $ 22,277 $ 18,207 $16,560
Non-cash items:
Depreciation 7,136 5,996 5,336
Amortization 592 512 487
Deferred income taxes (419) 229 (86)
Other (321) 516 (451)
Changes in assets and liabilities net of
acquisitions:
Accounts receivable (5,892) (4,994) (504)
Inventories (4,435) (2,939) (7,684)
Prepaid expenses (1,355) 471 (446)
Accounts payable and accrued expenses 2,461 1,580 (1,474)
Accrued income taxes 1,307 1,775 586
- --------------------------------------------------------------------------
Cash provided by operating activities 21,351 21,353 12,324
- --------------------------------------------------------------------------
Investments:
Property, plant and equipment (12,279) (12,533) (8,085)
Acquisitions/joint ventures (825) (1,287) -
Issuance of long-term note receivable - - (911)
Other (28) 17 (123)
- --------------------------------------------------------------------------
Cash used in investing activities (13,132) (13,803) (9,119)
- --------------------------------------------------------------------------
Financing:
Dividends paid (3,007) (2,993) (2,987)
Proceeds from exercise of stock options 2,990 308 374
- --------------------------------------------------------------------------
Cash used in financing activities (17) (2,685) (2,613)
- --------------------------------------------------------------------------
Effect of exchange rate changes on cash (381) 454 (317)
- --------------------------------------------------------------------------
Increase in cash and cash equivalents 7,821 5,319 275
Cash included from consolidation of a
subsidiary which became majority owned
in 1995 2,134 - -
Cash and cash equivalents at beginning
of year 13,246 7,927 7,652
- --------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 23,201 $ 13,246 $ 7,927
==========================================================================
Supplemental cash flow information:
Income tax payments, net of refunds $ 11,354 $ 8,057 $ 8,515
==========================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
Life Technologies, Inc.
Consolidated Statement of Changes in Stockholders' Equity
(amounts in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Additional Currency
Common Stock Paid-in Retained Exchange
--------------
Shares Amount Capital Earnings Effects Total
======================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1992 14,925 $149 $41,777 $ 60,400 $(5,646) $ 96,680
Net income 16,560 16,560
Dividends-$.20 per share (2,988) (2,988)
Shares issued under
stock option plans 26 1 407 408
Currency effects (660) (660)
- -------------------------------------------------------------------------------------
Balances at
December 31, 1993 14,951 150 42,184 73,972 (6,306) 110,000
Net income 18,207 18,207
Dividends-$.20 per share (2,995) (2,995)
Shares issued under
stock option plans 30 377 377
Currency effects 4,540 4,540
- -------------------------------------------------------------------------------------
Balances at
December 31, 1994 14,981 150 42,561 89,184 (1,766) 130,129
Net income 22,277 22,277
Dividends-$.20 per share (3,017) (3,017)
Shares issued under
stock option plans 201 2 3,434 3,436
Currency effects 1,100 1,100
- -------------------------------------------------------------------------------------
Balances at
December 31, 1995 15,182 $152 $45,995 $108,444 $ (666) $153,925
=====================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
=============================================================================
BASIS OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of Life Technologies,
Inc. (the "Company or Life Technologies") and its majority owned or controlled
subsidiaries. Intercompany accounts, transactions, and profits have been
eliminated in the consolidated financial statements. Investments in affiliated
companies (20% to 50% Life Technologies' ownership) are recorded in the
consolidated financial statements using the equity method of accounting except
in cases where the Company can effectively exercise control. In these cases,
the accounts of the affiliate are included in the Company's consolidated
financial statements. Certain amounts for prior years have been reclassified to
conform to and be consistent with the 1995 presentation.
Management has made estimates and assumptions in the preparation of these
financial statements 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.
NATURE OF OPERATIONS
Life Technologies is a multinational firm that develops, manufactures, and sells
cell and molecular biology products and cell culture products used principally
in life sciences research and commercial manufacture of genetically engineered
products. The Company's principal customers consist of laboratories generally
associated with universities, medical research centers, and government
institutions as well as biotechnology, pharmaceutical, energy, agricultural and
chemical companies. The Company is engaged in one line of business.
Sales of fetal bovine serum ("FBS") accounted for 16% of net sales in 1995 and
18% of net sales in 1994 and 1993. Historically, the availability and price of
FBS have been volatile and periodically have had a significant effect on the
Company's results.
BUSINESS ACQUISITIONS
In September 1995, the Company acquired an additional 1% ownership of its
Japanese joint venture, Life Technologies Oriental, K.K. ("LTOKK"), for
$150,000, which approximated book value. This additional ownership resulted in
a 51% controlling interest and led to the consolidation of the subsidiary's
financial results as of the acquisition date. Prior to the acquisition, the
Company accounted for LTOKK using the equity method of accounting and reported
$0.5 million in equity income for the first eight months in 1995. Equity income
reported for LTOKK in 1994 and 1993 was $0.7 million and $0.5 million,
respectively. Sales for LTOKK in the first eight months of 1995 were $22.2
million and were $24.5 million in 1994 and $21.2 million in 1993.
In August 1994, the Company acquired certain assets of a distributor of life
sciences research products serving Sweden, for $1.7 million. One million dollars
of the purchase price was deferred and is being paid over three years, ending in
1997. The acquisition was accounted for as a purchase.
None of the businesses acquired during the period, individually or in the
aggregate, constitute a significant subsidiary of the Company.
F-7
<PAGE>
TECHNOLOGY AGREEMENTS
The Company has obtained rights to products and technologies under a number of
licensing agreements or patents. The cost of technologies acquired from outside
sources is capitalized and amortized over the legal or expected useful life
where the technologies are currently commercially applicable. Where
considerable development effort is required to have acquired technologies become
part of the Company's product lines, the cost of the technologies are reported
as research and development expense. Internal efforts to develop or patent
technologies are expensed when incurred.
The Company also licenses technology it has developed to others. The Company
recognizes revenue on these licenses when payment is reasonably certain.
Revenues are reduced by related transaction expenses.
NET INCOME PER SHARE
Primary net income per common share has been computed by dividing net income by
the weighted average number of shares of common stock outstanding plus dilutive
common stock equivalents.
RELATED PARTY - DEXTER
At December 31, 1995, The Dexter Corporation ("Dexter") owned approximately
53.8% of the outstanding shares of the Company's common stock. Most
transactions with Dexter are administrative in nature (e.g., insurance), and the
Company has no significant product sales to Dexter or its affiliates. Two
executives of Dexter served as directors of the Company in 1995 and 1994.
The Company can borrow up to $8.0 million under a revolving line of credit from
Dexter to finance short-term working capital needs. There were no borrowings
during 1995. The Company borrowed various amounts up to $3.1 million and $4.5
million from Dexter in 1994 and 1993, respectively. There were no amounts
outstanding under this line of credit at year-end 1995, 1994 or 1993.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid short-term investments readily convertible
into cash. Cash equivalents consist primarily of time deposits and certificates
of deposit with various financial institutions throughout the world. These
investments are carried at cost, which approximates market, mature within 90
days and are therefore subject to minimal risk.
ACCOUNTS RECEIVABLE
Accounts receivable are reduced by allowances of $1.2 million and $0.4 million
at December 31, 1995 and 1994, respectively.
F-8
<PAGE>
INVENTORIES
Inventories are valued at the lower of cost or market. Inventories valued at
cost using the LIFO method were approximately 33% and 35% of total inventories
at December 31, 1995 and 1994, respectively. Inventories were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------
(amounts in thousands) 1995 1994
============================================
<S> <C> <C>
Materials and supplies $10,507 $ 8,811
Work in process 9,975 6,088
Finished goods 46,624 43,806
- -------------------------------------------
Total FIFO value 67,106 58,705
LIFO reserve (6,261) (5,995)
- -------------------------------------------
Total inventory $60,845 $52,710
===========================================
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is provided by
the straight-line method for financial reporting purposes based upon the
estimated useful lives of the assets which range from 3 to 50 years. The cost
of assets sold or retired and the related amounts of accumulated depreciation
are eliminated from the accounts and the resulting gain or loss is included in
income. Renewals and betterments are capitalized. Repairs and maintenance are
charged to expense when incurred and were $2.8 million in 1995, $2.5 million in
1994 and $2.7 million in 1993.
The cost and accumulated depreciation of property, plant and equipment were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(amounts in thousands) 1995 1994
============================================================
<S> <C> <C>
Land and land improvements $ 3,268 $ 3,163
Buildings and leasehold improvements 27,279 23,991
Machinery and equipment 51,098 45,717
Construction-in-process 8,045 6,477
- -----------------------------------------------------------
Total cost 89,690 79,348
Accumulated depreciation (37,829) (31,305)
- -----------------------------------------------------------
Property, plant and equipment, net $ 51,861 $ 48,043
===========================================================
</TABLE>
LEASES
The Company leases buildings, automobiles and equipment under operating lease
arrangements. These leases contain various renewal options, purchase options
and escalation clauses. The total rental expense of all leases was $5.9 million
in 1995, $5.8 million in 1994 and $5.9 million in 1993.
The future minimum rental payments required under noncancellable operating
leases as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
For the years ending December 31: (amounts in thousands)
===========================================================
<S> <C>
1996 $ 5,054
1997 3,115
1998 1,568
1999 1,427
- -----------------------------------------------------------
2000 1,140
2001 and thereafter 9,889
- -----------------------------------------------------------
Total minimum lease payments $22,193
===========================================================
</TABLE>
F-9
<PAGE>
In July 1995, the Company entered into an agreement with Montgomery County,
Maryland to lease a parcel of land on which the Company is constructing a new
corporate R&D center and expects to construct other administrative offices,
including the Company's headquarters. The agreement allows the Company to lease
the property for 25 years with a 50 year renewal clause. Rent payments will
commence at the earlier of July 1998 or the issuance of a use and occupancy
permit for the R&D center. The Company also has an option to purchase the land,
subject to several conditions.
INVESTMENTS AND OTHER ASSETS
Significant components of investments and other assets were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
(amounts in thousands) 1995 1994
======================================================================
<S> <C> <C>
Pension and retirement related $4,090 $3,180
Software, net of amortization 2,235 344
Investment in, and advances to, affiliated companies 800 4,043
Deferred tax assets 607 1,595
Patents and licenses, net of amortization 230 422
Other 709 212
- ----------------------------------------------------------------------
Total investments and other assets $8,671 $9,796
======================================================================
</TABLE>
The affiliated companies included above were LTOKK, the Company's joint venture
in Japan, and the predecessor company to Custom Primers, Inc., a producer of
custom oligonucleotides. LTOKK's financial results were consolidated subsequent
to the Company's acquisition of a controlling interest in September 1995 (see
"Business Acquisitions"). The Company acquired all outstanding stock of
Customer Primers, Inc. not owned by the Company in January 1996 (see "Subsequent
Events").
EXCESS ACQUISITION COSTS
The excess of costs over the net asset values of businesses acquired prior to
1992 are being amortized on a straight-line basis principally over 30 years. The
excess of costs over net asset values of businesses acquired since 1992 are
being amortized on a straight-line basis over no more than 10 years. The
Company assesses the recoverability of net cost in excess of net assets of
acquired businesses by determining whether the amortization of this intangible
asset over its remaining life can be recovered through future operating
earnings. The Company makes a specific provision against the asset when
impairment is identified. The Company did not make an impairment charge in
1995, 1994 or 1993. Future acquisitions will be evaluated using this method and
an appropriate useful life will be determined for amortization of the excess of
costs over the net asset value of businesses acquired, if any.
Accumulated amortization at December 31, 1995 and 1994, amounted to $3.4 million
and $3.0 million, respectively.
F-10
<PAGE>
ACCRUED LIABILITIES AND EXPENSES
Accrued liabilities and expenses were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(amounts in thousands) 1995 1994
====================================================================================================
<S> <C> <C>
Salaries, wages and benefits $ 6,322 $2,933
Compensated absences 1,935 1,822
Royalties 1,719 1,196
Other 3,845 3,505
- ----------------------------------------------------------------------------------------------------
Total accrued liabilities and expenses $13,821 $9,456
====================================================================================================
DEBT
The following is a summary of the outstanding debt at December 31, 1995 and 1994.
- ----------------------------------------------------------------------------------------------------
(amounts in thousands) 1995 1994
====================================================================================================
Current
Japanese Yen bank borrowings $ 967 -
Current portion of long-term debt 967 -
- ----------------------------------------------------------------------------------------------------
Short-term debt 1,934 -
- ----------------------------------------------------------------------------------------------------
Long-term notes
2.25% Note due 1996 967 -
4.50% Note due 2001 1,451 -
- ----------------------------------------------------------------------------------------------------
2,418 -
- ----------------------------------------------------------------------------------------------------
Less: Current portion of long-term debt 967 -
- ----------------------------------------------------------------------------------------------------
Long-term debt $ 1,451 -
====================================================================================================
</TABLE>
Short-term borrowings consist of notes payable from various banks denominated in
Japanese Yen as well as the current portion of long-term debt. The carrying
value of short-term borrowings approximates fair value. The average interest
rate on the Japanese Yen bank borrowings during the year and at year-end was
2.6%.
The Company currently has unused lines of credit with two banks totaling $21.5
million and a short-term revolving credit facility with Dexter for $8.0 million.
Long-term debt consists of Yen 100 million and Yen 150 million in the form of
promissory notes from the Company's 51% owned Japanese subsidiary to the
minority shareholder for working capital and financing needs. Long-term debt
represented less than 1.0% of total capital at December 31, 1995. The weighted
average interest rate during the year was 3.6%. The fair value of the Company's
long-term debt is estimated by management to approximate the carrying value of
the long-term debt at December 31, 1995. Aggregate maturities of long-term debt
are as follows: 1996 - Yen 100 million; 1997 - Yen 30 million; 1998 - Yen 30
million; 1999 - Yen 30 million, 2000 - Yen 30 million and 2001 - Yen 30 million.
F-11
<PAGE>
INCOME TAXES
The differences between the U.S. federal statutory tax rate and the Company's
effective tax rate are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1995 1994 1993
================================================================
<S> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
State income taxes 0.7% 1.1% 1.8%
Non-U.S. tax rate differences (0.6%) (3.2%) 3.8%
U.S. tax credits (0.4%) (2.2%) (6.6%)
Other 0.1% 5.3% 2.0%
- --------------------------------------------------------------
Effective income tax rate 34.8% 36.0% 36.0%
==============================================================
</TABLE>
The provision (benefit) for taxes on income for 1995, 1994 and 1993 is
summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(amounts in thousands) 1995 1994 1993
===============================================================
<S> <C> <C> <C>
Current
United States $ 2,759 $ 3,599 $1,685
International 9,396 5,967 7,014
State 424 510 702
- --------------------------------------------------------------
Total current 12,579 10,076 9,401
- --------------------------------------------------------------
Deferred
United States (532) 301 218
International 209 (114) (14)
State (96) 42 (290)
- --------------------------------------------------------------
Total deferred (419) 229 (86)
- --------------------------------------------------------------
Total provision for income taxes $12,160 $10,305 $9,315
==============================================================
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 and
1994 are presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(amounts in thousands) 1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Inventory reserves and intercompany profit $3,087 $1,680
Expenses deductible when paid 897 1,371
Reserves for vacation pay 598 508
Reserves for bad debts and product returns 371 160
Reserves for insurance 156 400
- ---------------------------------------------------------------
Other 1,055 951
- ---------------------------------------------------------------
Gross deferred tax assets 6,164 5,070
- ---------------------------------------------------------------
Deferred tax liabilities:
Fixed assets, principally depreciation 2,410 1,236
Inventory capitalization 445 327
Other 112 732
- ---------------------------------------------------------------
Gross deferred tax liabilities 2,967 2,295
- ---------------------------------------------------------------
Net deferred tax asset $3,197 $2,775
===============================================================
</TABLE>
Management has determined that tax benefits associated with the net deferred tax
asset will more likely than not be realized based on the availability of taxable
income in prior carryback years against which future tax deductions may be
offset and on expectations that future operating income of the Company will also
be sufficient to realize fully these net deferred tax assets.
F-12
<PAGE>
Tax credits for research and development and foreign income taxes paid on
foreign source income reduce income tax expense in the year realized.
U.S. and international withholding taxes have not been provided on approximately
$78.7 million of undistributed earnings of foreign subsidiaries, which are
considered to be permanently reinvested in the operations of such subsidiaries.
It is impractical to estimate the total tax liability, if any, until such a
distribution is made. Pretax income from international operations amounted to
$28.0 million in 1995, $19.3 million in 1994 and $17.2 million in 1993.
RETIREMENT BENEFITS
The Company has a qualified pension plan ("defined benefit") and a 401(k) plan
("employee deferral" and "defined contribution") for substantially all United
States employees. With respect to its qualified U.S. pension plan, the Company's
policy is to deposit with an independent trustee amounts as are necessary on an
actuarial basis to provide for benefits in accordance with the requirements of
the Employee Retirement Income Security Act and any other applicable Federal
laws and regulations. The U.S. pension plan provides benefits that are
generally based upon the employee's highest average compensation in any
consecutive five year period in the ten years before retirement. The Company's
401(k) plan allows employees to contribute, on a tax-deferred basis, up to
twelve percent of their annual base compensation subject to certain regulatory
and plan limitations. Prior to 1995, the Company provided a deferred profit
sharing program as a component of its 401(k) plan. Beginning in 1995, the
Company replaced the deferred profit sharing component of its 401(k) plan with
an employer match program under which the Company matches one half of the
employee's 401(k) deferral up to a maximum of three percent of annual base
compensation.
The Company also sponsors an unfunded, nonqualified supplementary retirement
plan for certain senior management. The Company has purchased life insurance on
the lives of participants designed to provide sufficient funds to recover all
costs of the plan. In addition to the above plans, the Company sponsors an
unfunded, nonqualified executive supplemental plan that provides for a target
benefit based upon compensation in the five years before retirement, which
benefit is then offset by other benefits payable to the participant.
The retirement benefits for most employees of non-U.S. operations are generally
provided by government sponsored or insured programs and, in certain countries,
by defined benefit plans. The only significant non-U.S. defined benefit plan is
for United Kingdom employees. The Company's policy with respect to its U.K.
pension plan is to fund amounts as are necessary on an actuarial basis to
provide for benefits under the plan in accordance with local laws and income tax
regulations. The U.K. pension plan provides benefits based upon the employees'
highest average base compensation over three consecutive years.
F-13
<PAGE>
The components of net periodic pension cost and other costs for the retirement
benefits plans during the years 1995, 1994 and 1993 are provided in the
following table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension Plans:
Service cost $ 1,254 $1,705 $ 1,132
Interest cost 1,429 1,352 1,065
Actual return on assets (2,050) (318) (1,138)
Net amortization and deferrals 974 (272) 502
- ---------------------------------------------------------------------------------------------------------------------
Net periodic pension costs 1,607 2,467 1,561
401(k) employer match program 787 - -
401(k) deferred profit sharing program - 461 350
Defined contribution plans and other 299 239 293
- ---------------------------------------------------------------------------------------------------------------------
Total pension costs $ 2,693 $3,167 $ 2,204
=====================================================================================================================
The assumptions used in accounting for pensions in 1995, 1994 and 1993 were as follows:
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
Pension plan assumptions:
Discount rate
Beginning of year:
U.S. 8.50% 6.75% 7.50%
U.K. 9.75% 6.75% 9.75%
End of year:
U.S. 6.50% 8.50% 6.75%
U.K. 7.75% 9.75% 6.75%
Average wage increase
U.S. 4-6% 6% 6%
U.K. 6% 6% 6%
Expected long-term rate of
return on plan assets
U.S. 9% 9% 9%
U.K. 8% 8% 8%
=====================================================================================================================
</TABLE>
The discount rate is the estimated rate at which the obligation for pension
benefits could effectively be settled. The average wage increase assumption
reflects the Company's best estimate of the future compensation levels of the
individual employees covered by the plans. The expected long-term rate of
return on plan assets reflects the average rate of earnings that the Company
estimates will be generated on the assets of the plans.
F-14
<PAGE>
The funded status of the Company's pension plans and amounts recognized at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Plans Where Plans Where
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
---------------------- ----------------------
(amounts in thousands) 1995 1994 1995 1994
==================================================================================
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligation:
Vested $15,074 $ 8,886 $ 1,302 $ 1,147
Accumulated 16,030 9,461 1,669 1,195
Projected 24,727 15,549 1,899 1,249
Plan assets at fair market value 17,444 13,944 - -
- ---------------------------------------------------------------------------------
Projected benefit obligation
in excess of plan assets (7,283) (1,605) (1,899) (1,249)
Unrecognized net (gain)/loss 4,736 (1,523) 164 25
Unrecognized prior service cost 2,681 2,950 522 8
Unrecognized net asset (334) (358) - -
Adjustment required to recognize
minimum liability - - (456) (12)
- ---------------------------------------------------------------------------------
Accrued pension liability $ (200) $ (536) $(1,669) $(1,228)
=================================================================================
</TABLE>
CONTINGENCIES
The Company is not involved in any pending or threatened legal proceedings other
than ordinary routine litigation incidental to its business. Litigation is
subject to many uncertainties, and it is reasonably possible that some of the
legal actions or proceedings referred to above could be decided unfavorably to
the Company. Although the amount of liability at December 31, 1995 with respect
to these matters could not be ascertained with certainty, the Company believes
that any resulting liability should not materially affect the Company's
consolidated financial statements.
SUBSEQUENT EVENTS
On January 17, 1996, the Company purchased approximately 75% of the common stock
of Custom Primers, Inc., a California-based producer of oligonucleotides, for
approximately $7.1 million in cash, increasing the Company's ownership to 100%.
The purchase agreement provides for an additional $4.4 million in earn-out
contingencies based on sales of oligonucleotides over the next five years. The
fair market value of net tangible assets acquired is approximately $0.5 million.
The Company expects to record about $6.5 million in intangibles at the date of
acquisition. The original intangibles will be amortized over five years.
Additional intangibles will be recorded if and at the time the earn-outs are
earned and any additional intangibles resulting from the earn-out payments will
be amortized over the remaining life of the asset.
F-15
<PAGE>
CURRENCY EFFECTS
The financial statements of the Company's non-U.S. operations are translated to
U.S. dollars for consolidation, and the translation adjustment resulting from
the fluctuation in the exchange rates is carried directly to stockholders'
equity. The adjustments will affect net income only upon sale or liquidation of
the underlying non-U.S. investment. Currency exchange gains and losses realized
on business transactions were not significant in 1995, 1994 or 1993.
The Company utilizes forward exchange contracts to hedge non-local currency
transactions and commitments. Gains and losses on forward exchange contracts
that hedge specific currency commitments are deferred and recognized in income
in the same period as the hedged transaction. Gains and losses on forward
contracts that do not hedge an identifiable currency commitment are included in
income as the gain or loss arises.
The market risk associated with forward exchange contracts is caused by
fluctuations in exchange rates subsequent to entering into the forward exchange
contracts. Forward exchange contracts outstanding at year-end 1995 were short-
term in nature and related to nonlocal currency transactions of the Company's
European and Japanese operations. The equivalent U.S. dollar purchase amounts
were $10.3 million and $2.1 million as of December 31, 1995 and 1994,
respectively. There were no purchase amounts outstanding as of December 31,
1993. The equivalent U.S. dollar sale amounts were $12.9 million and $2.1
million as of December 31, 1995 and 1993, respectively. There were no sale
amounts outstanding as of December 31, 1994. Deferred unrealized gains and
losses at December 31, 1995, 1994 and 1993 were not significant.
STOCK OPTIONS
In 1995, the Company established a long-term incentive plan for certain key
management and other personnel. The 1995 Long-term Incentive Plan provides that
up to 750,000 shares of common stock may be awarded through various stock and
stock related awards. For options awarded under the Plan, the option price
cannot be less than 100 percent of the fair market value of common stock at the
time the option is granted. Through December 31, 1995 the Company has granted
only stock options under this plan.
The 1991 Stock Option Plan provided for the granting of incentive and non-
qualified stock options to purchase up to 750,000 shares of common stock. The
option price could not be less than 100% of the fair market value for incentive
stock options and not less than 50% of the fair market value for non-qualified
stock options.
The 1984 Plan, as amended in 1988, permitted the granting of incentive and non-
qualified stock options to purchase up to 1,250,000 shares of common stock. The
option price could not be less than 100% of the fair market value for incentive
stock options and not less than 50% of the fair market value for non-qualified
stock options. Prior to the 1988 amendment, grants could include stock
appreciation rights ("SARs") which had to be exercised in tandem with the
related stock option.
The 1983 Plan authorized the granting of stock options to purchase up to 300,000
shares of common stock at a price not less than fair market value. At December
31, 1992, there were 13,333 options outstanding under this plan. These options
were exercised in 1994 at an average exercise price of $6.00.
F-16
<PAGE>
The transactions under the 1995, 1991 and 1984 Plans were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1995 1991 1984
Plan Plan Plan
============================================================================
<S> <C> <C> <C>
December 31, 1992 339,132 364,726
Granted 196,350
Expired or canceled (17,597) (1,050)
Exercised at average price
of $13.98 per share (5,571) (21,235)
- ---------------------------------------------------------------------------
December 31, 1993 512,314 342,441
Granted 206,250
Expired or canceled (12,663) (4,237)
Exercised at average price
of $14.18 per share (10,369) (5,714)
- ---------------------------------------------------------------------------
December 31, 1994 695,532 332,490
Granted 368,800
Expired or canceled (10,317) (7,050)
Exercised at average price
of $15.26 per share (91,688) (117,674)
- ---------------------------------------------------------------------------
December 31, 1995 368,800 593,527 207,766
===========================================================================
Price range $24.00-$24.00 $14.25-$20.88 $7.25-$16.63
Weighted average price $24.00 $18.57 $ 13.20
===========================================================================
Exercisable - 396,706 207,766
===========================================================================
</TABLE>
Most options become exercisable on a cumulative basis over a period of service
not exceeding ten years from the date of grant. In addition to the number of
shares available for grant represented by the stock options outstanding at
December 31, 1995, there were 381,200 shares of common stock available for
future grant under the 1995 plan. No further grants under the 1991 and 1984
Plans can be made. All SAR's have been exercised, canceled or expired as of
December 31, 1995. The Company makes no charge against income with respect to
options granted at fair market value.
The Company will elect the disclosure-only requirement of Financial Accounting
Statement No. 123, Accounting for Stock-Based Compensation, in 1996.
F-17
<PAGE>
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(amounts in thousands, except per share data)
- ---------------------------------------------------------------------------------------------
Quarterly amounts are unaudited First Second Third Fourth Year
=============================================================================================
<S> <C> <C> <C> <C> <C>
1995:
Net sales $66,243 $68,853 $66,981 $70,155 $272,232
Net royalties - - 67 - 67
Cost of sales 33,884 35,480 33,012 33,408 135,784
Operating income 8,439 8,184 8,081 9,119 33,823
Net income 5,622 5,614 5,367 5,674 22,277
Primary earnings
per share .37 .37 .35 .37 1.46
Market price per share:
High 20 1/4 23 26 3/4 27 1/2 27 1/2
Low 17 1/2 19 1/4 22 1/4 23 17 1/2
=============================================================================================
1994:
Net sales $58,069 $59,172 $59,098 $58,856 $235,195
Net royalties 67 - - - 67
Cost of sales 30,282 30,877 31,538 31,291 123,988
Operating income 7,369 7,075 6,496 6,566 27,506
Net income 4,679 4,638 4,352 4,538 18,207
Primary earnings
per share .31 .31 .29 .30 1.21
Market price per share:
High 19 1/2 18 3/4 19 1/2 20 1/4 20 1/4
Low 15 3/4 15 17 16 1/2 15
=============================================================================================
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DATA
- ------------------------------------------------------------
(amounts in thousands) 1995 1994 1993
============================================================
<S> <C> <C> <C>
Net Sales:
North America $177,917 $151,771 $129,279
Intercompany (27,008) (20,555) (13,006)
- ------------------------------------------------------------
Trade sales 150,909 131,216 116,273
- ------------------------------------------------------------
Europe 100,220 86,650 75,504
Intercompany (1,673) (3,181) (2,629)
- ------------------------------------------------------------
Trade sales 98,547 83,469 72,875
- ------------------------------------------------------------
Pacific 24,129 20,510 15,801
Intercompany (1,353) - -
- ------------------------------------------------------------
Trade sales 22,776 20,510 15,801
- ------------------------------------------------------------
Net sales $272,232 $235,195 $204,949
============================================================
Operating Income:
North America $ 11,344 $ 15,047 $ 14,408
Europe 27,063 19,551 18,298
Pacific area 5,198 2,164 2,185
General corporate expense (9,782) (9,256) (9,253)
- ------------------------------------------------------------
Operating income $ 33,823 $ 27,506 $ 25,638
============================================================
Assets:
North America $ 90,660 $ 87,341 $ 81,234
Europe 85,299 67,939 54,081
Pacific area 32,785 16,467 10,475
- ------------------------------------------------------------
Total assets $208,744 $171,747 $145,790
============================================================
</TABLE>
Intercompany sales between areas are based on estimated market prices or on
amounts computed to provide reasonable profit to each unit. Operating income
represents net sales less expenses of operations. Sales and related income prior
to September 1995 to the Company's then-unconsolidated Japanese joint venture,
LTOKK, are included in the Pacific area.
F-19
<PAGE>
INDEX TO EXHIBITS
-----------------
Page #
3(A) Certificate of Incorporation of the Registrant
including Amendment to Certificate of Incorporation
dated April 17, 1987, previously filed as Exhibit 3(A)
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992, which is incorporated
herein by reference.
3(B) By-laws of the Registrant as amended and restated on
April 16, 1991, previously filed as Exhibit 3(B) to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991, which is incorporated
herein by reference.
4(A) Instruments defining the rights of security holders,
including indentures.
Registrant by this filing agrees, upon request, to
file with the Securities and Exchange Commission
the instruments defining the rights of holders of
its long-term debt where the total amount of
securities authorized thereunder does not exceed
10% of the total assets of registrant and its
subsidiaries on a consolidated basis.
10(A) 1984 Stock Option Plan, previously filed as
Exhibit 4.1 to the Registrant's Registration Statement
on Form S-8, No. 33-21807, dated May 12, 1988, SEC file
no. 0-14991, which is incorporated herein by reference.
10(B) Executive Supplemental Retirement Plan, previously filed
as Exhibit 10(B) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990, SEC file
no. 0-14991, which is incorporated herein by reference.
10(C) Executive Deferred Compensation Benefit Plan, previously
filed as Exhibit 10.8 to the Registrant's Registration
Statement on Form S-1, No. 33-7993, dated October 1,
1986, which is incorporated herein by reference.
10(D) Employment Agreement dated June 23, 1989, between the
Registrant and Dr. J. Stark Thompson regarding certain
severance benefits in the event of termination of
employment following a change of control, as defined in
the agreement, previously filed as Exhibit 10(K) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1989, SEC file no. 0-14991, which is
incorporated herein by reference.
<PAGE>
Page#
-----
10(E) Employment Agreement dated June 23, 1989, between the
Registrant and Joseph C. Stokes, Jr. regarding certain
severance benefits in the event of termination of
employment following a change of control, as defined in
the agreement, previously filed as Exhibit 10(E) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(F) Employment Agreement dated June 23, 1989, between the
Registrant and Thomas M. Coutts regarding certain
severance benefits in the event of termination of
employment following a change of control, as defined in
the agreement, previously filed as Exhibit 10(F) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(G) Employment Agreement dated September 11, 1989, between
the Registrant and George E. Lowke, Ph.D. regarding
certain severance benefits in the event of termination
of employment following a change of control, as defined
in the agreement, previously filed as Exhibit 10(G) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(H) Employment Agreement dated April 13, 1993, between the
Registrant and John V. Cooper regarding certain
severance benefits in the event of termination of
employment following a change of control, as defined in
the agreement, previously filed as Exhibit 10(H) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993, SEC file no. 0-14991, which is
incorporated herein by reference.
10(I) Executive Deferred Compensation Benefit Plan, previously
filed as Exhibit 10(H) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991, SEC
file no. 0-14991, which is incorporated herein by
reference.
10(J) Employment Agreement dated July 1, 1990, between the
Registrant and Brian D. Graves regarding certain
severance benefits in the event of termination of
employment following a change of control, as defined in
the agreement, previously filed as Exhibit 10(J) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(K) 1991 Stock Option Plan, previously filed as Exhibit 4 to
the Registrant's Registration Statement on Form S-8 No.
33-956, dated May 9, 1991, which is incorporated herein
by reference.
10(L) 1995 Stock Option Plan, previously filed as Exhibit 4 to
the Registrant's Registration Statement on Form S-8 No.
33-59741, dated June 1, 1995, which is incorporated
herein by reference.
<PAGE>
Page#
-----
10(M) Employment Agreement dated September 1, 1990, between E-1
the Registrant and John E. Leffler regarding certain
severance benefits in the event of termination of
employment following a change of control, as defined in
the agreement.
10(N) Employment Agreement dated September 1, 1990, between E-14
the Registrant and Timothy E. Pierce regarding
certain severance benefits in the event of termination
of employment following a change of control, as defined
in the agreement.
11 Statement re: computation of per share earnings. E-27
21 Subsidiaries of the Registrant. E-31
23 Consent of Independent Accountants. E-32
27 Financial Data Schedule. (electronic filing only) E-33
<PAGE>
Exhibit 10(M)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between LIFE TECHNOLOGIES, INC., a Delaware Corporation
(the "Company"), and John E. Leffler (the "Executive"), dated as of the 11th day
of April, 1995.
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below).
The Board believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions
-------------------
(a) The "effective Date" shall be the first date during the "Change of
Control Period" (as defined in Section 1(b)) on which a Change of Control
occurs.
(b) The "Change of Control Period" is the period commencing on the date
hereof and ending on the second anniversary of such date; provided, however,
that commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate two years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this Agreement;
-----------------
(i) a "Change of Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of 50% or
more of either the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"), provided,
however, that any acquisition approved by a majority of the Incumbent Board (as
hereinafter defined), including a majority of the members of the Incumbent Board
who are not Dexter-related Directors (as
E-1
<PAGE>
hereinafter defined) or any acquisition by the Company, the Dexter Corporation
("Dexter") or any of their subsidiaries, or by any employee benefit plan (or
related trust) sponsored or maintained by the Company, Dexter or any of their
subsidiaries, or by any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding share of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all/or substantially all the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, shall not constitute a Change of Control;
or
(b) Individuals who as of April 19, 1989, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any individual becoming a director subsequent to April 19, 1989,
whose election, or nomination for election, by the Company's shareholders was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board, including a majority of the members of the Incumbent Board who
are not Dexter-related Directors, shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual or
threatened election contest (as such terms are use in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange Act) relating to the election of
Directors of the Company; or
(ii) at any time when either (x) Dexter is the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities
and at least half of the directors of the Company are Dexter-related Directors
(as hereinafter defined), or (y) Dexter is the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities
and there shall after any of the events set forth in the following clauses (a),
(b) or (c) be an increase in the percentage of the directors of the Company who
are Dexter-related Directors, then, in addition to the provisions of clause (i)
above, "Change of Control" shall mean:
(a) The acquisition, other than from Dexter, by any individual, entity
or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of either the then outstanding shares of Common
Stock of Dexter (the "Outstanding Dexter Common Stock") or the combined voting
power of the then outstanding voting securities of Dexter entitled to vote
generally in the election of directors (the "Outstanding Dexter Voting
Securities"), provided, however, that any acquisition by the Company, Dexter or
any of their subsidiaries, or by any employee benefit plan (or related trust)
sponsored or maintained by the Company, Dexter or any of their subsidiaries, or
by any corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of
E-2
<PAGE>
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Dexter Common Stock and Outstanding
Dexter Voting Securities immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such acquisition,
of the Outstanding Dexter Common Stock and Outstanding Dexter Voting Securities,
as the case may be, shall not constitute a Change of Control; or
(b) Individuals who, as of January 1, 1989, constitute the Board of
Directors of Dexter (the "Dexter Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of Dexter, provided
that any individual becoming a director subsequent to January 1, 1989, whose
election, or nomination for election, by Dexter's shareholders was approved by a
vote of at least a majority of the directors then comprising the Dexter
Incumbent Board shall be considered as though such individual were a member of
the Dexter Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) relating to the election of the Directors of
Dexter; or
(c) Approval by the stockholders of Dexter of a complete liquidation
or dissolution of Dexter or of the sale or other disposition of all or
substantially all of the assets of Dexter, or of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
Outstanding Dexter Common Stock and Outstanding Dexter Voting Securities
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation;
For purposes of this Agreement, a "Dexter-related Director" shall mean any
director of the Company who is or during the prior 10 years has been an officer,
director, employee or 5% or greater shareholder of Dexter or any of its
subsidiaries (other than the Company and its subsidiaries) or an officer,
director, partner, employee or 5% or greater shareholder of any law firm,
investment bank or other business organization that has been retained by Dexter
or any of its subsidiaries (other than the Company and its subsidiaries) to
provide services for an aggregate renumeration in any year of in excess of 5% of
the revenues of such law firm, investment bank or other business organization or
is otherwise controlling, controlled by or under common control with Dexter.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending at
the end of the 12th month following the Effective Date (the "Employment
----
Period").
E-3
<PAGE>
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 25 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company ad, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive shall
-----------
receive an annual base salary ("Annual Base Salary"), which shall be paid at a
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable to the Executive by the Company and its affiliated companies in
respect of the twelve month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in base salary
generally awarded in the ordinary course of business to other peer executives of
the Company and its affiliated companies. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to the
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" includes any company controlled by, controlling or under
common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year during the Employment Period,
E-4
<PAGE>
an annual bonus (the "Annual Bonus") in cash at least equal to either (A) the
average annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by the Company
for less than twelve full months) bonus paid, or payable but for any deferral to
the Executive by the Company and its affiliated companies under the Company's
deferred compensation arrangements, in respect of the three fiscal years
immediately preceding the fiscal year in which the Effective Date occurs, or
(B), in the event the annual bonus paid, or payable but for any deferral to the
Executive by the Company and its affiliated companies under the Company's
deferred compensation arrangement, in respect of the fiscal year immediately
preceding the fiscal year in which the Effective Date occurs was based upon a
formula or plan in which the Executive participated, then such Annual Bonus
shall be at least equal to the bonus which would be payable based on such
formula or plan had the Executive's participation therein and level of
participation remained in effect following the Effective Date. Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus, is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. In addition to Annual
---------------------------------------
Base Salary and Annual Bonus payable as hereinabove provided, the Executive
shall be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs generally
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities), savings opportunities and retirement
benefits opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the Effective Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent generally applicable
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide benefits which
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect at any time
thereafter generally with respect to other peer executives of the Company and
its affiliated companies.
E-5
<PAGE>
(vi) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter generally with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as provided at any time thereafter generally with respect to
other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect at any time
thereafter generally with respect to other peer executives of the Company and
its affiliated companies.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability (as defined below) of the
Executive has occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 12(b) of this Agreement of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for "Cause". For purposes of this Agreement, "Cause"
means (i) repeated violations by the Executive of the Executive's obligations
under Section 4(a) of this Agreement which are demonstrably willful and
deliberate on the Executive's part and which are not remedied in a reasonable
period of time after receipt of written notice from the Company, (ii) commission
of an intentional act of fraud, embezzlement or theft by the Executive in
connection with the Executive's duties or in the course of the
E-6
<PAGE>
Executive's employment with the Company, (iii) causing intentional wrongful
damage to property of the Company, (iv) intentionally and wrongfully disclosing
secret processes or confidential information of the Company, or (v)
participating, without the Company's consent, in the management of any business
enterprise which engages in substantial and direct competition with the Company,
and any such act shall have been materially harmful to the Company.
(c) Good Reason. The Executive's employment may be terminated during the
-----------
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company with
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
or written notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of written notice thereof given by the Executive;
(iii) the Company requiring the Executive to be based at any office or
location other than that described in Section 4(a) (i) (B) hereof or, requiring
the Executive to travel away from Executive's office in the course of
discharging responsibilities or duties in a manner which is inappropriate for
the performance of the Executive's duties hereunder and which is significantly
more frequent (in terms of either consecutive days or aggregate days in any
calendar year) than was required prior to the Change of Control;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by any successor to comply with and satisfy Section 11 (c)
of this Agreement, provided that such successor has received at least ten days
prior written notice from the Company or the Executive of the requirements of
Section 11(c) of this Agreement.
For the purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause or
---------------------
by the Executive for good Reason shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of
E-7
<PAGE>
receipt of such notice, specifies the termination date (which date shall be not
more than fifteen days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause, as the case
may be, shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of receipt
-------------------
of the Notice of Termination or any later date specified therein, as the case
may be; provided, however, that (i) if the Executive's employment is terminated
by the Company other than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than the following obligations: (i) payment of the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid, (ii) payment of the product of (x) the Annual Bonus paid or payable but
for any deferral (and annualized for any fiscal year consisting of less than
twelve full months or for which the Executive has been employed for less than
twelve full months) to the Executive for the most recently completed fiscal year
during the Employment Period, and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (iii) payment of any compensation previously
deferred by the Executive (together with any accrued interest thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(the amounts described in clauses (i), (ii) and (iii) above are hereafter
referred to as "Accrued Obligations"). All Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, at the option of the
Company, either (x) in a lump sum in cash within 30 days of the Date of
Termination or (y) in twelve equal consecutive monthly installments, with the
first installment to be paid within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the Executive's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided generally by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect generally with respect to other
peer executives and their families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(b) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other
E-8
<PAGE>
than for Accrued Obligations. All Accrued Obligations shall be paid to the
Executive at the option of the Company, either (x) in a lump sum in cash within
30 days of the Date of Termination or (y) in twelve equal consecutive monthly
installments, with the first installment to be paid within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
ad/or the Executive's family, as in effect at any time thereafter through the
Date of Termination generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(c) Cause. If the Executive's employment shall be terminated for Cause
-----
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
the Annual Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Executive, in each case to the extent
theretofore unpaid. If the Executive terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive at the option of the Company, either (x) in a lump sum in cash within
30 days of the Date of Termination, or (y) in twelve equal consecutive monthly
installments, with the first installment to be paid within 30 days of the Date
of Termination.
(d) Good Reason. If, during the Employment Period, the Company shall
-----------
terminate the Executive's employment other than for Cause or Disability, or if
the Executive shall terminate employment under this Agreement for Good Reason:
(i) the Company shall pay to the Executive the aggregate of the following
amounts, such amounts, to be payable at the option of the Company, either (x) in
a lump sum in cash within 30 days of the Date of Termination or (y) in twelve
equal consecutive monthly installments, with the first installment to be paid
within 30 days of the Date of Termination:
A. all Accrued Obligations; and
B. 1 times the sum of the Executive's Annual Base Salary and the
-
Executive's Annual Bonus paid or payable but for any deferral (and annualized
for any fiscal year consisting of less than twelve full months or for which the
executive has been employed for less than twelve full months) to the Executive
for the most recently completed fiscal year during the Employment Period; and
C. the Executive shall be entitled to receive a separate lump-sum
supplemental retirement benefit equal to the difference between (a) the
actuarial equivalent (utilizing for this purpose the actuarial assumptions
utilized with respect to the Life Technologies Inc. Retirement Plan (or any
successor plan thereto) (the "Retirement Plan") during the 90-day period
E-9
<PAGE>
immediately preceding the Effective Date) of the benefit payable under the
Retirement Plan and any supplemental and/or excess retirement plan providing
benefits for the Executive (the "SERP") which the Executive would receive if the
Executive's employment continued at the compensation levels provided for in
Section 4(b) (i) and 4(b)(ii) of this Agreement for the remainder of the
Employment Period, assuming for this purpose that all accrued benefits are fully
vested and that benefit accrual formulas are no less advantageous to the
Executive than those in effect during the 90-day period immediately preceding
the Effective Date, and (b) the actuarial equivalent (utilizing for this purpose
the actuarial assumptions utilized with respect to the Retirement Plan during
the 90-day period immediately preceding the Effective Date) of the Executive's
actual benefit (paid or payable), if any, under the Retirement Plan and the
SERP; and
(ii) for the remainder of the Employment Period, or such longer period as
any plan, program, practice or policy may provide, the Company shall continue
benefits to the Executive and, where applicable, the Executive's family at least
equal to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b) (iv) of this
Agreement if the Executive's employment had not been terminated in accordance
with the most favorable plans, practices, programs or policies of the Company
and its affiliated companies generally applicable to other peer executives and
their families during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have retired on
the last day of such period.
The amounts required to be paid under this Section 6(d) shall be reduced by any
other amount of severance (i.e., relating solely to salary or bonus continuation
or actual or deemed pension or insurance continuation) received by the Executive
upon such termination of employment under any severance plan, policy or
arrangement of the Company applicable to the Executive or a group of employees
of the Company, including the Executive, and applicable without regard to the
occurrence of a change of control of Dexter or the Company prior to such
termination of employment. The amounts payable to the Executive pursuant to
this Agreement will not be subject to any requirement of mitigation, nor will
they be offset or otherwise reduced by reason of Executive's receipt of
compensation from any source other than the Company.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
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<PAGE>
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder, except as provided in the last sentence of Section 6(d), shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement. The Company agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2) of the
Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Provisions.
-----------------------------
(a) Anything in this Agreement to the Contrary notwithstanding, in the
event it shall be determined that, as a result, directly or indirectly, of the
operation of the Company's Stock Option Plan, or any successor option or
restricted Stock plans (the "Option and Restricted Stock Acceleration") or the
receipt of any other payment or distribution by the Company to or for the
benefit of the Executive whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise (a "Payment") the Executive
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the amount
payable to the Executive hereunder or as a result of the Option and Restricted
Stock Acceleration shall, at the election of Executive, be reduced in an amount
that would result in the Executive being in the most advantageous net after-tax
position (taking into account both income taxes and any Excise Tax). For
purposes of this determination, the "base amount" as defined in Section N
280G(b) (3)(A) of the Code shall be allocated between the Option and Restricted
Stock Acceleration, on the one hand, and Payments, on the other hand, in
accordance with Section 280G(b)(3)(B) of the Code.
(b) All determinations required to be made under this Section 9,
including the amount of any reduction that will be made in the payments made
pursuant to this Agreement and the assumptions to be utilized in arriving at
such determinations, shall be made by Coopers & Lybrand (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with an opinion that failure to
report the Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive.
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<PAGE>
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicated or divulge any such information, knowledge or date to
anyone other than the Company and those designated by it. In addition, to the
extent that the Executive is a party to any other agreement relating to
confidential information, inventions or similar matters with the Company, the
Executive shall continue to comply with the provisions of such agreements. In
no event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
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If to the Executive:
-------------------
John E. Leffler
c/o Life Technologies, Inc.
8717 Grovemont Circle
Gaithersburg, MD 20877
If to the Company:
-----------------
Life Technologies, Inc.
8717 Grovemont Circle
Gaithersburg, MD 20877
Attn: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof in any particular instance shall not be
deemed to be a waiver of such provision or any other provision thereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
/s/ John E. Leffler
-------------------
[Executive]
LIFE TECHNOLOGIES, INC.
By:/s/ J. Stark Thompson
---------------------
President and CEO
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<PAGE>
Exhibit (N)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between LIFE TECHNOLOGIES, INC., a Delaware Corporation
(the "Company"), and Timothy E. Pierce (the "Executive"), dated as of the 1st
----------------- ---
day of September, 1990.
---------
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below).
The Board believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions
-------------------
(a) The "effective Date" shall be the first date during the "Change of
Control Period" (as defined in Section 1(b)) on which a Change of Control
occurs.
(b) The "Change of Control Period" is the period commencing on the date
hereof and ending on the second anniversary of such date; provided, however,
that commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate two years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this Agreement;
-----------------
(i) a "Change of Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of 50% or
more of either the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"), provided,
however, that any acquisition approved by a majority of the Incumbent Board (as
hereinafter defined), including a majority of the members of the Incumbent Board
who are not Dexter-related Directors (as
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<PAGE>
hereinafter defined) or any acquisition by the Company, the Dexter Corporation
("Dexter") or any of their subsidiaries, or by any employee benefit plan (or
related trust) sponsored or maintained by the Company, Dexter or any of their
subsidiaries, or by any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding share of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all/or substantially all the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, shall not constitute a Change of Control;
or
(b) Individuals who as of April 19, 1989, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any individual becoming a director subsequent to April 19, 1989,
whose election, or nomination for election, by the Company's shareholders was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board, including a majority of the members of the Incumbent Board who
are not Dexter-related Directors, shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual or
threatened election contest (as such terms are use in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange Act) relating to the election of
Directors of the Company; or
(ii) at any time when either (x) Dexter is the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities
and at least half of the directors of the Company are Dexter-related Directors
(as hereinafter defined), or (y) Dexter is the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities
and there shall after any of the events set forth in the following clauses (a),
(b) or (c) be an increase in the percentage of the directors of the Company who
are Dexter-related Directors, then, in addition to the provisions of clause (i)
above, "Change of Control" shall mean:
(a) The acquisition, other than from Dexter, by any individual, entity
or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of either the then outstanding shares of Common
Stock of Dexter (the "Outstanding Dexter Common Stock") or the combined voting
power of the then outstanding voting securities of Dexter entitled to vote
generally in the election of directors (the "Outstanding Dexter Voting
Securities"), provided, however, that any acquisition by the Company, Dexter or
any of their subsidiaries, or by any employee benefit plan (or related trust)
sponsored or maintained by the Company, Dexter or any of their subsidiaries, or
by any corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of
E-15
<PAGE>
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Dexter Common Stock and Outstanding
Dexter Voting Securities immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such acquisition,
of the Outstanding Dexter Common Stock and Outstanding Dexter Voting Securities,
as the case may be, shall not constitute a Change of Control; or
(b) Individuals who, as of January 1, 1989, constitute the Board of
Directors of Dexter (the "Dexter Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of Dexter, provided
that any individual becoming a director subsequent to January 1, 1989, whose
election, or nomination for election, by Dexter's shareholders was approved by a
vote of at least a majority of the directors then comprising the Dexter
Incumbent Board shall be considered as though such individual were a member of
the Dexter Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) relating to the election of the Directors of
Dexter; or
(c) Approval by the stockholders of Dexter of a complete liquidation
or dissolution of Dexter or of the sale or other disposition of all or
substantially all of the assets of Dexter, or of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
Outstanding Dexter Common Stock and Outstanding Dexter Voting Securities
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation;
For purposes of this Agreement, a "Dexter-related Director" shall mean any
director of the Company who is or during the prior 10 years has been an officer,
director, employee or 5% or greater shareholder of Dexter or any of its
subsidiaries (other than the Company and its subsidiaries) or an officer,
director, partner, employee or 5% or greater shareholder of any law firm,
investment bank or other business organization that has been retained by Dexter
or any of its subsidiaries (other than the Company and its subsidiaries) to
provide services for an aggregate renumeration in any year of in excess of 5% of
the revenues of such law firm, investment bank or other business organization or
is otherwise controlling, controlled by or under common control with Dexter.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending at
the end of the 12th month following the Effective Date (the "Employment
----
Period").
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<PAGE>
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 25 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company ad, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive shall
-----------
receive an annual base salary ("Annual Base Salary"), which shall be paid at a
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable to the Executive by the Company and its affiliated companies in
respect of the twelve month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in base salary
generally awarded in the ordinary course of business to other peer executives of
the Company and its affiliated companies. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to the
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" includes any company controlled by, controlling or under
common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year during the Employment Period,
E-17
<PAGE>
an annual bonus (the "Annual Bonus") in cash at least equal to either (A) the
average annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by the Company
for less than twelve full months) bonus paid, or payable but for any deferral to
the Executive by the Company and its affiliated companies under the Company's
deferred compensation arrangements, in respect of the three fiscal years
immediately preceding the fiscal year in which the Effective Date occurs, or
(B), in the event the annual bonus paid, or payable but for any deferral to the
Executive by the Company and its affiliated companies under the Company's
deferred compensation arrangement, in respect of the fiscal year immediately
preceding the fiscal year in which the Effective Date occurs was based upon a
formula or plan in which the Executive participated, then such Annual Bonus
shall be at least equal to the bonus which would be payable based on such
formula or plan had the Executive's participation therein and level of
participation remained in effect following the Effective Date. Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus, is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. In addition to Annual
---------------------------------------
Base Salary and Annual Bonus payable as hereinabove provided, the Executive
shall be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs generally
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities), savings opportunities and retirement
benefits opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the Effective Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent generally applicable
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide benefits which
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect at any
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<PAGE>
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter generally with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as provided at any time thereafter generally with respect to
other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect at any time
thereafter generally with respect to other peer executives of the Company and
its affiliated companies.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability (as defined below) of the
Executive has occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 12(b) of this Agreement of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for "Cause". For purposes of this Agreement, "Cause"
means (i) repeated violations by the Executive of the Executive's obligations
under Section 4(a) of this Agreement which are demonstrably willful and
deliberate on the Executive's part and which are not remedied in a reasonable
period of time after receipt of written notice from the Company, (ii) commission
of an intentional act of fraud, embezzlement or theft by the
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<PAGE>
Executive in connection with the Executive's duties or in the course of the
Executive's employment with the Company, (iii) causing intentional wrongful
damage to property of the Company, (iv) intentionally and wrongfully disclosing
secret processes or confidential information of the Company, or (v)
participating, without the Company's consent, in the management of any business
enterprise which engages in substantial and direct competition with the Company,
and any such act shall have been materially harmful to the Company.
(c) Good Reason. The Executive's employment may be terminated during the
-----------
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company with
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
or written notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of written notice thereof given by the Executive;
(iii) the Company requiring the Executive to be based at any office or
location other than that described in Section 4(a) (i) (B) hereof or, requiring
the Executive to travel away from Executive's office in the course of
discharging responsibilities or duties in a manner which is inappropriate for
the performance of the Executive's duties hereunder and which is significantly
more frequent (in terms of either consecutive days or aggregate days in any
calendar year) than was required prior to the Change of Control;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by any successor to comply with and satisfy Section 11 (c)
of this Agreement, provided that such successor has received at least ten days
prior written notice from the Company or the Executive of the requirements of
Section 11(c) of this Agreement.
For the purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause or
---------------------
by the Executive for good Reason shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
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<PAGE>
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than fifteen days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause, as the case
may be, shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of receipt
-------------------
of the Notice of Termination or any later date specified therein, as the case
may be; provided, however, that (i) if the Executive's employment is terminated
by the Company other than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than the following obligations: (i) payment of the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid, (ii) payment of the product of (x) the Annual Bonus paid or payable but
for any deferral (and annualized for any fiscal year consisting of less than
twelve full months or for which the Executive has been employed for less than
twelve full months) to the Executive for the most recently completed fiscal year
during the Employment Period, and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (iii) payment of any compensation previously
deferred by the Executive (together with any accrued interest thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(the amounts described in clauses (i), (ii) and (iii) above are hereafter
referred to as "Accrued Obligations"). All Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, at the option of the
Company, either (x) in a lump sum in cash within 30 days of the Date of
Termination or (y) in twelve equal consecutive monthly installments, with the
first installment to be paid within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the Executive's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided generally by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect generally with respect to other
peer executives and their families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(b) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this
E-21
<PAGE>
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations. All Accrued Obligations shall be paid to the
Executive at the option of the Company, either (x) in a lump sum in cash within
30 days of the Date of Termination or (y) in twelve equal consecutive monthly
installments, with the first installment to be paid within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
ad/or the Executive's family, as in effect at any time thereafter through the
Date of Termination generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(c) Cause. If the Executive's employment shall be terminated for Cause
-----
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
the Annual Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Executive, in each case to the extent
theretofore unpaid. If the Executive terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive at the option of the Company, either (x) in a lump sum in cash within
30 days of the Date of Termination, or (y) in twelve equal consecutive monthly
installments, with the first installment to be paid within 30 days of the Date
of Termination.
(d) Good Reason. If, during the Employment Period, the Company shall
-----------
terminate the Executive's employment other than for Cause or Disability, or if
the Executive shall terminate employment under this Agreement for Good Reason:
(i) the Company shall pay to the Executive the aggregate of the following
amounts, such amounts, to be payable at the option of the Company, either (x) in
a lump sum in cash within 30 days of the Date of Termination or (y) in twelve
equal consecutive monthly installments, with the first installment to be paid
within 30 days of the Date of Termination:
A. all Accrued Obligations; and
B. 1 times the sum of the Executive's Annual Base Salary and the
-
Executive's Annual Bonus paid or payable but for any deferral (and annualized
for any fiscal year consisting of less than twelve full months or for which the
executive has been employed for less than twelve full months) to the Executive
for the most recently completed fiscal year during the Employment Period; and
C. the Executive shall be entitled to receive a separate lump-sum
supplemental retirement benefit equal to the difference between (a) the
actuarial equivalent (utilizing for this purpose the actuarial assumptions
utilized with respect to the Life Technologies Inc. Retirement Plan (or any
E-22
<PAGE>
successor plan thereto) (the "Retirement Plan") during the 90-day period
immediately preceding the Effective Date) of the benefit payable under the
Retirement Plan and any supplemental and/or excess retirement plan providing
benefits for the Executive (the "SERP") which the Executive would receive if the
Executive's employment continued at the compensation levels provided for in
Section 4(b) (i) and 4(b)(ii) of this Agreement for the remainder of the
Employment Period, assuming for this purpose that all accrued benefits are fully
vested and that benefit accrual formulas are no less advantageous to the
Executive than those in effect during the 90-day period immediately preceding
the Effective Date, and (b) the actuarial equivalent (utilizing for this purpose
the actuarial assumptions utilized with respect to the Retirement Plan during
the 90-day period immediately preceding the Effective Date) of the Executive's
actual benefit (paid or payable), if any, under the Retirement Plan and the
SERP; and
(ii) for the remainder of the Employment Period, or such longer period as
any plan, program, practice or policy may provide, the Company shall continue
benefits to the Executive and, where applicable, the Executive's family at least
equal to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b) (iv) of this
Agreement if the Executive's employment had not been terminated in accordance
with the most favorable plans, practices, programs or policies of the Company
and its affiliated companies generally applicable to other peer executives and
their families during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have retired on
the last day of such period.
The amounts required to be paid under this Section 6(d) shall be reduced by any
other amount of severance (i.e., relating solely to salary or bonus continuation
or actual or deemed pension or insurance continuation) received by the Executive
upon such termination of employment under any severance plan, policy or
arrangement of the Company applicable to the Executive or a group of employees
of the Company, including the Executive, and applicable without regard to the
occurrence of a change of control of Dexter or the Company prior to such
termination of employment. The amounts payable to the Executive pursuant to
this Agreement will not be subject to any requirement of mitigation, nor will
they be offset or otherwise reduced by reason of Executive's receipt of
compensation from any source other than the Company.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance
E-23
<PAGE>
with such plan, policy, practice or program except as explicitly modified by
this Agreement.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder, except as provided in the last sentence of Section 6(d), shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement. The Company agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2) of the
Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Provisions.
-----------------------------
(a) Anything in this Agreement to the Contrary notwithstanding, in the
event it shall be determined that, as a result, directly or indirectly, of the
operation of the Company's Stock Option Plan, or any successor option or
restricted Stock plans (the "Option and Restricted Stock Acceleration") or the
receipt of any other payment or distribution by the Company to or for the
benefit of the Executive whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise (a "Payment") the Executive
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the amount
payable to the Executive hereunder or as a result of the Option and Restricted
Stock Acceleration shall, at the election of Executive, be reduced in an amount
that would result in the Executive being in the most advantageous net after-tax
position (taking into account both income taxes and any Excise Tax). For
purposes of this determination, the "base amount" as defined in Section N
280G(b) (3)(A) of the Code shall be allocated between the Option and Restricted
Stock Acceleration, on the one hand, and Payments, on the other hand, in
accordance with Section 280G(b)(3)(B) of the Code.
(b) All determinations required to be made under this Section 9,
including the amount of any reduction that will be made in the payments made
pursuant to this Agreement and the assumptions to be utilized in arriving at
such determinations, shall be made by Coopers & Lybrand (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with an opinion that failure to
report the Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence
E-24
<PAGE>
or similar penalty. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive.
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicated or divulge any such information, knowledge or date to
anyone other than the Company and those designated by it. In addition, to the
extent that the Executive is a party to any other agreement relating to
confidential information, inventions or similar matters with the Company, the
Executive shall continue to comply with the provisions of such agreements. In
no event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
E-25
<PAGE>
If to the Executive:
-------------------
Timothy E. Pierce
c/o Life Technologies, Inc.
8717 Grovemont Circle
Gaithersburg, MD 20877
If to the Company:
-----------------
Life Technologies, Inc.
8717 Grovemont Circle
Gaithersburg, MD 20877
Attn: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof in any particular instance shall not be
deemed to be a waiver of such provision or any other provision thereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
/s/ Timothy E. Pierce
---------------------
[Executive]
LIFE TECHNOLOGIES, INC.
By:/s/ J. Stark Thompson
---------------------
President and CEO
E-26
<PAGE>
Exhibit 11
INDEX
-----
Calculation of earnings per share for the quarters and for the years ended
December 31:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
o 1995 E-28
o 1994 E-29
o 1993 E-30
</TABLE>
E-27
<PAGE>
Exhibit 11
LIFE TECHNOLOGIES
CALCULATION OF EARNINGS PER SHARE
for the year ended December 31, 1995
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters (unaudited)
----------------------------------
PRIMARY First Second Third Fourth Year
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 5,622 $ 5,614 $ 5,367 $ 5,674 $22,277
============================================
Weighted average shares
outstanding 14,996 15,031 15,078 15,162 15,067
Weighted average effect of
common stock equivalents 131 189 263 269 218
--------------------------------------------
15,127 15,220 15,341 15,431 15,285
============================================
Primary net income per share $.37 $.37 $.35 $.37 $1.46
============================================
FULLY DILUTED
- -------------
Net income $ 5,622 $ 5,614 $ 5,367 $ 5,674 $22,277
============================================
Weighted average shares
outstanding 14,996 15,031 15,078 15,162 15,067
Weighted average effect of
common stock equivalents 149 234 320 338 348
--------------------------------------------
15,145 15,265 15,398 15,500 $15,415
============================================
Fully diluted net income
per share $ .37 $ .37 $ .35 $ .37 $ 1.45
============================================
</TABLE>
E-28
<PAGE>
Exhibit 11
LIFE TECHNOLOGIES
CALCULATION OF EARNINGS PER SHARE
for the year ended December 31, 1994
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters (unaudited)
----------------------------------
PRIMARY First Second Third Fourth Year
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 4,679 $ 4,638 $ 4,352 $ 4,538 $18,207
============================================
Weighted average shares
outstanding 14,959 14,970 14,974 14,980 14,971
Weighted average effect of
common stock equivalents 102 87 103 105 100
--------------------------------------------
15,061 15,057 15,077 15,085 15,071
============================================
Primary net income per share $.31 $.31 $.29 $.30 $1.21
============================================
FULLY DILUTED
- -------------
Net income $ 4,679 $ 4,638 $ 4,352 $ 4,538 $18,207
============================================
Weighted average shares
outstanding 14,959 14,970 14,974 14,980 14,971
Weighted average effect of
common stock equivalents 102 110 130 165 159
--------------------------------------------
15,061 15,080 15,104 15,145 $15,130
============================================
Fully diluted net income
per share $ .31 $ .31 $ .29 $ .30 $ 1.20
============================================
</TABLE>
E-29
<PAGE>
Exhibit 11
LIFE TECHNOLOGIES
CALCULATION OF EARNINGS PER SHARE
for the year ended December 31, 1993
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters (unaudited)
----------------------------------
PRIMARY First Second Third Fourth Year
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 4,362 $ 4,372 $ 3,939 $ 3,887 $16,560
============================================
Weighted average shares
outstanding 14,933 14,934 14,945 14,951 14,942
Weighted average effect of
common stock equivalents 211 143 135 105 149
--------------------------------------------
15,144 15,077 15,080 15,056 15,091
============================================
Primary net income per share $.29 $.29 $.26 $.26 $1.10
============================================
FULLY DILUTED
- -------------
Net income $ 4,362 $ 4,372 $ 3,939 $ 3,887 $16,560
============================================
Weighted average shares
outstanding 14,933 14,934 14,945 14,951 14,942
Weighted average effect of
common stock equivalents 211 143 158 115 148
--------------------------------------------
15,144 15,077 15,103 15,066 $15,090
============================================
Fully diluted net income
per share $ .29 $ .29 $ .26 $ .26 $ 1.10
============================================
</TABLE>
E-30
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
The following table sets forth subsidiaries of Life Technologies, Inc. which are
included in the consolidated financial statements.
<TABLE>
<CAPTION>
Percentage Jurisdiction in
of Which Incorporated
Name Ownership or Organized
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bethesda Research Labs (U.K.) Ltd. 100% (B) (G) England
Biomed Benelux B.V. 100% (E) (G) Netherlands
Canadian Life Technologies, Inc. 100% Ontario
GIBCO/Bio-Cult Diagnostics, Ltd. 100% (F) (G) Scotland
GIBCO Leasing Ltd. 100% (B) (G) Scotland
GIBCO New Zealand (1989) Ltd. 100% (D) (G) New Zealand
Laboratory Services Ltd. 100% New Zealand
Labserum Distributors (1980) Ltd. 100% (D) (G) New Zealand
Life Technologies A.G. 100% (C) Switzerland
Life Technologies A.S. 100% Denmark
Life Technologies B.V. 100% (C) Netherlands
Life Technologies (Europe) Ltd. 100% (B) (G) Scotland
Life Technologies Foreign Sales Corp. 100% U.S.Virgin Islands
Life Technologies Holdings, Unlimited 100% Scotland
Life Technologies GmbH 100% (C) Germany
Life Technologies Investment Holdings,Inc.100% Delaware
Life Technologies Italia S.r.l. 100% Italy
Life Technologies Ltd. 100% (B) Scotland
Life Technologies Ltd. 100% New Zealand
Life Technologies Overseas Ltd. 100% (B) Scotland
Life Technologies (Pacific) Ltd. 100% Hong Kong
Life Technologies Pty. Ltd. 100% Australia
Life Technologies S.A.R.L. 100% (C) France
Life Technologies Asia Pacific Inc. 100% Delaware
N.V. Life Technologies S.A. 100% (C) Belgium
Phoenix Chemicals Ltd. 100% (D) (G) New Zealand
Prespak Plastics (1988) Ltd. 100% (A) (G) New Zealand
Serum Technologies Holdings, Inc. 100% Delaware
Life Technologies Sweden AB 100% Sweden
Life Technologies GIBCO BRL Co., Ltd. 51% Republic of China,
(Taiwan)
Life Technologies S.A. 100% Spain
Life Technologies Oriental K.K. 51% Japan
</TABLE>
(A) Owned by Laboratory Services Ltd.
(B) Owned by Life Technologies Holdings, Unlimited
(C) Owned by Life Technologies Overseas Ltd.
(D) Owned by Life Technologies Ltd. (New Zealand)
(E) Owned by Life Technologies B.V.
(F) Owned by Life Technologies Ltd. (Scotland)
(G) Inactive
E-31
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Life Technologies, Inc. and subsidiaries on Form S-8, Registration No. 33-59741,
Registration No. 33-21807 and Registration No. 33-956, and the Company's
registration statement on Form S-3, Registration No. 33-29536, of our report
dated January 23, 1996, on our audits of the consolidated financial statements
of Life Technologies, Inc. and subsidiaries as of December 31, 1995 and 1994,
and for the years ended December 31, 1995, 1994 and 1993, which report is
included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Rockville, MD
February 23, 1996
E-32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet, Income Statement and Exhibit 11 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 23,201
<SECURITIES> 0
<RECEIVABLES> 49,947
<ALLOWANCES> 1,225
<INVENTORY> 60,845
<CURRENT-ASSETS> 142,022
<PP&E> 89,690
<DEPRECIATION> 37,829
<TOTAL-ASSETS> 208,744
<CURRENT-LIABILITIES> 45,261
<BONDS> 1,451
0
0
<COMMON> 152
<OTHER-SE> 153,925
<TOTAL-LIABILITY-AND-EQUITY> 208,744
<SALES> 272,232
<TOTAL-REVENUES> 272,299
<CGS> 135,784
<TOTAL-COSTS> 135,784
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 34,943
<INCOME-TAX> 12,160
<INCOME-CONTINUING> 22,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,277
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.45
</TABLE>
