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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
For the fiscal year ended December 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-14991
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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.)
9800 MEDICAL CENTER DRIVE, ROCKVILLE, MD 20850
(Address of principal executive offices) (Zip Code)
--------------------------------
Registrant's telephone number, including area code: (301) 610-8000
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 March 5, 1999 was $249,515,560.
The number of shares of Common Stock outstanding as of March 5, 1999 was
24,944,867.
Documents Incorporated By Reference
Portions of the registrant's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on May 4, 1999 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 May 4, 1999.
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 consisting of
laboratories generally associated with universities, medical research centers,
and government institutions as well as biotechnology, pharmaceutical, energy,
agricultural and chemical companies. The Company sells its products principally
through its own direct sales organization which is supplemented by a network of
distributors.
The Company's activities are focused on the following areas:
o 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, custom primers, 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.
o 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. This use of the Company's products
is also referred to as "industrial bioprocessing".
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
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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
environment which surrounds such cells naturally (in vivo) and which facilitate
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," a researcher can modify 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 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.
PRODUCTS AND SERVICES
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Information regarding the Company's products and services is contained in the
Financial Note entitled "Segment Reporting and Related Information" on pages F-
22 through F-24 of this 1998 Annual Report on Form 10-K.
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GEOGRAPHIC AND OPERATING SEGMENT INFORMATION
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Information regarding geographic and operating segment information is contained
in the Financial Note entitled "Segment Reporting and Related Information" on
pages F-22 through F-24 of this 1998 Annual Report on Form 10-K.
SALES AND MARKETING
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At December 31, 1998, the Company had approximately 174 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 $21.9 million in 1998, $21.3 million in 1997 and $19.1 million
in 1996. R&D expenses in 1998, 1997 and 1996 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.
The Company conducts most of its research and development activities at its own
facilities using its own personnel. At December 31, 1998, the Company had
approximately 146 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 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.
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, speed of delivery, technical support, price,
breadth of product line, and timely product development. The Company believes
its customers are diverse and place varying degrees of importance on the
competitive attributes listed above. While it is difficult to rank these
attributes for all its customers in the aggregate, the Company believes it is
well positioned to compete in each category.
PATENTS AND LICENSES
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The Company has a number of U.S and foreign patents and has numerous pending
patent applications. In addition to its patent portfolio, the Company also owns
other intellectual property, and on a case by case basis, the Company grants
licenses to others to use such intellectual property. The Company does not
believe that license revenue is material to its business as a whole. In
addition, it is the Company's policy to obtain 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 1998, approximately 17% of
the Company's net sales were related to products which were licensed from others
or which incorporated technologies licensed from others. The Company
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intends to continue its current strategy of seeking licenses to technologies and
products from sources around the world.
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 affiliated joint ventures, and is not dependent on any one supplier or
group of suppliers. Raw materials, other than raw fetal bovine serum ("FBS"),
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 affiliated joint
ventures. 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 customers' current requirements.
GOVERNMENT REGULATION
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Certain of the Company's cell culture products are subject to regulation under
the U.S. 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 in vitro diagnostic cell culture
products are subject to periodic inspection by the U.S. Food and Drug
Administration ("FDA") and other product-oriented federal agencies and various
state and local authorities in the U.S. Such facilities are believed to be in
compliance in all material respects with the requirements of the FDA's current
Good Manufacturing Practices, other federal, state and local regulations and
other quality standards such as ISO 9000.
The U.S. 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
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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 Water Act, the Toxic Substances Control Act,
the Clean Air Act, various statutes and regulations applicable to the use of
radioactive material, national restrictions on technology transfer, import,
export and customs regulations, statutes and regulations relating to government
contracting, and similar laws and regulations in foreign countries. In
particular, the Company is subject to European regulations regarding importation
of animal-derived products such as FBS.
EMPLOYEES
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At December 31, 1998, the Company had approximately 1,759 full-time and 49 part-
time employees, approximately 677 of whom were employed outside the United
States. No 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 property at the following principal locations, each
of which contains manufacturing, storage, laboratory or office facilities:
Rockville, Maryland (Owned)
Frederick, Maryland (Owned and leased)
Glasgow area, principally Inchinnan, Scotland (Owned and leased)
Grand Island, New York (Owned)
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 1999
to 2020, 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 with some space available for expansion at some
of its locations. The Company considers the facilities to be in a condition
suitable for their current uses. Because of anticipated 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.
Additional information regarding the Company's properties is contained in Item 7
of this 1998 Annual Report on Form 10-K in the sections entitled "1998 Cash
Flows" and "1999 Cash Flows" as well as in the Financial Notes entitled
"Property, Plant and Equipment" and "Leases" on pages F-10 and F-11 of this 1998
Annual Report on Form 10-K.
Item 3. LEGAL PROCEEDINGS
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The Company is involved in various legal proceedings, including class actions,
that are incidental to its business. The Company is not involved in any pending
legal proceedings which the Company believes could reasonably be expected to
have a material adverse effect on the Company's financial condition or results
of operations.
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From July 8 to July 10, 1998, several lawsuits purporting to be brought as class
actions on behalf of the Company's public stockholders were filed against the
Company, Dexter Corporation ("Dexter") and the Company's directors (with whom
the Company has indemnification agreements) in the Court of Chancery of the
State of Delaware. In September 1998 these lawsuits were consolidated into a
single action, titled In re Life Technologies, Inc. Shareholders Litigation
(Consolidated Civil Action No. 16513). On November 6, 1998, an Amended
Consolidated Class Action Complaint, a motion for preliminary injunction and a
motion for expedited proceedings were filed in the Court of Chancery of the
State of Delaware. The amended consolidated complaint alleges, among other
things, that Dexter and the defendant directors of the Company who are
affiliated with Dexter or are officers of the Company have breached their
respective fiduciary duties to the Company's public stockholders. The amended
consolidated complaint seeks to enjoin defendants, preliminarily and
permanently, from consummating a tender offer by Dexter, to require Dexter to
supplement its Offer to Purchase and to recover monetary damages and fees and
expenses of litigation. On November 9, 1998, the Delaware Chancery Court
scheduled a hearing to be held on November 24, 1998, with respect to the motion
for preliminary injunction filed on November 6, 1998. At the November 24, 1998
hearing, the Court of Chancery of the State of Delaware denied the plaintiffs'
motion for preliminary injunction.
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: 57; years of service: 10) 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.
JOHN V. COOPER (age 47; years of service: 7) was elected Senior Vice President
and General Manager, Americas Research Products Division, effective February 2,
1999. Prior thereto, he held the position of Vice President and General
Manager, Americas Research Products Division, effective April 13, 1993. Prior
thereto, he held several managerial positions with the Company since joining the
Company in 1992. Prior to joining the Company, he had been a Worldwide Business
Manager in Printed Circuit Materials for DuPont.
THOMAS M. COUTTS (age: 54; years of service: 29) 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.
BRIAN D. GRAVES (age: 57; years of service: 17) 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.
TIMOTHY E. PIERCE, PH.D. (age: 57; years of service: 8) was elected Vice
President and General Manager, Asia Pacific Division, effective September 18,
1990.
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JOSEPH C. STOKES, JR. (age: 51; years of service: 10) was elected Senior Vice
President and Chief Financial Officer, effective July 16, 1996. Prior thereto,
he held the position of Vice President, Finance, Secretary and Treasurer,
effective March 1, 1989. He was appointed a director of the Company on February
2, 1999.
ROSEMARY J. VERSTEEGEN, PH.D. (age: 50; years of service: 17) was elected a Vice
President of the Company on April 16, 1991. Prior thereto, she held several
managerial positions with the Company since joining the Company in 1982.
DEREK E. WOODS, PH.D. (age: 48; years of service: 3) was elected Vice President,
Research and Development on April 15, 1997, and prior thereto had served in that
position as an appointed officer since joining the Company in 1996. Prior
thereto, he worked for Johnson & Johnson in various research and business
development positions.
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 quoted on the OTC Bulletin Board under the symbol:
LTEK. Prior to the close of business on February 1, 1999, the Company's Common
Stock was quoted on the Nasdaq National Market under the symbol: LTEK.
Effective with the close of business on February 1, 1999, the Company's Common
Stock was delisted from the Nasdaq Stock Market, because of the Company's
inability to remain in compliance with certain maintenance standards required
for continued listing on the Nasdaq National Market, including the number of
shareholders and public float requirements. The Company fell out of compliance
with certain requirements as a result of the completed tender offer for the
Company's Common Stock by Dexter Corporation. The high and low sales prices for
the Company's Common Stock for each quarter of 1997 and 1998 as reported by The
Nasdaq Stock Market are contained in the Financial Notes entitled "Quarterly
Financial Information" on page F-21 of this 1998 Annual Report on Form 10-K.
The number of stockholders of record of the Company's Common Stock at March 5,
1999 was 354. At March 5, 1999, Dexter Corporation owned approximately 71% of
the outstanding Common Stock of the Company.
The Company's Board of Directors has declared regular quarterly cash dividends
in each fiscal quarter since the second quarter of 1991. For the previous three
years, cash dividends declared were: $0.03-1/3 per share in the first quarter of
1996, $0.04 per share for the remaining three fiscal quarters of 1996 and the
first two quarters of 1997, and $0.05 per share for the last two quarters of
1997 and all four quarters of 1998. The Company's Board of Directors 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 1998 Annual Report on Form 10-K.
SELECTED FINANCIAL DATA
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(amounts in thousands, except per share data)
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<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Revenues $364,206 $332,808 $310,339 $272,299 $235,262
Research and development
expenses 21,880 21,281 19,084 15,871 15,000
Shareholder acquisition expenses 5,335 - - - -
Gain on product line disposal - - 2,569 - -
Operating income 50,509 50,934 46,101 34,152 28,040
Net income 31,303 32,235 28,700 22,277 18,207
Additions to property, plant
and equipment $ 18,024 $ 23,386 $ 42,151 $ 11,159 $ 12,123
Average shares outstanding:
Basic 23,687 23,171 22,881 22,601 22,457
Diluted 24,204 23,945 23,504 22,929 22,607
AT DECEMBER 31
Cash and cash equivalents $ 56,047 $ 19,076 $ 15,326 $ 23,201 $ 13,246
Working capital 160,403 100,927 84,196 96,761 71,255
Total assets 353,587 280,274 253,931 208,744 171,747
Long-term debt - 4,564 4,668 1,451 -
Stockholders' equity 276,108 208,724 182,919 153,925 130,129
Per share $ 11.07 $ 8.94 $ 7.97 $ 6.76 $ 5.79
Shares outstanding 24,941 23,351 22,951 22,773 22,471
PER SHARE
Net income:
Basic $ 1.32 $ 1.39 $ 1.25 $ .99 $ .81
Diluted 1.29 1.35 1.22 .97 .81
Cash dividends declared .20 .18 .15 1/3 .13 1/3 .13 1/3
Market price:
High 40 35 7/8 26 1/2 18 1/3 13 1/2
Low 29 3/8 24 1/4 15 1/3 11 2/3 10
Close 38 7/8 33 1/4 25 18 1/6 13
</TABLE>
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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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Statements in this Annual Report on Form 10-K concerning the Company's business
outlook or future economic performance; anticipated profitability, revenues,
expenses or other financial items; and statements concerning assumptions made or
expectations as to any future events, conditions, performance or other matters,
are "forward-looking statements" as that term is defined under the Federal
Securities Laws. Forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
those stated in such statements. Such risks, uncertainties and factors include,
but are not limited to, changes in government funding for life sciences
research, changes in pricing or availability of fetal bovine serum, changes in
currency exchange rates, changes and delays in new product introduction,
customer acceptance of new products, changes in government regulations, changes
in pricing or other actions by competitors and general economic conditions, as
well as other risks detailed in the Company's filings with the Securities and
Exchange Commission, including this 1998 Annual Report on Form 10-K. See in
particular the sections entitled "Business Outlook" and "1999 Cash Flows".
The information in this Item 7 should be read in conjunction with the related
consolidated financial statements and notes thereto contained elsewhere in this
1998 Annual Report on Form 10-K.
GENERAL
The Company develops, manufactures, and sells cell culture and cell and
molecular biology products, services and technologies. Many of the Company's
products are sold under the GIBCO BRL brand name. Cell culture products and
services are used to grow cells under laboratory conditions and for the
commercial manufacture of pharmaceuticals and other life sciences products. Cell
culture products include cell and tissue culture media, reagents, fetal bovine
("FBS") and other animal sera, growth and attachment factors, and plasticware.
Cell and molecular biology products, services and technologies are used to
identify, isolate, and manipulate the metabolic processes and genetic material
of living organisms. Cell and molecular biology products include enzymes,
nucleic acids, lipids, competent cells, custom oligonucleotides, and related
products.
RESULTS OF OPERATIONS
REVENUES
Revenues for the Company's operating segments in 1998, 1997 and 1996 compare as
follows:
<TABLE>
<CAPTION>
(amounts in thousands) 1998 1997 1996
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<S> <C> <C> <C>
Americas Research $129,428 $118,095 $108,041
U.S. Bioindustrial 71,634 61,335 51,025
Europe 116,996 105,682 106,041
Asia Pacific 43,915 45,756 43,386
Other 2,233 1,940 1,846
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Consolidated revenues $364,206 $332,808 $310,339
======================== ======== ======== ========
</TABLE>
Revenues for 1998 were $364.2 million, an increase of $31.4 million, or 9%, over
1997 revenues. The effect of changes in currency exchange rates reduced 1998
revenues by $6.4 million, or 2%, when compared with 1997 revenues. Revenues for
the Americas Research segment increased approximately 10% when comparing 1998
with 1997. The effect of changes in currency exchange rates reduced 1998
revenues for the Americas Research segment by $0.9 million, or 1%, when compared
with 1997 revenues. Revenues in Latin America increased
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significantly in 1998 when compared with 1997. This increase was directly
related to the establishment of a Company subsidiary in Brazil in late 1997.
Sales of custom oligonucleotides for the Americas Research segment increased
approximately 29% in 1998 compared with 1997 and contributed approximately 2% of
the 10% increase in segment revenues. Revenues for the U.S. Bioindustrial
segment increased approximately 17% when comparing 1998 with 1997. Sales of
enzymes increased approximately 70%, reflecting a significant increase in enzyme
sales to customers for use in commercial diagnostic applications. Sales of
custom oligonucleotides for the U.S. Bioindustrial segment increased
approximately 47% in 1998 compared with 1997. Revenues for the European segment
increased approximately 11% in 1998 compared with 1997. The effect of changes in
currency exchange rates reduced 1998 revenues for the European segment by $1.1
million, or 1%, when compared with 1997 revenues. Sales of cell and molecular
biology products increased 13% on a currency comparable basis and included a 33%
increase in custom oligonucleotide sales. Revenues for the Asia Pacific segment
decreased approximately 4% when comparing 1998 with 1997. The effect of changes
in currency exchange rates reduced 1998 revenues for the Asia Pacific segment by
$4.3 million, or 9%, when compared with 1997 revenues. Sales of cell and
molecular biology products increased 11% on a currency comparable basis in the
Asia Pacific segment when comparing 1998 revenues with 1997.
Revenues for 1997 were $332.8 million, an increase of $22.5 million, or 7%, over
1996 revenues. The effect of changes in currency exchange rates reduced 1997
revenues by $12.7 million, or 4% when compared with 1996 revenues. Revenues for
the Americas Research segment increased approximately 9% when comparing 1997
with 1996. The effect of changes in currency exchange rates decreased 1997
revenues for the Americas Research segment by $0.2 million when compared with
revenues in 1996. Sales of cell and molecular biology products increased 13% on
a currency comparable basis and included a 56% increase in custom
oligonucleotide sales. Revenues for the U.S. Bioindustrial segment increased
approximately 20% in 1997 compared with 1996 revenues. Sales of cell and
molecular biology products for the U.S. Bioindustrial Segment increased 30% when
comparing 1997 revenues with 1996 and included increases in custom
oligonucleotide and enzyme sales of 80% and 45%, respectively. Revenues for the
European segment were essentially unchanged in 1997 from 1996. The effect of
changes in currency exchange rates decreased 1997 revenues for the European
segment by $9.0 million, or 9%, when compared with revenues in 1996. Sales of
cell and molecular biology products for the European segment increased 14% on a
currency comparable basis and included an 82% increase in custom oligonucleotide
sales. Revenues for the Asia Pacific segment increased approximately 6% in 1997
over 1996. The effect of changes in currency exchange rates decreased 1997
revenues for the Asia Pacific segment by $3.5 million, or 8%, when compared with
1996. Sales of cell and molecular biology products for the Asia Pacific segment
increased 23% on a currency comparable basis and included a 114% increase in
custom oligonucleitide sales.
Royalty income was $2.5 million, $1.8 million and $0.9 million in 1998, 1997 and
1996, respectively. Royalty income relates principally to the Company's
patented technology to improve the accuracy of amplification based assays. The
Company generally grants a license to this technology for an up-front fee and
future royalties on sales of products which incorporate the licensed technology.
Royalty income based on licensee sales of products incorporating technology
licensed from the Company was $2.2 million in 1998, $1.6 million in 1997 and
$0.4 million in 1996.
COST OF SALES - GROSS MARGIN
Gross margins were 53.6% of net sales in 1998 compared with 53.9% of net sales
in 1997. FBS gross margins improved slightly in 1998 when compared with 1997,
as unit costs decreased at a greater rate than unit selling prices. The Company
reduced its LIFO reserves in the amount of $0.2 million during 1998,
10
<PAGE>
largely as a result of lower unit costs for FBS. Gross margins benefited from
production efficiencies when comparing 1998 with 1997 but were negatively
affected by unfavorable currency comparisons.
Gross margins were 53.9% of net sales in 1997 compared with 52.5% of net sales
in 1996. FBS gross margins improved in 1997 when compared with 1996,
principally due to lower unit costs in 1997 compared with 1996. The Company
reduced its LIFO reserves in the amount of $1.4 million during 1997, largely as
a result of lower unit costs for FBS. Gross margins also benefited from a
favorable change in the mix of sales, production efficiencies and lower scrap
costs.
MARKETING AND ADMINISTRATIVE EXPENSES
Marketing and administrative expenses were 32.8% of net sales in 1998 and 32.6%
of net sales in both 1997 and 1996. The Company has increased its spending for
marketing and administrative expenses over the period from 1996 to 1998,
expressed as a percentage of sales, to implement its new core business
enterprise management information systems and to acquire and protect
intellectual property rights. Costs related to operating the Company's new
Brazilian subsidiary increased marketing and administrative expenses as a
percentage of sales when comparing 1998 with 1997.
RESEARCH AND DEVELOPMENT ("R&D") EXPENSES
Research and development expenses were $21.9 million in 1998, $21.3 million in
1997 and $19.1 million in 1996. R&D expenses in 1998, 1997 and 1996 were
directed primarily 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 6.0%, 6.4% and 6.2% of net sales
in 1998, 1997 and 1996, respectively.
SHAREHOLDER ACQUISITION EXPENSES
The Company reported $5.3 million in expenses in 1998 related to the acquisition
of additional shares of the Company by Dexter Corporation ("Dexter"). Dexter
announced on July 7, 1998 its intention to acquire, for $37 per share in cash,
the shares of the Company it did not already own. Shortly thereafter, the Board
of Directors of the Company appointed a special committee of the board,
consisting of independent directors, to evaluate Dexter's proposal. The special
committee engaged legal and investment banking advisors to support their
evaluation. On November 2, 1998, Dexter commenced a tender offer to acquire the
shares of the Company it did not already own which ultimately resulted in their
acquisition of an additional 22% of the Company in late December, 1998.
Approximately $4.0 million of the shareholder acquisition expenses reported in
1998 was for investment banking services in support of the special committee's
evaluation. The remaining shareholder acquisition expenses were primarily legal
expenses associated with the transaction. As of December 31, 1998, Dexter owned
approximately 71% of the Company.
GAIN ON PRODUCT LINE DISPOSAL
The Company reported a $2.6 million gain in 1996 on the disposal of its
molecular diagnostics product line which was sold in 1990 for book value plus a
$2.6 million note receivable. The Company delayed recognition of the gain on
this sale until the note was collected because of reasonable doubt as to whether
the note might be collected. The Company received payments on the note,
primarily for interest, from the time the note was first issued. All interest
payments were included in interest income.
11
<PAGE>
OPERATING INCOME
Operating income for 1998 was $50.5 million, a decrease of 1% compared with
1997. Excluding the $5.3 million in expenses related to the acquisition of
additional shares by Dexter, operating income increased 10% in 1998 when
compared with 1997. Changes in currency exchange rates used to translate non-
U.S. earnings to U.S. dollars decreased operating income in 1998 by $0.9 million
when compared with 1997.
Operating income for 1997 was $50.9 million, an increase of 10% compared with
1996. The increase in operating income was 17% when comparing 1997 results with
1996 operating income and excluding the one-time gain on the product line
disposal from 1996 results. The percentage increase in adjusted operating
income was greater than the percentage increase in net sales principally due to
the improvement in gross margins. Changes in currency exchange rates used to
translate non-U.S. earnings to U.S. dollars decreased operating income in 1997
by $1.1 million when compared with 1996.
OTHER INCOME AND EXPENSES
Investment income was $0.7 million in 1998, $0.5 million in 1997 and $0.7
million in 1996. Investment income in 1996 included $0.1 million related to an
interest bearing note received upon the disposition of the Company's molecular
diagnostics product line in late 1990. Apart from the interest on the
aforementioned note, interest income varied from 1996 to 1998 based on changes
in available cash and prevailing interest rates.
INCOME TAXES
Income taxes were 37.5% of income before taxes in 1998 compared with 36.0% of
income before taxes in both 1997 and 1996. The effective income tax rate was
higher in 1998 reflecting limited income tax benefits related to the shareholder
acquisition expenses reported in 1998. Apart from the effect on income tax
expense related to the shareholder acquisition expenses, the effective income
tax rate would have been 34.5% in 1998. The reduction in the adjusted 1998
income tax rate compared with the 1997 income tax rate was due to the
realization of a higher proportion of taxable income in countries with lower tax
rates as well as greater benefits from tax credits recognized in 1998.
MINORITY INTERESTS
Income attributed to minority interest investors was $0.6 million in 1998, $0.6
million in 1997 and $1.2 million in 1996. The decrease in 1997 compared with
1996 is due to lower minority ownership in the Company's Japanese subsidiary in
1997 compared with 1996, as well as lower earnings in 1997 at entities less than
100% owned by the Company.
NET INCOME
Net income was $31.3 million in 1998, $32.2 million in 1997 and $28.7 million in
1996. Excluding shareholder acquisition expenses and the related income tax
effect from 1998 results, and the one-time gain on the product line disposal
from 1996 results, net income has increased 13%, 19% and 21% in 1998, 1997, and
1996, respectively.
EARNINGS PER SHARE
Diluted earnings per share were $1.29 in 1998, a 4% decrease compared with
diluted earnings per share of $1.35 in 1997. Excluding approximately $5.3
million of expenses related to the acquisition of additional shares of the
12
<PAGE>
Company by Dexter, 1998 diluted earnings per share were $1.50, an increase of
11% over the previous year.
Diluted earnings per share were $1.35 in 1997, which constituted an increase of
11% when compared with diluted earnings per share of $1.22 in 1996. Excluding
the one-time gain reported in 1996 related to the disposition of a product line,
diluted earnings per share increased 17%.
BUSINESS OUTLOOK
The Company expects to concentrate on its core cell culture and cell and
molecular biology product lines and related service and technology offerings in
1999. 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, its competitors and its customers, and changes in
technology and scientific discoveries.
Changes in currency exchange rates, economic and currency instability,
especially in Asia and Latin America, the supply and price of FBS, and the
availability of well-trained employees throughout the world are factors that
could have a significant effect on the Company in 1999. A strengthening of the
U.S. dollar and Pound Sterling against other currencies could have a negative
effect on the Company's operating results.
Volatility in the FBS market could significantly affect the Company's operating
results. The market volatility of FBS and the increasing demand for alternative
media provide strong incentive to develop products and technologies which are
not dependent on animal sera raw materials. To date, serum-free media has only
been developed for specific, relatively narrow purposes. If a more broadly
applicable alternative to animal derived products were developed, it could have
a significant effect on the Company's operating results, which could be positive
or negative, depending on what rights were held by the Company in the
alternative products.
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.
The Company is in the process of replacing its core financial, order
entry/distribution, and manufacturing systems at its major locations worldwide.
The Company has been advised by its software vendor that the release/version of
the software being implemented by the Company is Year 2000 compliant. The
Company began the installation of this software in the first quarter of 1998 in
the United States, and currently expects U.S. installation to be complete in the
third quarter of 1999. The Company plans to complete internal testing and
external validation of Year 2000 compliance with respect to this system during
the third quarter of 1999. The Company also currently expects to have these new
systems installed in Europe and in the Asia/Pacific region by the end of the
second quarter 1999, and to test and validate these systems by the end of the
century. The Company plans to certify software currently in use at other sites
and not replaced by the new systems for Year 2000 compliance by the third
quarter of 1999. As previously reported, although the Company decided to replace
these core systems several years ago for reasons unrelated to Year 2000
concerns, a portion of the overall project relates to an unanticipated software
upgrade implemented specifically to address Year 2000 issues. Due to the
significant amount of time and effort expended for overall systems replacement
activities, it is difficult to calculate the actual costs specifically
attributable to the Year 2000 software upgrade portion of the project. However,
the Company estimates that the cost of this upgrade (which represents external
costs incurred to
13
<PAGE>
date directly related to Year 2000 remediation efforts) approximates $0.1
million.
The Company is also implementing a comprehensive project plan to identify other
internal and external systems which may require modification or upgrade to be
made Year 2000 compliant. An inventory and assessment of these systems was
substantially complete by the end of 1998. Remediation and testing of non-Year
2000 compliant systems is expected to be completed by the end of the third
quarter 1999. As part of this project, the Company expects to develop and test
contingency plans by the third quarter of 1999 which identify workarounds in the
event of a malfunction of a system designated as a priority system at the
inventory stage. In addition, the Company is in the process of identifying
suppliers of key goods and services to all business areas, and requesting
information about their Year 2000 readiness. The Company plans to evaluate this
information on a continuing basis into Year 2000, and to develop contingency
plans where the information provided raises significant concerns about a
vendor's ability to supply the Company on an uninterrupted basis during the Year
2000 transition. As of December 31, 1998, costs incurred related to this part
of the project were not material. The Company believes that the cost of
modifications necessary to become Year 2000 compliant will be approximately $2.0
million, principally for capital expenditures. There can be no assurance,
however, that the Company will be able to identify all aspects of its business
that are subject to Year 2000 problems, or identify Year 2000 problems of
customers or suppliers that affect the Company's business. There also can be no
assurance that the Company's software vendors are correct in their assertions
that the software is Year 2000 compliant or that the Company's estimate of the
costs of systems preparation for Year 2000 compliance will prove ultimately to
be accurate.
LIQUIDITY AND CAPITAL RESOURCES
1998 CASH FLOWS
The Company generated $42.1 million in cash from operations during 1998. Net
income after adjustments for depreciation and amortization was the principal
source of cash from operations in 1998. The components of working capital
increased at a rate generally commensurate with the increase in net sales and,
in the aggregate, required $6.3 million in cash during 1998.
The Company paid $25.4 million in cash for capital expenditures in 1998. Capital
spending in 1998 included $4.6 million for land under a capital lease at the
Company's headquarters in Rockville, Maryland and $3.8 million to complete the
Company's new administrative and R&D facilities at that site. The Company also
spent $6.9 million to relocate and consolidate its U.S.-based cell generation
and custom oligonucleotide production facilities to its core cell and molecular
biology production facility in Frederick, Maryland. The balance of 1998 capital
spending was principally for new and replacement machinery and equipment and
management information systems related to the Company's ongoing business
operations. The Company paid $1.1 million in deferred purchase payments related
to the 1996 acquisition of Custom Primers, Inc., a California-based producer of
oligonucleotides. Cash provided from other investing activities was principally
related to the disposition of excess land owned by the Company in Gaithersburg,
Maryland at the former site of its cell and molecular biology R&D facility and
Company headquarters.
Financing activities provided $21.3 million in cash to the Company during 1998.
The Company received $27.1 million in cash during 1998 related to the exercise
of stock options. Substantially all vested stock options were exercised prior
to consummation of Dexter's tender offer for additional shares of the Company in
December, 1998. The Company used $4.7 million for its quarterly cash dividends
and $1.0 million to reduce debt in 1998.
14
<PAGE>
1999 CASH FLOWS
Capital expenditures in 1999 are expected to range from $30-35 million. The
Company is contemplating additional facility upgrades and expansions of $15-20
million with the balance of expected 1999 capital expenditures for new and
replacement machinery, equipment and management information systems.
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.
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 currently has an unused short-term revolving credit facility with
Dexter Corporation, an affiliate of the Company, in the amount of $8.0 million.
The Company believes it will be able to generate sufficient cash from its
operations and its existing credit facility to meet all its anticipated cash
requirements in 1999, apart from any significant business acquisition which may
occur and which may be financed using cash from operations, debt, equity, or
other sources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
Life Technologies is exposed to market risk related to changes in foreign
currency exchange rates, commodity prices, and interest rates, and selectively
uses financial instruments to manage these risks. The Company does not enter
into financial instruments for speculation or trading purposes. A discussion of
the Company's accounting policies for derivative financial instruments is
included in the financial note entitled "Currency Effects" on pages F-17 and F-
18 of this 1998 Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The Financial Statements and Supplementary Data appear on pages F-1 through F-24
of this 1998 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 captions "Executive
Compensation", "Compensation Committee Interlocks and Insider Participation" and
"Compensation of Directors" in the Company's Proxy Statement, which is
incorporated herein by reference.
15
<PAGE>
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
- -------- ----------------------------------------------
None.
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, 1998, 1997 and 1996
c. Consolidated Statement of Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996
d. Consolidated Balance Sheet as of December 31,
1998 and 1997
e. Consolidated Statement of Cash Flows for the
years ended December 31, 1998, 1997 and 1996
f. Consolidated Statement of Changes in
Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996
g. 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),
(N), (O) and (P) are management contracts, compensatory plans,
contracts or arrangements.
3(A) Certificate of Incorporation of the Registrant, including
Amendment to Certificate of Incorporation dated April 17, 1987
and Amendment to Certificate of Incorporation dated April 14,
1998, previously filed as Exhibit 3(A) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, SEC file no. 0-14991, 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
16
<PAGE>
December 31, 1991, SEC file no. 0-14991, which is incorporated
herein by reference.
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) Change-in-Control Agreement dated February 13, 1997, 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 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, SEC
file no. 0-14991, which is incorporated herein by reference.
10(E) Change-in-Control Agreement dated February 13, 1997, 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 10.3 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, SEC
file no. 0-14991, which is incorporated herein by reference.
10(F) Change-in-Control Agreement dated February 13, 1997, 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 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, SEC file no. 0-
14991, which is incorporated herein by reference.
10(G) Change-in-Control Agreement dated February 13, 1997, 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 10.5 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, SEC file no. 0-
14991, which is incorporated herein by reference.
10(H) Change-in-Control Agreement dated February 13, 1997, 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.
10(I) Form of Employment Agreement effective February 13, 1997,
between the Registrant and certain executive officers of the
Registrant regarding certain severance benefits in the event of
termination of employment following a change in control,
17
<PAGE>
as defined in the agreement, previously filed as Exhibit 10.6
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, SEC file no. 0-14991, which is
incorporated herein by reference
10(J) 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(K) 1995 Long-term Incentive 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(L) 1996 Non-Employee Directors' Stock Option Plan, previously
filed as Exhibit 4(b) to the Registrant's Registration
Statement on Form S-8 No. 333-03773, dated May 15, 1996, which
is incorporated herein by reference.
10(M) 1996 Non-Employee Directors' Annual Retainer Stock Plan,
previously filed as Exhibit 4(a) to the Registrant's
Registration Statement on Form S-8 No. 333-03773, dated May 15,
1996, which is incorporated herein by reference.
10(N) 1997 Long-term Incentive Plan, previously filed as Exhibit 4 to
the Registrant's Registration Statement on Form S-8 No. 333-
28607, dated June 6, 1997, which is incorporated herein by
reference.
10(O) Form of Indemnity Agreement between Registrant and Directors.
10(P) Form of Indemnity Agreement between Registrant and Executive
Officers.
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 therefore to the Registrant.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated November 3, 1998,
reporting that two directors of the Company, Frank E. Samuel, Jr. and
Iain C. Wylie, resigned as members of the Company's Board of Directors
effective November 3, 1998. Copies of the letters of resignation
(including attachments) and the Company's press release filed in
connection with receipt of the resignations were included in the
Current Report on Form 8-K.
(c) Exhibits
See (a) (3) above.
(d) Financial Statement Schedules
See (a) (2) above.
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.
Dated: March 9, 1999 LIFE TECHNOLOGIES, INC.
(Registrant)
By /s/ Joseph C. Stokes, Jr.
----------------------------------------
Joseph C. Stokes, Jr.
Senior Vice President and
Chief Financial Officer and Director
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/ J. Stark Thompson, Ph.D.
- ---------------------------- ----------------------------------------
Thomas H. Adams, Ph.D. J. Stark Thompson, Ph.D.
Director President and Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Bruce H. Beatt /s/ K. Grahame Walker
- ---------------------------- ----------------------------------------
Bruce H. Beatt K. Grahame Walker
Director Chairman of the Board of Directors
/s/ Kathleen Burdett /s/ George M. Whitesides
- ---------------------------- ----------------------------------------
Kathleen Burdett George M. Whitesides
Director Director
/s/ R. Barry Gettins, Ph.D. /s/ Joseph C. Stokes, Jr.
- ---------------------------- ----------------------------------------
R. Barry Gettins, Ph.D. Joseph C. Stokes, Jr.
Director Senior Vice President and
Chief Financial Officer and Director
(Principal Financial Officer)
/s/ Peter G. Kelly /s/ C. Eric Winzer
- ---------------------------- ----------------------------------------
Peter G. Kelly C. Eric Winzer
Director Controller
(Principal Accounting Officer)
19
<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.
Senior Vice President and
Chief Financial Officer and Director
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. J. Stark Thompson, Ph.D.
Director President and Chief Executive Officer
and Director
(Principal Executive Officer)
- ---------------------------- ----------------------------------------
Bruce H. Beatt K. Grahame Walker
Director Chairman of the Board of Directors
- ---------------------------- ----------------------------------------
Kathleen Burdett George M. Whitesides
Director Director
- ---------------------------- ----------------------------------------
R. Barry Gettins, Ph.D. Joseph C. Stokes, Jr.
Director Senior Vice President and
Chief Financial Officer and Director
(Principal Financial Officer)
- ---------------------------- ----------------------------------------
Peter G. Kelly C. Eric Winzer
Director Controller
(Principal Accounting Officer)
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Index to Consolidated Financial Statements F-1
Report of Independent Accountants F-2
Consolidated Statement of Income for the
years ended December 31, 1998, 1997 and 1996 F-3
Consolidated Statement of Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996 F-3
Consolidated Balance Sheet as of December 31,
1998 and 1997 F-4
Consolidated Statement of Cash Flows for the
years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statement of Changes in F-6
Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Life Technologies, Inc.
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, comprehensive income, changes in
stockholders' equity and cash flows present fairly, in all material respects,
the consolidated financial position of Life Technologies, Inc. and its
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
------------------------------
McLean, Virginia
January 22, 1999
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, 1998 1997 1996
====================================================================================================================================
<S> <C> <C> <C>
Revenues:
Net sales $361,726 $330,967 $309,455
Net royalties 2,480 1,841 884
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 364,206 332,808 310,339
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Cost of sales 167,862 152,547 146,926
Marketing and administrative 118,620 108,046 100,797
Research and development 21,880 21,281 19,084
Shareholder acquisition expenses 5,335 - -
Gain on product line disposal - - (2,569)
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 313,697 281,874 264,238
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 50,509 50,934 46,101
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Investment income 697 474 708
Interest expense (91) (70) (89)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income 606 404 619
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 51,115 51,338 46,720
Income taxes 19,168 18,481 16,819
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interests 31,947 32,857 29,901
Minority interests (644) (622) (1,201)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 31,303 $ 32,235 $ 28,700
====================================================================================================================================
Earnings per share:
Basic $ 1.32 $ 1.39 $ 1.25
Diluted $ 1.29 $ 1.35 $ 1.22
Average shares outstanding:
Basic 23,687 23,171 22,881
Diluted 24,204 23,945 23,504
Cash dividends declared per share $ .20 $ .18 $.15 1/3
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Life Technologies, Inc.
Consolidated Statement of Comprehensive Income
(amounts in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
====================================================================================================================================
<S> <C> <C> <C>
Net income $31,303 $32,235 $28,700
Other comprehensive income
Currency translation effects 1,292 (8,414) (1,378)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $32,595 $23,821 $27,322
====================================================================================================================================
</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, 1998 1997
====================================================================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 56,047 $ 19,076
Trade accounts receivable, net 67,797 57,103
Inventories:
FIFO 75,739 69,696
LIFO reserve (1,420) (1,633)
- ------------------------------------------------------------------------------------------------------------------------------------
Total inventory 74,319 68,063
Prepaid and other current assets 16,121 6,799
Current deferred tax assets 5,871 5,738
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 220,155 156,779
Property, plant and equipment, net 107,374 100,098
Investments and other assets 15,392 12,353
Excess of cost over net assets of businesses
acquired, net 10,666 12,365
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $353,587 $281,595
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 2,210 $ 2,976
Accounts payable 23,916 21,420
Accrued and deferred income taxes 2,755 8,558
Accrued liabilities and expenses 30,871 22,898
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 59,752 55,852
Long-term debt - 4,564
Pension liabilities 9,103 5,768
Deferred income taxes 5,173 3,695
Minority interests 3,451 2,992
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
24,941,180 in 1998 and
23,350,979 in 1997 249 234
Additional paid-in capital 94,067 54,503
Retained earnings 188,202 161,689
Accumulated other comprehensive income (loss) (6,410) (7,702)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 276,108 208,724
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $353,587 $281,595
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
Life Technologies, Inc.
Consolidated Statement of Cash Flows
(amounts in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
=====================================================================================
<S> <C> <C> <C>
CASH INFLOWS (OUTFLOWS)
Operations:
Net income $ 31,303 $ 32,235 $ 28,700
Non-cash items:
Depreciation 11,383 10,126 8,293
Amortization 2,947 2,591 2,283
Deferred income taxes 481 (627) (533)
Gain on product line disposal - - (2,569)
Minority interests in net income 644 622 1,201
Changes in assets and liabilities
net of acquisitions:
Trade accounts receivable (8,769) (7,461) (7,422)
Inventories (5,953) (9,035) 140
Prepaid and other current assets (4,745) (1,367) 995
Accounts payable 2,433 3,286 3,261
Accrued income taxes 2,548 (1,783) (1,764)
Accrued liabilities and expenses 8,143 2,020 7,367
Other 1,697 1,003 312
- -------------------------------------------------------------------------------------
Cash provided by operating activities 42,112 31,610 40,264
- -------------------------------------------------------------------------------------
Investments:
Capital expenditures (25,359) (27,300) (36,017)
Acquisitions and joint ventures (1,047) (914) (11,704)
Proceeds from product line disposal - - 2,569
Other 585 (127) (30)
- -------------------------------------------------------------------------------------
Cash used in investing activities (25,821) (28,341) (45,182)
- -------------------------------------------------------------------------------------
Financing:
Proceeds from exercise of stock options 27,051 4,052 1,998
Dividends paid (4,711) (3,929) (3,351)
Short-term borrowings, net (971) 1,896 319
Long-term loan repayments (23) (713) (1,617)
- -------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities 21,346 1,306 (2,651)
- -------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (666) (825) (306)
- -------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 36,971 3,750 (7,875)
Cash and cash equivalents at beginning
of year 19,076 15,326 23,201
- -------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 56,047 $ 19,076 $ 15,326
====================================================================================
Supplemental cash flow information:
Cash paid during the year:
Income tax, net of refunds $ 16,120 $ 20,081 $ 18,092
Non-cash financing activity:
Capital lease - - $ 4,739
====================================================================================
</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>
- --------------------------------------------------------------------------------------------------------
Accumulated
Other
Additional Comprehensive
Common Stock Paid-in Retained Income
Shares Amount Capital Earnings (Loss) Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1995 22,773 $152 $45,995 $108,444 $ (666) $153,925
Net income 28,700 28,700
Dividends-$.15-1/3 per share (3,511) (3,511)
Shares issued under
stock option and stock
grant plans 178 2 1,996 1,998
Tax benefit on stock
option plans 429 429
Stock split 76 (76) -
Currency effects 1,378 1,378
- --------------------------------------------------------------------------------------------------------
Balances at
December 31, 1996 22,951 230 48,344 133,633 712 182,919
Net income 32,235 32,235
Dividends-$.18 per share (4,179) (4,179)
Shares issued under
stock option and stock
grant plans 400 4 4,124 4,128
Tax benefit on stock
option plans 2,035 2,035
Currency effects (8,414) (8,414)
- --------------------------------------------------------------------------------------------------------
Balances at
December 31, 1997 23,351 234 54,503 161,689 (7,702) $208,724
Net income 31,303 31,303
Dividends-$.20 per share (4,790) (4,790)
Shares issued under
stock option and stock
grant plans 1,590 15 28,585 28,600
Tax benefit on stock
option plans 10,979 10,979
Currency effects 1,292 1,292
- --------------------------------------------------------------------------------------------------------
Balances at
December 31, 1998 24,941 $249 $94,067 $188,202 $(6,410) $276,108
========================================================================================================
</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 1998 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 periods. Actual results could differ from those estimates.
NATURE OF OPERATIONS
Life Technologies is a multinational firm that develops, manufactures, and sells
cell culture and cell and molecular biology 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.
BUSINESS ACQUISITIONS
In January 1996, the Company paid $7.1 million to purchase 75% of the common
stock of Custom Primers, Inc. ("CPI"), a California-based producer of
oligonucleotides, increasing the Company's ownership to 100%. The Company had
acquired 25% of CPI in several transactions prior to 1996 valued at $0.8
million. Based upon the net assets purchased in January 1996 and the total cash
paid of $7.9 million, the Company recorded $7.4 million of acquisition costs in
excess of net assets acquired in 1996. The January 1996 purchase agreement
provides for additional earn-out contingencies based on the sales of
oligonucleotides over the five year period following the date of the purchase
agreement. For the years 1998, 1997 and 1996, the Company recorded additional
earn-outs of $1.1 million, $1.0 million and $0.8 million, respectively. The
original intangible is being amortized over five years and additional
intangibles resulting from earn-outs are being amortized over the remaining term
of the original amortization period.
In September 1996, the Company acquired an additional 29% ownership of its
Japanese subsidiary, Life Technologies Oriental, K.K., for $3.7 million. This
additional purchase increased the Company's ownership from 51% to 80% and
resulted in $1.8 million of additional goodwill.
None of the businesses acquired during the period, individually or in the
aggregate, constitute a significant subsidiary of the Company.
TECHNOLOGY AGREEMENTS
F-7
<PAGE>
The Company has obtained rights to products and technologies under a number of
licensing agreements or patents. Where the agreement requires the Company to pay
royalties on sales of licensed products or technologies, the Company includes
the royalty expense in cost of sales in the period of the sale. Where the
Company acquires technologies from outside sources for incorporation into its
own development efforts or products, the cost of the technology is capitalized
and amortized over the legal or expected useful life when the technology is
commercially applicable at the time acquired by the Company. Where considerable
development effort is required to have acquired technologies become part of the
Company's product lines, the cost of the acquired technologies is reported as
research and development expense in the period the technology is acquired.
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.
EARNINGS PER SHARE
Basic earnings per common share have been computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per common share have been computed by dividing net income by the
weighted-average number of common shares outstanding plus an assumed increase in
common shares outstanding for dilutive securities. Net income as reported is
available to common stockholders and is not adjusted for basic or diluted
earnings per share. Dilutive securities consist entirely of options to acquire
common stock for a specified price and their dilutive effect is measured using
the treasury method.
The following table reconciles the weighted average number of common shares
outstanding during each period for basic earnings per share with the comparable
amount for diluted earnings per share.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
===============================================================================
<S> <C> <C> <C>
Weighted average shares outstanding-basic 23,687 23,171 22,881
Stock options 517 774 623
- --------------------------------------------------------------------------------
Weighted average shares outstanding-diluted 24,204 23,945 23,504
================================================================================
</TABLE>
RELATED PARTY - DEXTER
At December 31, 1998, Dexter Corporation ("Dexter") owned approximately 71% of
the outstanding shares of the Company's common stock. Dexter acquired
approximately 22% of the outstanding shares of the Company through a tender
offer consummated on December 22, 1998. Most transactions with Dexter are
administrative in nature (e.g., insurance) and are not significant in amount.
The Company has no significant product sales to Dexter or its affiliates. Three
executives of Dexter and two members of the Dexter board of directors served as
directors of the Company in 1998. Three executives of Dexter served as directors
of the Company in 1997 and 1996.
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 have been no amounts
outstanding under this line of credit since prior to 1996.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 130, Reporting Comprehensive Income, in the first
quarter of 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income consists of
F-8
<PAGE>
net income and foreign currency translation adjustments as presented in the
consolidated statement of comprehensive income. The adoption of SFAS No. 130 had
no impact on total stockholders' equity or net income.
The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, in the fourth quarter of 1998. Disclosures required by
this new standard are included in the notes to the consolidated financial
statements under the caption "Segment Reporting and Related Information".
The Company adopted SFAS No. 132, Employers' Disclosures about Pension and Other
Postretirement Benefits, in 1998. SFAS No. 132 standardizes disclosure
requirements for pension and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan
assets, and eliminates certain disclosures formerly required by accounting
standards applicable to pensions and other postretirement benefits. Disclosures
required under SFAS No. 132 are included under the caption "Retirement Benefits"
in the notes to the consolidated financial statements.
The Financial Accounting Standards Board has issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which becomes effective for years
beginning after June 15, 1999. SFAS No. 133, requires that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company will adopt SFAS No. 133 by January 1,
2000. Because of the Company's minimal use of derivatives, management does not
anticipate that adoption of this statement will have a material effect on the
earnings or financial position of the Company.
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, and mature within 90
days and, therefore, are subject to minimal risk.
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are reduced by allowances of $2.0 million, $1.6
million and $1.5 million at December 31, 1998, 1997 and 1996, respectively.
INVENTORIES
Inventories are valued at the lower of cost or market. Inventories valued at
cost using the LIFO method were approximately 29% and 30% of total inventories
at December 31, 1998 and 1997, respectively. Inventories were as follows:
F-9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997
================================================================================================================================
<S> <C> <C>
Materials and supplies $12,946 $12,082
Work-in-process 11,291 9,906
Finished goods 51,502 47,708
- --------------------------------------------------------------------------------------------------------------------------------
Total FIFO value 75,739 69,696
LIFO reserve (1,420) (1,633)
- --------------------------------------------------------------------------------------------------------------------------------
Total inventory $74,319 $68,063
================================================================================================================================
</TABLE>
Inventories were reduced by allowances, other than the LIFO reserve, of $4.7
million, $3.5 million and $3.1 million at December 31, 1998, 1997 and 1996
respectively.
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 $4.7 million in 1998, $4.5 million in
1997 and $3.4 million in 1996.
Interest expense is capitalized in connection with the construction of major
facilities. Capitalized interest is recorded as part of the cost of the asset to
which it relates and is amortized over the asset's estimated useful life. The
Company capitalized $0.1 million of interest cost in 1998 and $0.3 million of
interest cost in 1997, all of which interest related to debt associated with a
capital lease. No interest was capitalized in 1996.
The cost and accumulated depreciation of property, plant and equipment were as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997
===================================================================================================================================
<S> <C> <C>
Land and land improvements $ 11,527 $ 6,184
Land under a capital lease - 4,739
Buildings and leasehold improvements 67,244 63,545
Machinery and equipment 75,979 66,535
Construction-in-progress 4,790 10,365
- -----------------------------------------------------------------------------------------------------------------------------------
Total cost 159,540 151,368
Accumulated depreciation (52,166) (51,270)
- -----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net $107,374 $100,098
===================================================================================================================================
</TABLE>
F-10
<PAGE>
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 operating leases was $8.9
million in 1998, $6.3 million in 1997, and $5.8 million in 1996.
The future minimum rental payments required under noncancellable leases as of
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
(amounts in thousands) Operating Leases
==========================================================================================================
<S> <C>
For the years ending
1999 $ 7,425
2000 5,409
2001 3,283
2002 1,528
2003 1,280
2004 and thereafter 4,248
- ----------------------------------------------------------------------------------------------------------
Total minimum lease payments $23,173
==========================================================================================================
</TABLE>
INVESTMENTS AND OTHER ASSETS
Significant components of investments and other assets were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997
========================================================================================================
<S> <C> <C>
Pension and retirement related $ 6,018 $ 4,683
Software, net of amortization 4,196 3,594
Deferred tax assets 3,571 2,775
Other 1,607 1,301
- --------------------------------------------------------------------------------------------------------
Investments and other assets $15,392 $12,353
========================================================================================================
</TABLE>
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 cash flows. The
Company makes a specific provision against the asset when impairment is
identified. The Company did not make an impairment charge in 1998, 1997 or 1996.
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, 1998 and 1997 amounted to $10.8 million
and $7.9 million, respectively.
F-11
<PAGE>
ACCRUED LIABILITIES AND EXPENSES
Accrued liabilities and expenses were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997
===========================================================================================================================
<S> <C> <C>
Salaries, wages and benefits $11,400 $10,080
Royalties 5,867 3,179
Shareholder acquisition expenses 3,973 -
Taxes, other than income 1,779 1,485
Dividends payable 1,245 1,167
Deferred purchase and construction payments 1,225 1,538
Other 5,382 5,449
- ---------------------------------------------------------------------------------------------------------------------------
Accrued liabilities and expenses $30,871 $22,898
===========================================================================================================================
</TABLE>
DEBT
The following is a summary of the outstanding debt at December 31, 1998 and
1997.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997
===========================================================================================================================
<S> <C> <C>
Short-term debt:
Japanese Yen bank borrowings $ 2,210 $ 2,882
Current portion of obligations under a capital lease - 94
- ---------------------------------------------------------------------------------------------------------------------------
Short-term debt $ 2,210 $ 2,976
===========================================================================================================================
Long-term debt:
Capital lease (7.5%) $ 4,658
Less: Current portion of long-term debt - 94
- ---------------------------------------------------------------------------------------------------------------------------
Long-term debt $ - $ 4,564
===========================================================================================================================
</TABLE>
Short-term debt consisted of notes payable to various banks denominated in
Japanese Yen. The carrying value of short-term borrowings approximates fair
value. The average interest rate on the Japanese Yen bank borrowings during the
year was 1.53% in 1998 and 1.56% in 1997. Year-end weighted average interest
rates were 1.47% in 1998 and 1.85% in 1997.
The Company exercised an option to purchase a parcel of land previously under a
capital lease in the first quarter of 1998 for $4.6 million. The parcel of land
is used for the new corporate R&D center and administrative office facility,
including the Company's headquarters.
INCOME TAXES
The differences between the U.S. federal statutory tax rate and the Company's
effective tax rate are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
========================================================================================================================
<S> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
State income taxes 2.0 1.7 1.5
Non-U.S. tax rate differences (.8) 0.8 1.1
Repatriation of foreign earnings,
net of related benefits (1.3) (0.7) (3.3)
Non-deductible expenses 5.1 1.5 1.7
Other, including tax credits (2.5) (2.3) -
- ------------------------------------------------------------------------------------------------------------------------
Effective income tax rate 37.5% 36.0% 36.0%
========================================================================================================================
</TABLE>
The provision (benefit) for taxes on income for 1998, 1997 and 1996 is
summarized below:
- -------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
===============================================================================
F-12
<PAGE>
<TABLE>
<S> <C> <C> <C>
Current:
United States $ 9,443 $ 9,540 $ 7,348
International 7,684 8,569 8,788
State 1,560 999 1,216
- --------------------------------------------------------------------------------------------------------------------
Total current 18,687 19,108 17,352
- --------------------------------------------------------------------------------------------------------------------
Deferred:
United States 270 (497) (838)
International 162 (46) 545
State 49 (84) (240)
- --------------------------------------------------------------------------------------------------------------------
Total deferred 481 (627) (533)
- --------------------------------------------------------------------------------------------------------------------
Total provision for income taxes $19,168 $18,481 $16,819
====================================================================================================================
</TABLE>
Deferred tax assets and liabilities were comprised of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997
=========================================================================================================================
<S> <C> <C>
Deferred tax assets:
Retirement benefits $ 3,038 $ 2,211
Expenses not currently deductible 2,081 2,075
Intercompany profits 1,937 2,328
Inventory reserves 1,645 1,170
Other 741 729
- -------------------------------------------------------------------------------------------------------------------------
Gross deferred tax assets 9,442 8,513
- -------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Fixed assets, principally depreciation 4,768 3,182
Inventory 582 579
Retirement benefits 399 507
Other 25 29
- -------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities 5,774 4,297
- -------------------------------------------------------------------------------------------------------------------------
Net deferred tax asset $ 3,668 $ 4,216
=========================================================================================================================
</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.
In 1998, 1997 and 1996, income tax benefits of $11.0 million, $2.0 million and
$0.4 million, respectively, attributable to employee stock option transactions
were allocated to stockholders' equity.
U.S. and international withholding taxes have not been provided on approximately
$89.1 million of undistributed earnings of foreign subsidiaries. The Company
remits only those earnings which are considered to be in excess of the
reasonably anticipated working capital needs of the foreign subsidiaries, with
the balance 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 $27.2 million in 1998, $26.6 million in 1997, and $30.6 million in
1996.
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
F-13
<PAGE>
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
fifteen percent of their annual base compensation subject to certain regulatory
and plan limitations. The Company matches one half of the employee's 401(k)
deferral up to a maximum Company match 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 the average annual compensation during the highest five
consecutive years of the last ten years before retirement, which benefit is then
offset by other work related 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 employee's
highest average base compensation over three consecutive years.
F-14
<PAGE>
The funded status of the Company's domestic pension plans and amounts recognized
at December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
===================================================================================================================
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 26,569 $ 22,821 $21,009
Service cost 2,244 2,098 1,827
Interest cost 1,900 1,615 1,324
Amendments 1,567 437 -
Actuarial (gain)/loss 2,317 295 (804)
Benefits paid (692) (535) (427)
Expenses paid (129) (162) (108)
- -------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 33,776 26,569 22,821
- -------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at
beginning of year 19,611 15,567 12,442
Actual return on plan assets 3,032 3,058 2,411
Employer contribution 411 1,683 1,249
Benefits paid (692) (535) (427)
Expenses paid (129) (162) (108)
- -------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 22,233 19,611 15,567
- -------------------------------------------------------------------------------------------------------------------
Funded status: (11,543) (6,958) (7,254)
Unrecognized actuarial (gain)/loss 401 (604) 892
Unrecognized prior service cost 3,544 2,295 2,128
- -------------------------------------------------------------------------------------------------------------------
Net amount recognized $( 7,598) $( 5,267) $(4,234)
===================================================================================================================
Amounts recognized in the statement
of financial position consist of:
Accrued benefit liability (9,265) (5,772) (4,550)
Intangible asset 1,667 505 316
- -------------------------------------------------------------------------------------------------------------------
Net amount recognized $( 7,598) $( 5,267) $(4,234)
===================================================================================================================
</TABLE>
The weighted average assumptions used in accounting for the domestic pension
plans in 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1998 1997 1996
================================================================================================================
<S> <C> <C> <C>
Discount rate 6.75% 7.00% 7.00%
Expected return on plan assets 9.00% 9.00% 9.00%
Rate of compensation increase 4.83% 4.83% 4.83%
================================================================================================================
</TABLE>
The discount rate is the estimated rate at which the obligation for pension
benefits could effectively be settled. The expected return on plan assets
reflects the average rate of earnings that the Company estimates will be
generated on the assets of the plans. The rate of compensation increase reflects
the Company's best estimate of the future compensation levels of the individual
employees covered by the plans.
F-15
<PAGE>
The components of net periodic pension cost for the Company's domestic pension
plans for the years 1998, 1997 and 1996 are provided in the following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
=====================================================================================================================
<S> <C> <C> <C>
Service cost $ 2,244 $ 2,098 $ 1,827
Interest cost 1,900 1,615 1,324
Expected return on plan assets (1,743) (1,375) (1,105)
Amortization of:
Prior service cost 318 270 270
Actuarial loss 23 108 226
- ---------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 2,742 $ 2,716 $ 2,542
=====================================================================================================================
</TABLE>
The funded status of the Company's U.K. pension plan and amounts recognized at
December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
======================================================================================================================
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 9,026 $ 5,777 $ 5,616
Service cost 513 319 361
Interest cost 682 504 432
Plan participants' contributions 160 154 182
Amendments - (9) -
Actuarial (gain)/loss 2,270 2,527 (1,268)
Benefits paid (110) (12) (202)
Foreign currency exchange rate changes 123 (234) 656
- ---------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 12,664 9,026 5,777
- ---------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at
beginning of year 7,217 6,147 4,895
Actual return on plan assets 1,000 724 270
Employer contribution 471 453 471
Plan participants' contributions 160 154 182
Benefits paid (110) (12) (202)
Foreign currency exchange rate changes 93 (249) 531
- ---------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 8,831 7,217 6,147
- ---------------------------------------------------------------------------------------------------------------------
Funded status: (3,833) (1,809) 370
Unrecognized actuarial loss 4,749 2,943 714
Unrecognized portion of net obligation
at transition 654 (307) (343)
Unrecognized prior service cost (287) 697 787
Fourth quarter contribution 293 112 123
- ---------------------------------------------------------------------------------------------------------------------
Net amount recognized $ 1,576 $ 1,636 $ 1,651
=====================================================================================================================
Amounts recognized in the statement
of financial position consist of:
Prepaid benefit cost 1,576 1,636 1,651
- ---------------------------------------------------------------------------------------------------------------------
Net amount recognized $ 1,576 $ 1,636 $ 1,651
=====================================================================================================================
</TABLE>
F-16
<PAGE>
The weighted average assumptions used in accounting for the U.K. pension plan in
1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997 1996
================================================================================
<S> <C> <C> <C>
Discount rate 6.00% 7.50% 8.50%
Expected return on plan assets 8.00% 8.00% 8.00%
Rate of compensation increase 5.00% 6.00% 6.00%
================================================================================
</TABLE>
The components of net periodic pension costs for the Company's U.K. pension plan
for the years 1998, 1997 and 1996 are provided in the following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
================================================================================
<S> <C> <C> <C>
Service cost $ 513 $ 319 $ 361
Interest cost 682 504 432
Expected return on plan assets (592) (487) (413)
Amortization of:
Transition obligation (23) (23) (22)
Prior service cost 50 50 48
Actuarial loss 119 31 61
- --------------------------------------------------------------------------------
Net periodic pension cost $ 749 $ 394 $ 467
================================================================================
</TABLE>
The projected benefit obligations, accumulated benefit obligations and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $4.5, $3.5 and $0, respectively, as of December
31, 1998; $2.4, $2.0, and $0, respectively, as of December 31, 1997 and $1.9,
$1.7 and $0, respectively, as of December 31, 1996.
The Company's match to the 401(k) plan totaled $1.1 million, $1.1 million and
$1.0 million in 1998, 1997 and 1996, respectively. The Company's contribution
to its remaining plans totaled $0.3 million, $0.6 million and $0.5 million in
1998, 1997 and 1996, respectively.
CONTINGENCIES
The Company is subject to potential liability under government regulations and
various claims and legal actions which are pending or may be asserted. These
claims and legal actions have arisen in the ordinary course and conduct of the
Company's business and some are expected to be covered, at least partly, by
insurance. Estimated amounts for claims that are probable and can be reasonably
estimated are reflected as liabilities of the Company. The ultimate resolution
of these claims is subject to many uncertainties. It is reasonably possible
that some of the actions or proceedings referred to above could be decided
unfavorably to the Company. These matters, if resolved in a manner different
than the estimates, could have a material adverse effect on the Company's
consolidated financial position, operating results or cash flows when resolved
in a future reporting period.
CURRENCY EFFECTS
The financial statements of the Company's non-U.S. operations are translated to
U.S. dollars for consolidation using exchange rates at period end for assets and
liabilities and average exchange rates during each reporting period for results
of operations. Net exchange gains or losses resulting from the translation of
foreign financial statements, the effect of exchange rate changes on
intercompany transactions of a long-term investment nature, and net exchange
rate gains and losses on foreign currency transactions that are designated as,
and are effective as, economic hedges of the net investment in a foreign entity
are recorded as a separate component of equity. These
F-17
<PAGE>
adjustments will affect net income only upon sale or liquidation of the
underlying non-U.S. investment.
Many of the Company's reporting entities conduct a portion of their business in
currencies other than the entity's functional currency. These transactions give
rise to receivables or payables that are denominated in currencies other than
the entity's functional currency. Changes in the exchange rates between the
functional currency and the currency in which the transaction is denominated
result in currency transaction gains and losses that are included in the
determination of income. Currency exchange gains and losses realized on
business transactions were $0.3 million of net gains in 1998, $1.0 million of
net losses in 1997, and $0.2 million of net losses in 1996.
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 1998 were short-
term in nature and related to non-local currency transactions of the Company's
Japanese subsidiary. The equivalent U.S. dollar purchase amounts of all forward
contracts were $3.1 million, $2.9 million, and $6.2 million as of December 31,
1998, 1997 and 1996, respectively. There were no sale amounts outstanding as of
December 31, 1998, 1997 and 1996. Deferred unrealized gains and losses at
December 31, 1998, 1997 and 1996 were not significant.
STOCK INCENTIVE PLANS
In 1997, the Company established a long-term incentive plan for certain key
management and other personnel. The Company's 1997 long-term incentive plan
provides that up to 1,000,000 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, 1998 the Company
has granted 540,000 stock options under this plan.
In 1996, the Company established a Non-Employee Directors' Annual Retainer Stock
Plan enabling members of the Board of Directors who are not officers or
employees of the Company to receive common stock in lieu of all or a portion of
the annual cash retainer fee and to receive an automatic annual amount of 300
shares of common stock for services rendered. The plan provides that up to
112,500 shares may be granted based on the fair market value of the common stock
at the date of issue. There have been 6,035 shares granted through December 31,
1998 under this plan. The plan was terminated, effective as of February 1,
1999.
In 1996, the Company established a Non-Employee Directors' Stock Option Plan
that provides for each of the Company's non-employee directors to receive an
automatic, annual option to purchase 6,750 shares of common stock. The plan
provides that up to 750,000 shares may be granted based on the fair market value
of the common stock at the annual grant date. There have been 121,500 stock
options granted through December 31, 1998 under this plan. The plan was
terminated, effective as of February 1, 1999.
F-18
<PAGE>
All other stock option plans have been frozen and no further grants under the
frozen plans can be made. These plans are listed under "Former Plans No Longer
Granting Options."
Most options become exercisable on a cumulative basis over a three year period
of service and are generally exercisable for a period not exceeding ten years
from the date of grant. At December 31, 1998 there were 490,916 and 639,750
shares of common stock available for future grant under the 1997 and 1996 stock
option plans, respectively.
The transactions under the stock option plans were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 Former Plans
Long-term Non-Employee No Longer
Incentive Directors' Granting
Plan Plan Options
================================================================================
<S> <C> <C> <C>
December 31, 1995 1,755,137
Granted at average price
of $24.44 per share 40,500 509,900
Expired or canceled at average
price of $15.50 per share (22,592)
Exercised at average price
of $11.70 per share (187,164)
- --------------------------------------------------------------------------------
December 31, 1996 40,500 2,055,281
Granted at average price
of $34.26 per share 524,000 33,750
Expired or canceled at average
price of $21.10 per share (4,500) (6,241)
Exercised at average price
of $10.96 per share (2,250) (413,186)
- --------------------------------------------------------------------------------
December 31, 1997 524,000 67,500 1,635,854
Granted at average price
of $35.56 per share 16,000 47,250
Expired or canceled at average
price of $27.45 per share (30,916) (6,750) (39,729)
Exercised at average price
of $18.00 per share (148,557) (27,000) (1,418,493)
- --------------------------------------------------------------------------------
December 31, 1998 360,527 81,000 177,632
================================================================================
Price range:
Minimum $ 34.41 $ 22.88 $ 4.83
Maximum $ 38.19 $ 38.29 $ 25.00
Weighted average price $ 34.58 $ 25.88 $ 18.43
================================================================================
Exercisable 16,167 6,750 22,042
================================================================================
</TABLE>
F-19
<PAGE>
Information with respect to stock options outstanding at December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Number of Remaining Average Number of Average
Options Contractual Exercise Options Exercise
Price Range Outstanding Life Price Exercisable Price
================================================================================
<S> <C> <C> <C> <C> <C>
$ 8.83 to $12.42 6,216 1.9 $11.18 6,216 $11.18
$16.00 to $18.00 17,050 7.0 $17.23 6,550 $16.00
$22.87 to $22.88 13,500 7.8 $22.88 4,500 $22.88
$25.00 to $25.00 154,366 7.8 $25.00 9,276 $25.00
$31.87 to $33.25 54,000 9.4 $32.73 2,250 $31.88
$34.41 to $34.41 344,527 8.8 $34.41 16,167 $34.41
$38.18 to $38.29 29,500 9.4 $38.21 - -
================================================================================
$ 8.83 to $38.29 619,159 8.5 $31.14 44,959 $25.29
================================================================================
</TABLE>
The Company elected the disclosure-only presentation of SFAS No. 123,
Accounting for Stock-Based Compensation, in 1996 and, consequently, makes no
charge against income in the financial statements with respect to options
granted at fair market value. To measure stock-based compensation in accordance
with SFAS No. 123, the fair value of each option grant was estimated on the date
of grant using the Black-Scholes option-pricing model. The following table sets
forth the assumptions used and the pro forma net income and earnings per share
resulting from applying SFAS No. 123.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997 1996
================================================================================
<S> <C> <C> <C>
Net income (amounts in thousands)
As reported $31,303 $32,235 $28,700
Pro forma 28,784 30,501 27,918
Basic earnings per share (in dollars)
As reported $ 1.32 $ 1.39 $ 1.25
Pro forma $ 1.22 $ 1.32 $ 1.22
Diluted earnings per share (in dollars)
As reported $ 1.29 $ 1.35 $ 1.22
Pro forma $ 1.19 $ 1.27 $ 1.19
Average Shares Outstanding (in thousands)
Actual 23,687 23,171 22,881
Assuming Dilution 24,204 23,945 23,504
Risk-free interest rate 4.6% 5.8% 6.1%
Dividend yield 0.5% 0.5% 0.6%
Expected life in years 3.4 5.0 4.0
Volatility 28% 29% 31%
Weighted average remaining contractual
life in years 8.5 7.0 6.3
Weighted average fair value at date
of grant(in dollars) $ 9.82 $ 11.93 $ 7.94
================================================================================
</TABLE>
F-20
<PAGE>
QUARTERLY FINANCIAL INFORMATION
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
(quarterly amounts are unaudited) First Second Third Fourth Year
==================================================================================
<S> <C> <C> <C> <C> <C>
1998:
Net sales $88,355 $ 91,544 $89,084 $92,743 $361,726
Net royalties 437 689 518 836 2,480
Cost of sales 41,076 42,701 40,833 43,252 167,862
Shareholder acquisition expenses - - 310 5,025 5,335
Operating income 13,489 14,675 13,319 9,026 50,509
Net income 8,625 9,447 8,754 4,477 31,303
Basic earnings per share $ .37 $ .40 $ .37 $ .18 $ 1.32
Diluted earnings per share $ .36 $ .39 $ .36 $ .18 $ 1.29
Shares outstanding
Basic 23,447 23,575 23,668 24,050 23,687
Stock options 582 547 541 401 517
Diluted 24,029 24,122 24,209 24,451 24,204
Market price per share:
High $38 1/2 $ 39 1/2 $39 3/8 $40 $ 40
Low $30 $ 30 3/4 $30 1/2 $29 3/8 $ 29 3/8
==================================================================================
1997:
Net sales $80,168 $ 84,556 $83,243 $83,000 $330,967
Net royalties 344 463 430 604 1,841
Cost of sales 36,116 39,069 38,126 39,236 152,547
Operating income 12,461 13,220 12,429 12,824 50,934
Net income 7,838 8,338 7,873 8,186 32,235
Basic earnings per share $ .34 $ .36 $ .34 $ .35 $ 1.39
Diluted earnings per share $ .33 $ .35 $ .33 $ .34 $ 1.35
Shares outstanding
Basic 22,984 23,137 23,243 23,316 23,171
Stock options 810 735 727 788 774
Diluted 23,794 23,872 23,970 24,104 23,945
Market price per share:
High $28 3/4 $30 $31 1/4 $35 7/8 $ 35 7/8
Low $24 1/4 $25 5/16 $26 7/8 $29 1/2 $ 24 1/4
==================================================================================
</TABLE>
F-21
<PAGE>
SEGMENT REPORTING AND RELATED INFORMATION
Life Technologies adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, in the fourth quarter of 1998. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services
and geographic areas. While SFAS No. 131 supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise, it retains requirements to
report information about major customers.
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker, or decision making group, in deciding how to allocate
resources and in assessing performance. Life Technologies is managed in a
matrixed fashion with some organizational units focused on delivering the
Company's product and service offerings to customers. These organizational
units have been established primarily by geography. Other organizational units
are focused on developing and managing various components of the product and
service offerings. While the chief operating decision maker reviews financial
information with respect to all of these organization units, the units based on
geography are most routinely reviewed by the chief operating decision maker in
terms of assessing performance with respect to revenues and related expenses.
The Company has four operating segments. The Americas Research segment serves
universities, medical research centers, government institutions and other
related "not-for-profit" research institutions in the United States as well as
all customers in Canada, Mexico, Latin and South America. The U.S.
Bioindustrial segment delivers products and services to biotechnology,
pharmaceutical, chemical and related "for-profit" companies in the United
States. The European segment serves customers in Europe, Africa and the Middle
East. The Asia Pacific segment serves customers in Asia, including Japan,
Australasia, China and India. All four of the operating segments offer
essentially the same products and services.
The accounting policies of the operating segments are the same as those
described in the notes to the consolidated financial statements. Intercompany
transactions between geographic areas are eliminated prior to reporting
operating segment financial information to the chief operating decision maker.
All profit related to intercompany transactions between geographic areas is
reported in the operating segment in which the sale to the Company's trade
customer occurs. Expenses related to developing and managing the Company's
product and service offerings, as well as some expenses managed globally or not
related to operating segments, are not included in operating segment results.
Operating segment identifiable assets are primarily inventories and receivables.
Long-lived assets are principally related to manufacturing or developing
products and services and are not allocated to operating segments.
F-22
<PAGE>
Operating segment revenues for the years ending December 31, 1998, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
================================================================================
<S> <C> <C> <C>
Americas Research $129,428 $118,095 $108,041
U.S. Bioindustrial 71,634 61,335 51,025
Europe 116,996 105,682 106,041
Asia Pacific 43,915 45,756 43,386
Other 2,233 1,940 1,846
- --------------------------------------------------------------------------------
Total revenues $364,206 $332,808 $310,339
================================================================================
</TABLE>
Operating segment profit and a reconciliation to reported operating income for
the years ending December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
================================================================================
<S> <C> <C> <C>
Americas Research $ 43,012 42,035 37,725
U.S. Bioindustrial 26,163 20,790 15,946
Europe 29,607 29,045 30,492
Asia Pacific 10,371 11,041 8,748
Research and development (21,880) (21,281) (19,084)
Other non-segment expenses (31,429) (30,696) (30,295)
Shareholder acquisition expenses (5,335) - -
Gain on product line disposal - - 2,569
- --------------------------------------------------------------------------------
Operating income $ 50,509 $ 50,934 $ 46,101
================================================================================
</TABLE>
Identifiable operating segment assets and a reconciliation to total assets as of
December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
================================================================================
<S> <C> <C> <C>
Americas Research $ 48,544 $ 45,088 $ 38,679
U.S. Bioindustrial 28,136 23,761 20,106
Europe 50,351 39,856 41,070
Asia Pacific 24,866 21,939 20,140
Property, plant & equipment, net 107,374 100,098 88,367
Other long-lived assets 26,057 24,718 25,067
Cash and cash equivalents 56,047 19,076 15,326
Other, principally tax-related 12,212 7,059 5,176
- --------------------------------------------------------------------------------
Total assets $353,587 $281,595 $253,931
================================================================================
</TABLE>
Life Technologies offers numerous products, services and technologies that can
be characterized broadly into two categories: cell culture and cell and
molecular biology. Cell culture products and services are used to grow cells
under laboratory conditions and for the commercial manufacture of
pharmaceuticals and other life sciences products. Cell culture products include
cell and tissue culture media, reagents, fetal bovine ("FBS") and other animal
sera, growth and attachment factors, and plasticware. Cell and molecular
biology products, services and technologies are used to identify, isolate, and
manipulate the metabolic processes and genetic material of living organisms.
Cell and molecular biology products include enzymes, nucleic acids, lipids,
competent cells, custom oligonucleotides, and related products.
F-23
<PAGE>
The major product line components of revenues for 1998, 1997 and 1996 compare as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cell culture $184,345 $172,598 $169,038
Cell and molecular biology 179,861 160,210 141,301
- --------------------------------------------------------------------------------
Total revenues $364,206 $332,808 $310,339
================================================================================
</TABLE>
Sales of FBS accounted for 12% of net sales in 1998, 13% of net sales in 1997
and 14% of net sales in 1996. Historically, the availability and price of FBS
have been volatile and periodically have had a significant effect on the
Company's results.
The Company earns revenues from customers in many countries. Other than the
United States, the Company's country of domicile, there is no individual country
in which revenues from external customers represent 10% or more of the Company's
consolidated revenues. Revenues attributed to customers based in the United
States, as well as revenues from customers in all other countries combined, were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
================================================================================
<S> <C> <C> <C>
United States $181,765 $161,863 $144,140
All other countries 182,441 170,945 166,199
- --------------------------------------------------------------------------------
Total revenues $364,206 $332,808 $310,339
================================================================================
</TABLE>
Long-lived assets by geographic area as of December 31, 1998, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1998 1997 1996
================================================================================
<S> <C> <C> <C>
United States $104,598 $ 98,394 $ 83,934
United Kingdom 16,736 15,841 17,357
All other 8,526 7,806 9,978
- --------------------------------------------------------------------------------
Total long-lived assets $129,860 $122,041 $111,269
================================================================================
</TABLE>
F-24
<PAGE>
<TABLE>
INDEX TO EXHIBITS PAGE#
-----------------
<S> <C>
3(A) Certificate of Incorporation of the Registrant, including Amendment to
Certificate of Incorporation dated April 17, 1987 and Amendment to
Certificate of Incorporation dated April 14, 1998, previously filed as
Exhibit 3(A) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, SEC file no. 0-14991, 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, SEC file no. 0-14991
which is incorporated herein by reference.
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) Change-in-Control Agreement dated February 13, 1997, 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 10.2
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, SEC file no. 0-14991, which is incorporated herein by
reference.
10(E) Change-in-Control Agreement dated February 13, 1997, 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 10.3
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, SEC file no. 0-14991, which is incorporated herein by
reference.
10(F) Change-in-Control Agreement dated February 13, 1997, 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 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, SEC file no. 0-14991, which is incorporated herein by
reference.
10(G) Change-in-Control Agreement dated February 13, 1997, between the
Registrant and John V. Cooper regarding certain severance benefits in
the event of termination of employment following a
</TABLE>
<PAGE>
<TABLE>
<S> <C>
change of control, as defined in the agreement, previously filed as
Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, SEC file no. 0-14991, which is
incorporated herein by reference.
10(H) Change-in-Control Agreement dated February 13, 1997, between the E-1
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.
10(I) Form of Employment Agreement effective February 13, 1997, between the
Registrant and certain executive officers of the Registrant regarding
certain severance benefits in the event of termination of employment
following a change in control, as defined in the agreement, previously
filed as Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, SEC file no. 0-14991, which is
incorporated herein by reference.
10(J) 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(K) 1995 Long-term Incentive 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(L) 1996 Non-Employee Directors' Stock Option Plan, previously filed as
Exhibit 4(b) to the Registrant's Registration Statement on Form S-8 No.
333-03773, dated May 15, 1996, which is incorporated herein by
reference.
10(M) 1996 Non-Employee Directors' Annual Retainer Stock Plan, previously
filed as Exhibit 4(a) to the Registrant's Registration Statement on Form
S-8 No. 333-03773, dated May 15, 1996, which is incorporated herein by
reference.
10(N) 1997 Long-term Incentive Plan, previously filed as Exhibit 4 to the
Registrant's Registration Statement on Form S-8 No. 333-28607, dated
June 6, 1997, which is incorporated herein by reference.
10(O) Form of Indemnity Agreement between Registrant and Directors and E-17
executive officers.
10(P) Form of Indemnity Agreement between Registrant and Executive Officers E-26
21 Subsidiaries of the Registrant. E-35
23 Consent of Independent Accountants. E-36
27 Financial Data Schedule. E-37
</TABLE>
<PAGE>
CHANGE-IN-CONTROL AGREEMENT EXHIBIT 10(H)
AGREEMENT by and between LIFE TECHNOLOGIES, INC., a Delaware
Corporation (the "Company"), and Brian D. Graves (the "Executive"), dated
---------------
as of the 13th day of February, 1997.
---- -------- -
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
stockholders 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 l(b)) on which a Change
of Control occurs; provided that the Executive is employed on that date.
Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which a Change
of Control occurs, and it is reasonably demonstrated by the Executive that
such termination of employment or cessation of status as an officer (i) was
at the request of a third party who has taken steps reasonably calculated
to effect the Change of Control or (ii) otherwise arose in connection with
or anticipation of the Change of Control, then for all purposes of this
Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination of employment or cessation of status as an
officer.
(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.
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<PAGE>
2. Change of Control. For the purpose of this Agreement;
-----------------
(a) a "Change of Control" shall mean:
(i) Any acquisition or series of acquisitions, 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 20% 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 (A) any acquisition by the Company, Dexter Corporation or any
of their subsidiaries, (B) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company, Dexter or any of
their subsidiaries, (C) any transaction or series of transactions that
results in any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) having beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of more than 20%
of the Outstanding Company Common Stock but less than the percentage of
Outstanding Company Common Stock then beneficially owned by Dexter, or (D)
any acquisition or series of acquisitions which results in any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) acquiring beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of more than 20% of the Outstanding Company
Common Stock and while such a beneficial owner such individual, entity or
group does not exercise the voting power of his, her or its Outstanding
Company Common Stock or otherwise exercise control with respect to any
matter concerning or affecting the Company and promptly sells, transfers,
assigns or otherwise disposes of that number of shares of Outstanding
Company Common Stock necessary to reduce his, her or its beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of the
Outstanding Company Common Stock to below 20%, as the case may be, shall
not constitute a Change of Control; or
(ii) Individuals who as of December 1, 1996, 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
December 1, 1996, whose election, or nomination for election, by the
Company's stockholders 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 (as
hereinafter defined), 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 used in Rule 14a-
11 of the Regulation 14A promulgated under the Exchange Act) relating to
the election of directors of the Company; or
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(iii) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, or of the sale or other
disposition of all or substantially all of the assets of the Company, or of
a reorganization, merger or consolidation of the Company, 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
Company Common Stock and Outstanding Company 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 60% 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; or
(iv) At any time when 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 any of the events set forth in the following clauses (A), (B) or
(C) below shall occur:
(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 (I) any
acquisition by the Company, Dexter or any of their subsidiaries, (II) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company, Dexter or any of their subsidiaries, or (III)
any acquisition by any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares 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 of 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
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<PAGE>
(B) Individuals who, as of December 1, 1996, 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 December 1,
1996, whose election, or nomination for election, by Dexter's stockholders
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 of Dexter, 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 60% 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 stockholder of Dexter or any of its
subsidiaries (other than the Company and its subsidiaries) or an officer,
director, partner, employee or 5% or greater stockholder 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 remuneration 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 24th 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 50 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 and, 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 the highest 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) base salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the three fiscal years immediately preceding
the fiscal year 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.
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<PAGE>
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each fiscal year during the Employment Period,
an annual bonus (the "Annual Bonus") in cash at least equal to the higher of
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 and/or the
Executive's family at any time during the 90-day period immediately preceding
the Effective Date.
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<PAGE>
(v) Business Expenses. During the Employment Period, the
-----------------
Executive shall be entitled to receive prompt reimbursement for all reasonable
business 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.
(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 15(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
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<PAGE>
Executive's responsibilities and duties 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 Executive's employment with the Company or its affiliated
companies, (iii) causing intentional wrongful damage to property of the Company
or its affiliated companies, (iv) intentionally and wrongfully disclosing secret
processes or confidential information of the Company or its affiliated
companies, or (v) participating, without the Company's express written consent,
in the management of any business enterprise which engages in substantial and
direct competition with the Company or its affiliated companies, and any such
act shall have been materially harmful to the Company or its affiliated
companies.
(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 responsibilities or
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 which 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 of 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 his or her 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 the Company to comply with
and satisfy Section 14(c) of this Agreement, provided that such successor has
received at least ten (10) days prior written notice from the Company or the
Executive of the requirements of Section 14(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.
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<PAGE>
(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 15(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 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
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<PAGE>
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
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 peer 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
and/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 the Executive shall terminate employment under this Agreement for Good
Reason:
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<PAGE>
(i) the Company shall pay to the Executive the aggregate of the
following amounts, such amounts to be payable by the Company in a lump sum in
cash within 30 days of the Date of termination.
A. All Accrued Obligations; and
B. 1.5 times the sum of the Executive's Annual Base
---
Salary and the higher of either (i) 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 (ii) the targeted annual bonus payable to
the Executive pursuant to the Company's Incentive Compensation Plan for the
fiscal year in which the Date of Termination occurs (assuming 100% achievement
of the Company performance factor and 100% achievement of the Executive's
personal performance factor; 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
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 level 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
D. An amount equal to that portion, if any, of the
Company's contribution to the Executive's 401(k), savings or other similar
individual account plan which is not vested as of the Date of Termination (the
"Unvested Company Contribution"), plus an amount which when added to the
Unvested Company Contribution would be sufficient after Federal, state and local
income taxes (based on the tax returns filed by the Executive most recently
prior to the Date of Termination) to enable the Executive to net an amount equal
to the Unvested Company Contribution; and
(ii) the Company shall pay the Executive up to $25,000 for executive
outplacement services utilized by the Executive upon the receipt by the Company
of written receipts or other appropriate documentation; and
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<PAGE>
(iii) 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; provided, however, that if the
Executive becomes employed elsewhere during the Employment Period and is thereby
afforded comparable insurance and welfare benefits to those described in Section
4(b)(iv), the Company's obligation to continue providing the Executive with such
benefits shall cease or be correspondingly reduced, as the case may be. 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; and
(iv) All outstanding stock options held by the Executive pursuant to
any Company stock option plan shall immediately become vested and exercisable as
to all or any part of the shares covered thereby, with the Executive being able
to exercise his or her stock options within a period of three months following
the Date of Termination or such longer period as may be permitted under
Executive's stock option agreements; and
(v) If, in the calendar year immediately preceding the Date of
Termination, the Executive had relocated the Executive's primary residence from
one location (the "Point of Origin") to its location at the Date of Termination
at the request of the Company, then any relocation expenses that are actually
incurred in the year immediately following the Date of Termination by the
Executive in moving the Executive's primary residence to any location shall be
reimbursed by the Company to the extent such expenses do not exceed the cost of
relocating the Executive's primary residence to the Point of Origin, provided
such expenses are substantiated by means of written receipts. The cost of
relocating the Executive's primary residence to the Point of Origin shall be
determined by averaging estimates obtained by the Company in writing from three
reputable moving companies, selected by the Company in good faith. It shall be
the obligation of the Executive to notify the Company in advance of any such
relocation so that such estimates may be obtained.
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 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, except as specifically set forth herein,
will they be offset or otherwise reduced by reason of the Executive's receipt of
compensation from any source other than the Company.
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<PAGE>
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.
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, including the costs and expenses of any arbitration
proceeding, 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 content 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"); provided that the
--------
Executive's claim is not determined by a court of competent jurisdiction or an
arbitrator to be frivolous or otherwise entirely without merit.
9. Release. Upon fulfillment of the Company's obligation to make
-------
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder, the Executive fully and unconditionally releases and
discharges all claims and causes of action which the Executive or his or her
heirs, personal representatives, successors, or assigns ever had, now have, or
hereafter may have against the Company and any of its affiliated companies on
account of any claims and causes of action arising out of or relating to this
Agreement, any other document relating hereto or delivered in connection with
the transactions contemplated hereby.
10. Certain Additional Payments by the Company.
------------------------------------------
(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 any of the Company's existing stock option plans, or any
successor option or restricted stock plans (collectively, the "Option and
Restricted Stock Acceleration"), either standing alone or taken together with
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
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<PAGE>
Tax"), then the amount payable to the Executive hereunder or as a result of the
Option and Restricted Stock Acceleration shall 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
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,
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 L.L.P. (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and the Executive. All fees and expenses of the Accounting Firm for tax and
accounting advice provided to the Executive, up to a maximum of $15,000, 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.
11. 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 in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge or data 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 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
12. Public Announcements. The Executive shall consult with the
--------------------
Company before issuing any press release or otherwise making any public
statement with respect to the Company or any of its affiliated companies, this
Agreement or the transactions contemplated hereby, and the Executive shall not
issue any such press release or make any such public statement without the prior
written approval of the Company, except as may be required by applicable law,
rule or regulation or any self regulatory agency requirements, in which event
the Company shall have the right to review and comment upon any such press
release or public statement prior to its issuance.
13. Arbitration. Any dispute, controversy or claim arising out of or
-----------
relating to this Agreement, or any breach thereof, shall be determined and
settled by arbitration to be held in the City of New York pursuant to the labor
rules of the American Arbitration Association or any successor organization.
Any award rendered thereunder shall be final, conclusive and binding on the
parties. Subject to the provisions of Section 8 hereof, each party shall pay
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<PAGE>
one-half of all costs and expenses of any arbitration proceeding brought
pursuant to this Section, and each party shall pay its own attorneys' fees and
expenses.
14. 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.
15. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Sate 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:
If to the Executive:
-------------------
Brian D. Graves
11591 Lake Newport Road
Reston, Virginia 22094
If to the Company:
-----------------
Life Technologies, Inc.
Post Office Box 6482
9800 Medical Center Drive
Rockville, MD 20850
(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.
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<PAGE>
(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.
(f) This Agreement shall replace and supersede the Executive's
Employment Agreement dated as of the 13th day of April 1993 between the
Executive and the Company and, upon execution hereof by the parties hereto, such
prior employment agreement shall become null and void.
IN WITNESS WHEREOF, the Executive has hereunto set his or her 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
LIFE TECHNOLOGIES, INC.
/s/ Brian D. Graves By: /s/ Joseph C. Stokes, Jr.
- ---------------------------- ----------------------------------
Brian D. Graves Joseph C. Stokes, Jr.
Sr. Vice President and
Chief Financial Officer
E-16
<PAGE>
EXHIBIT 10(O)
DIRECTOR'S AGREEMENT
This INDEMNITY AGREEMENT made and entered into as of the _____ day of
___________ by and between Life Technologies, Inc., a Delaware corporation (the
"Company"), and __________________,(the "Indemnitee");
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance and indemnification against
inordinate risks of claims and actions against them arising out of their service
to and activities on behalf of the Company; and
WHEREAS, the current difficulties of obtaining adequate insurance have
increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors has determined that the inability to
attract and retain such persons is detrimental to the best interests of the
Company's stockholders and that the Company should act to assure such persons
that there will be increased certainty of such protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnitee is willing to serve, continue to serve and
take on additional service for or on behalf of the Company on the condition that
he/she be so indemnified;
NOW, THEREFORE, in consideration of the premises, the covenants
contained herein, and for $10 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Indemnitee do hereby covenant and agree as follows:
SECTION 1. Service by the Indemnitee. The Indemnitee will serve
-------------------------
and/or continue to serve as a director of the Company faithfully and to the best
of the Indemnitee's ability so long as the Indemnitee is duly elected or
qualified in accordance with the provisions of the By-laws of the Company or
until such time as the Indemnitee tenders his/her resignation in writing. The
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or other obligation imposed by operation of
law), in which event the Company shall have no obligation under this Agreement
to continue the Indemnitee in any such position. Nothing in this Agreement
shall confer upon the Indemnitee the right to continue in the employ of the
Company or affect the right of the Company to terminate the Indemnitee's
employment at any time in the sole discretion of the Company, with or without
cause.
SECTION 2. Indemnification. The Company shall indemnify the
---------------
Indemnitee to the fullest extent permitted by applicable law in effect on the
date hereof or as such laws may from time to time be amended. Without
diminishing the scope of the indemnification provided by this Section 2, the
rights of indemnification of the Indemnitee provided hereunder shall include
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<PAGE>
but shall not be limited to those rights hereinafter set forth, except that no
indemnification shall be paid to the Indemnitee:
(a) on account of any suit in which judgment is rendered
against the Indemnitee for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(b) on account of the Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest,
or to constitute willful misconduct;
(c) to the extent expressly prohibited by applicable law;
(d) for which payment is actually made to the Indemnitee
under a valid and collectible insurance policy or under a valid and
enforceable indemnity clause, by-law or agreement, except in respect
of any excess beyond payment under such insurance, clause, by-law or
agreement;
(e) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and,
in this respect, both the Company and the Indemnitee have been
advised that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities
laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to the
appropriate court for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by the Indemnitee, or any proceeding by the Indemnitee
against the Company or its directors, officers, employees or other
Indemnitees, unless (i) such indemnification is expressly required to
be made by law, (ii) the proceeding was authorized by the Board of
Directors of the Company, (iii) such indemnification is provided by
the Company, in its sole discretion, pursuant to the powers vested in
the Company under applicable law, or (iv) except as provided in
Sections 10 and 13 hereof.
SECTION 3. Action or Proceeding Other Than an Action by or in the
------------------------------------------------------
Right of the Company. The Indemnitee shall be entitled to the indemnification
- --------------------
rights provided in this Section if he/she is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, other than
an action by or in the right of the Company, by reason of the fact that he/she
is or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
or fiduciary of any other entity, including but not limited to, another
corporation, partnership, joint venture, trust, or by reason of anything done or
not done by the Indemnitee in any such capacity. Pursuant to this Section, the
Indemnitee shall be indemnified against all expenses (including attorneys'
fees), costs, judgments, penalties, fines and
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<PAGE>
amounts paid in settlement actually and reasonably incurred by the Indemnitee in
connection with such action, suit or proceeding (including, but not limited to,
the investigation, defense or appeal thereof), if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his/her conduct was unlawful.
SECTION 4. Actions by or in the Right of the Company. The Indemnitee
-----------------------------------------
shall be entitled to the indemnification rights provided in this Section if the
Indemnitee is a person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding brought by or
in the right of the Company to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was a director, officer, employee or agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, agent or fiduciary of another entity, including,
but not limited to, another corporation, partnership, joint venture, trust, or
by reason of anything done or not done by the Indemnitee in any such capacity.
Pursuant to this Section, the Indemnitee shall be indemnified against all
expenses (including attorneys' fees), costs and amounts paid in settlement
actually and reasonably incurred by the Indemnitee in connection with such
action, suit or proceeding (including, but not limited to, the investigation,
defense or appeal thereof) if the Indemnitee acted in good faith and in a manner
he/she reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that no such indemnification shall be made in
respect of any claim, issue, or matter as to which applicable law expressly
prohibits such indemnification by reason of any adjudication of liability of the
Indemnitee to the Company, unless and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses and costs which
such court shall deem proper.
SECTION 5. Indemnification for Costs, Charges and Expenses of
--------------------------------------------------
Successful Party. Notwithstanding the other provisions of this Agreement, to
- ----------------
the extent that the Indemnitee has served as a witness on behalf of the Company
or has been successful, on the merits or otherwise, in defense of any action,
suit or proceeding referred to in Sections 3 and 4 hereof, or in defense of any
claim, issue or matter therein, including, without limitation, the dismissal of
any action without prejudice, the Indemnitee shall be indemnified against all
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him/her in connection therewith.
SECTION 6. Partial Indemnification. If the Indemnitee is entitled
-----------------------
under any provision of this Agreement to indemnification by the Company for some
or a portion of the expenses (including attorneys' fees), costs, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him/her
in connection with the investigation, defense, appeal or settlement of such
suit, action, investigation or proceeding described in Section 3 or 4 hereof,
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including reasonable attorneys' fees), costs, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him/her to which
the Indemnitee is entitled.
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<PAGE>
SECTION 7. Determination of Entitlement to Indemnification. Upon
-----------------------------------------------
written request by the Indemnitee for indemnification pursuant to Section 3 or 4
hereof, the entitlement of the Indemnitee to indemnification pursuant to the
terms of this Agreement shall be determined by the following person or persons
who shall be empowered to make such determination: (a) the Board of Directors
of the Company by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined); or (b) if such a quorum is not obtainable
or, even if obtainable, if the Board of Directors by the majority vote of
Disinterested Directors so directs, by Independent Counsel (as hereinafter
defined) in a written opinion to the Board of Directors, a copy of which shall
be delivered to the Indemnitee. Such Independent Counsel shall be selected by
the Board of Directors and approved by the Indemnitee. Upon failure of the Board
to so select such Independent Counsel or upon failure of the Indemnitee to so
approve, such Independent Counsel shall be selected by the Chancellor of the
State of Delaware or such other person as the Chancellor shall designate to make
such selection. Such determination of entitlement to indemnification shall be
made not later than 45 days after receipt by the Company of a written request
for indemnification. Such request shall include documentation or information
which is necessary for such determination and which is reasonably available to
the Indemnitee. Any costs or expenses (including attorneys' fees) incurred by
the Indemnitee in connection with the Indemnitee's request for indemnification
hereunder shall be borne by the Company. The Company hereby indemnifies and
agrees to hold the Indemnitee harmless therefrom irrespective of the outcome of
the determination of the Indemnitee's entitlement to indemnification. If the
person making such determination shall determine that the Indemnitee is entitled
to indemnification as part (but not all) of the application for indemnification,
such person shall reasonably prorate such partial indemnification among such
claims, issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings. The
----------------------------------------------
Secretary of the Company shall, promptly upon receipt of the Indemnitee's
request for indemnification, advise in writing the Board of Directors or such
other person or persons empowered to make the determination as provided in
Section 7 that the Indemnitee has made such request for indemnification. Upon
making such request for indemnification, the Indemnitee shall be presumed to be
entitled to indemnification hereunder and the Company shall have the burden of
proof in making of any determination contrary to such presumption. If the
person or persons so empowered to make such determination shall have failed to
make the requested indemnification within 45 days after receipt by the Company
of such request, the requisite determination of entitlement to indemnification
shall be deemed to have been made and the Indemnitee shall be absolutely
entitled to such indemnification, absent actual and material fraud in the
request for indemnification. The termination of any action, suit, investigation
or proceeding described in Section 3 or 4 hereof by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
---- ----------
of itself: (a) create a presumption that the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, that the Indemnitee had reasonable cause to believe that
his/her conduct was unlawful; or (b) otherwise adversely affect the rights of
the Indemnitee to indemnification except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs. All reasonable
---------------------------------
expenses and costs incurred by the Indemnitee (including attorneys' fees,
retainers and advances of disbursements required of the Indemnitee) shall be
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<PAGE>
paid by the Company in advance of the final disposition of such action, suit or
proceeding at the request of the Indemnitee within twenty days after the receipt
by the Company of a statement or statements from the Indemnitee requesting such
advance or advances from time to time. The Indemnitee's entitlement to such
expenses shall include those incurred in connection with any proceeding by the
Indemnitee seeking an adjudication or award in arbitration pursuant to this
Agreement. Such statement or statements shall reasonably evidence the expenses
and costs incurred by the Indemnitee in connection therewith and shall include
or be accompanied by an undertaking by or on behalf of the Indemnitee to repay
such amount if it is ultimately determined that the Indemnitee is not entitled
to be indemnified against such expenses and costs by the Company as provided by
this Agreement or otherwise.
SECTION 10. Remedies of the Indemnitee in Cases of Determination not
--------------------------------------------------------
to Indemnify or to Advance Expenses. In the event that a determination is made
- -----------------------------------
that the Indemnitee is not entitled to indemnification hereunder or if payment
has not been timely made following a determination of entitlement to
indemnification pursuant to Sections 7 and 8, or if expenses are not advanced
pursuant to Section 9, the Indemnitee shall be entitled to a final adjudication
in any appropriate court of the State of Delaware or any other court of
competent jurisdiction of his/her entitlement to such indemnification or
advance. Alternatively, the Indemnitee at his/her option may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association, such award to be made within sixty days
following the filing of the demand for arbitration. The Company shall not
oppose the Indemnitee's right to seek any such adjudication or award in
arbitration or any other claim. Such judicial proceeding or arbitration shall
be made de novo and the Indemnitee shall not be prejudiced by reason of a
-- ----
determination (if so made) that he/she is not entitled to indemnification. If a
determination is made or deemed to have been made pursuant to the terms of
Section 7 or Section 8 hereof that the Indemnitee is entitled to
indemnification, the Company shall be bound by such determination and is
precluded from asserting that such determination has not been made or that the
procedure by which such determination was made is not valid, binding and
enforceable. The company further agrees to stipulate in any such court or
before any such arbitrator that the Company is bound by all the provisions of
this Agreement and is precluded from making any assertions to the contrary. If
the court or arbitrator shall determine that the Indemnitee is entitled to any
indemnification hereunder, the Company shall pay all reasonable expenses
(including attorneys' fees) and costs actually incurred by the Indemnitee in
connection with such adjudication or award in arbitration (including, but not
limited to, any appellant proceedings).
SECTION 11. Notification and Defense of Claim. Promptly after
---------------------------------
receipt by the Indemnitee of notice of the commencement of any action, suit or
proceeding, the Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company in writing of the
commencement thereof; but the omission to so notify the Company will not relieve
it from any liability that it may have to the Indemnitee otherwise than under
this Agreement. Notwithstanding any other provision of this Agreement, with
respect to any such action, suit or proceeding as to which the Indemnitee
notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at
its own expense; and
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<PAGE>
(b) Except as otherwise provided in this Section 11(b), to
the extent that it may wish, the Company, jointly with any other
indemnifying party similarly notified, shall be entitled to assume
the defense thereof, with counsel satisfactory to the Indemnitee.
After notice from the Company to the Indemnitee of its election to so
assume the defense thereof, the Company shall not be liable to the
Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as
otherwise provided below. The Indemnitee shall have the right to
employ his/her own counsel in such action, suit or proceeding, but
the fees and expense of such counsel incurred after notice from the
Company of its assumption of the defense thereof shall be at the
expense of the Indemnitee unless (i) the employment of counsel by the
Indemnitee has been authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of the
defense of such action or (iii) the Company shall not in fact have
employed counsel to assume the defense of the action, in each of
which cases the fees and expenses of counsel shall be at the expense
of the Company. The Company shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of
the Company or as to which the Indemnitee shall have made the
conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify the
Indemnitee under this Agreement for any amounts paid in settlement of
any action or claim effected without its written consent. The
Company shall not settle any action or claim in any manner that would
impose any penalty or limitation on the Indemnitee without the
Indemnitee's written consent. Neither the Company nor the Indemnitee
will unreasonably withhold their consent to any proposed settlement.
SECTION 12. Other Rights to Indemnification. The indemnification and
-------------------------------
advancement of expenses (including attorneys' fees) and costs provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of the By-
laws, agreement, provision of the Certificate of Incorporation of the Company,
vote of stockholders or Disinterested Directors, provision of law or otherwise.
SECTION 13. Attorneys' Fees and Other Expenses to Enforce Agreement.
-------------------------------------------------------
In the event that the Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce his/her rights under, or to
recover damages for breach of, this Agreement, the Indemnitee, if he/she
prevails in whole or in part in such action, shall be entitled to recover from
the Company and shall be indemnified by the Company against, any actual expenses
for attorneys' fees and disbursements reasonably incurred by the Indemnitee.
SECTION 14. Duration of Agreement. This Agreement shall continue
---------------------
until and terminate upon the later of: (a) ten years after the Indemnitee has
ceased to occupy any of the positions or have any relationships
E-22
<PAGE>
described in Sections 3 and 4 of this Agreement; and (b) the final termination
of all pending or threatened actions, suits, proceedings or investigations to
which the Indemnitee may be subject by reason of the fact that the Indemnitee is
or was a director, officer, employee, agent or fiduciary of the Company or is or
was serving at the request of the Company as a director, officer, employee,
agent or fiduciary of any other entity, including, but not limited to, another
corporation, partnership, joint venture or trust, or by reason of anything done
or not done by the Indemnitee in any such capacity. The indemnification provided
under this Agreement shall continue as to the Indemnitee even though he/she may
have ceased to be a director or officer of the Company. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to the
benefit of the Indemnitee and the Indemnitee's spouse, assigns, heirs, devises,
executors, administrators or other legal representatives.
SECTION 15. Severability. If any provision or provisions of this
------------
Agreement shall be held invalid, illegal or unenforceable for any reason
whatsoever (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifest by the provision held invalid, illegal or
unenforceable.
SECTION 16. Identical Counterparts. This Agreement may be executed
----------------------
in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
SECTION 17. Headings. The headings of the paragraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
SECTION 18. Definitions. For purposes of this Agreement:
-----------
(a) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the action, suit,
investigation or proceeding in respect of which indemnification is
being sought by the Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member
of a law firm that neither is presently nor in the past five years has
been retained to represent: (i) the Company or the Indemnitee in any
matter material to either such party, or (ii) any other party to the
action, suit, investigation or proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or the
Indemnitee
E-23
<PAGE>
in an action to determine the Indemnitee's right to indemnification
under this Agreement.
SECTION 19. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
SECTION 20. Notices. All notices, requests, demand or other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or if (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to the Indemnitee, to:
______________________________
c/o Life Technologies, Inc.
9800 Medical Center Drive
Rockville, Maryland 20850
(b) If to the Company, to:
Life Technologies, Inc.
9800 Medical Center Drive
Rockville, Maryland 20850
Attn: President
E-24
<PAGE>
with a copy to:
Mara Rogers, Esq.
Fulbright & Jaworski
666 Fifth Avenue
New York, New York 10103
or to such other address as may be furnished to the Indemnitee by the Company or
to the Company by the Indemnitee, as the case may be.
SECTION 21. Governing Law. The parties hereto agree that this
-------------
Agreement shall be governed by, construed and enforced in accordance with, the
Laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first written above.
LIFE TECHNOLOGIES, INC.
By: /s/ Joseph C. Stokes, Jr.
------------------------------
Joseph C. Stokes, Jr.
Senior Vice President &
Chief Financial Officer
___________________________________
Indemnitee
Address: c/o Life Technologies, Inc.
9800 Medical Center Drive
Rockville, MD 20850
E-25
<PAGE>
EXHIBIT 10(P)
OFFICER'S AGREEMENT
This INDEMNITY AGREEMENT made and entered into as of the ___ day of
_________, by and between Life Technologies, Inc., a Delaware corporation (the
"Company"), and ______________ (the "Indemnitee");
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as officers or in other capacities unless they are
provided with adequate protection through insurance and indemnification against
inordinate risks of claims and actions against them arising out of their service
to and activities on behalf of the Company; and
WHEREAS, the current difficulties of obtaining adequate insurance have
increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors has determined that the inability to
attract and retain such persons is detrimental to the best interests of the
Company's stockholders and that the Company should act to assure such persons
that there will be increased certainty of such protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnitee is willing to serve, continue to serve and
take on additional service for or on behalf of the Company on the condition that
he/she be so indemnified;
NOW, THEREFORE, in consideration of the premises, the covenants
contained herein, and for $10 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Indemnitee do hereby covenant and agree as follows:
SECTION 1. Service by the Indemnitee. The Indemnitee will serve
-------------------------
and/or continue to serve as an officer of the Company faithfully and to the best
of the Indemnitee's ability so long as the Indemnitee is duly elected or
qualified in accordance with the provisions of the By-laws of the Company or
until such time as the Indemnitee tenders his/her resignation in writing. The
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or other obligation imposed by operation of
law), in which event the Company shall have no obligation under this Agreement
to continue the Indemnitee in any such position. Nothing in this Agreement
shall confer upon the Indemnitee the right to continue in the employ of the
Company or affect the right of the Company to terminate the Indemnitee's
employment at any time in the sole discretion of the Company, with or without
cause.
SECTION 2. Indemnification. The Company shall indemnify the
---------------
Indemnitee to the fullest extent permitted by applicable law in effect on the
date hereof or as such laws may from time to time be amended. Without
diminishing the scope of the indemnification provided by this Section 2, the
rights of indemnification of the Indemnitee provided hereunder shall include
E-26
<PAGE>
but shall not be limited to those rights hereinafter set forth, except that no
indemnification shall be paid to the Indemnitee:
(a) on account of any suit in which judgment is rendered
against the Indemnitee for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(b) on account of the Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest,
or to constitute willful misconduct;
(c) to the extent expressly prohibited by applicable law;
(d) for which payment is actually made to the Indemnitee
under a valid and collectible insurance policy or under a valid and
enforceable indemnity clause, by-law or agreement, except in respect
of any excess beyond payment under such insurance, clause, by-law or
agreement;
(e) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and,
in this respect, both the Company and the Indemnitee have been
advised that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities
laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to the
appropriate court for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by the Indemnitee, or any proceeding by the Indemnitee
against the Company or its directors, officers, employees or other
Indemnitees, unless (i) such indemnification is expressly required to
be made by law, (ii) the proceeding was authorized by the Board of
Directors of the Company, (iii) such indemnification is provided by
the Company, in its sole discretion, pursuant to the powers vested in
the Company under applicable law, or (iv) except as provided in
Sections 10 and 13 hereof.
SECTION 3. Action or Proceeding Other Than an Action by or in the
------------------------------------------------------
Right of the Company. The Indemnitee shall be entitled to the indemnification
- --------------------
rights provided in this Section if he/she is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, other than
an action by or in the right of the Company, by reason of the fact that he/she
is or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
or fiduciary of any other entity, including but not limited to, another
corporation, partnership, joint venture, trust, or by reason of anything done or
not done by the Indemnitee in any such capacity. Pursuant to this Section, the
Indemnitee shall be indemnified against all expenses (including attorneys'
fees), costs, judgments, penalties, fines and
E-27
<PAGE>
amounts paid in settlement actually and reasonably incurred by the Indemnitee in
connection with such action, suit or proceeding (including, but not limited to,
the investigation, defense or appeal thereof), if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his/her conduct was unlawful.
SECTION 4. Actions by or in the Right of the Company. The Indemnitee
-----------------------------------------
shall be entitled to the indemnification rights provided in this Section if the
Indemnitee is a person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding brought by or
in the right of the Company to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was a director, officer, employee or agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, agent or fiduciary of another entity, including,
but not limited to, another corporation, partnership, joint venture, trust, or
by reason of anything done or not done by the Indemnitee in any such capacity.
Pursuant to this Section, the Indemnitee shall be indemnified against all
expenses (including attorneys' fees), costs and amounts paid in settlement
actually and reasonably incurred by the Indemnitee in connection with such
action, suit or proceeding (including, but not limited to, the investigation,
defense or appeal thereof) if the Indemnitee acted in good faith and in a manner
he/she reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that no such indemnification shall be made in
respect of any claim, issue, or matter as to which applicable law expressly
prohibits such indemnification by reason of any adjudication of liability of the
Indemnitee to the Company, unless and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses and costs which
such court shall deem proper.
SECTION 5. Indemnification for Costs, Charges and Expenses of
--------------------------------------------------
Successful Party. Notwithstanding the other provisions of this Agreement, to
- ----------------
the extent that the Indemnitee has served as a witness on behalf of the Company
or has been successful, on the merits or otherwise, in defense of any action,
suit or proceeding referred to in Sections 3 and 4 hereof, or in defense of any
claim, issue or matter therein, including, without limitation, the dismissal of
any action without prejudice, the Indemnitee shall be indemnified against all
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him/her in connection therewith.
SECTION 6. Partial Indemnification. If the Indemnitee is entitled
-----------------------
under any provision of this Agreement to indemnification by the Company for some
or a portion of the expenses (including attorneys' fees), costs, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him/her
in connection with the investigation, defense, appeal or settlement of such
suit, action, investigation or proceeding described in Section 3 or 4 hereof,
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including reasonable attorneys' fees), costs, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him/her to which
the Indemnitee is entitled.
E-28
<PAGE>
SECTION 7. Determination of Entitlement to Indemnification. Upon
-----------------------------------------------
written request by the Indemnitee for indemnification pursuant to Section 3 or 4
hereof, the entitlement of the Indemnitee to indemnification pursuant to the
terms of this Agreement shall be determined by the following person or persons
who shall be empowered to make such determination: (a) the Board of Directors
of the Company by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined); or (b) if such a quorum is not obtainable
or, even if obtainable, if the Board of Directors by the majority vote of
Disinterested Directors so directs, by Independent Counsel (as hereinafter
defined) in a written opinion to the Board of Directors, a copy of which shall
be delivered to the Indemnitee. Such Independent Counsel shall be selected by
the Board of Directors and approved by the Indemnitee. Upon failure of the Board
to so select such Independent Counsel or upon failure of the Indemnitee to so
approve, such Independent Counsel shall be selected by the Chancellor of the
State of Delaware or such other person as the Chancellor shall designate to make
such selection. Such determination of entitlement to indemnification shall be
made not later than 45 days after receipt by the Company of a written request
for indemnification. Such request shall include documentation or information
which is necessary for such determination and which is reasonably available to
the Indemnitee. Any costs or expenses (including attorneys' fees) incurred by
the Indemnitee in connection with the Indemnitee's request for indemnification
hereunder shall be borne by the Company. The Company hereby indemnifies and
agrees to hold the Indemnitee harmless therefrom irrespective of the outcome of
the determination of the Indemnitee's entitlement to indemnification. If the
person making such determination shall determine that the Indemnitee is entitled
to indemnification as part (but not all) of the application for indemnification,
such person shall reasonably prorate such partial indemnification among such
claims, issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings. The
----------------------------------------------
Secretary of the Company shall, promptly upon receipt of the Indemnitee's
request for indemnification, advise in writing the Board of Directors or such
other person or persons empowered to make the determination as provided in
Section 7 that the Indemnitee has made such request for indemnification. Upon
making such request for indemnification, the Indemnitee shall be presumed to be
entitled to indemnification hereunder and the Company shall have the burden of
proof in making of any determination contrary to such presumption. If the
person or persons so empowered to make such determination shall have failed to
make the requested indemnification within 45 days after receipt by the Company
of such request, the requisite determination of entitlement to indemnification
shall be deemed to have been made and the Indemnitee shall be absolutely
entitled to such indemnification, absent actual and material fraud in the
request for indemnification. The termination of any action, suit, investigation
or proceeding described in Section 3 or 4 hereof by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
---- ----------
of itself: (a) create a presumption that the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, that the Indemnitee had reasonable cause to believe that
his/her conduct was unlawful; or (b) otherwise adversely affect the rights of
the Indemnitee to indemnification except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs. All reasonable
---------------------------------
expenses and costs incurred by the Indemnitee (including attorneys' fees,
retainers and advances of disbursements required of the Indemnitee) shall be
E-29
<PAGE>
paid by the Company in advance of the final disposition of such action, suit or
proceeding at the request of the Indemnitee within twenty days after the receipt
by the Company of a statement or statements from the Indemnitee requesting such
advance or advances from time to time. The Indemnitee's entitlement to such
expenses shall include those incurred in connection with any proceeding by the
Indemnitee seeking an adjudication or award in arbitration pursuant to this
Agreement. Such statement or statements shall reasonably evidence the expenses
and costs incurred by the Indemnitee in connection therewith and shall include
or be accompanied by an undertaking by or on behalf of the Indemnitee to repay
such amount if it is ultimately determined that the Indemnitee is not entitled
to be indemnified against such expenses and costs by the Company as provided by
this Agreement or otherwise.
SECTION 10. Remedies of the Indemnitee in Cases of Determination not
--------------------------------------------------------
to Indemnify or to Advance Expenses. In the event that a determination is made
- -----------------------------------
that the Indemnitee is not entitled to indemnification hereunder or if payment
has not been timely made following a determination of entitlement to
indemnification pursuant to Sections 7 and 8, or if expenses are not advanced
pursuant to Section 9, the Indemnitee shall be entitled to a final adjudication
in any appropriate court of the State of Delaware or any other court of
competent jurisdiction of his/her entitlement to such indemnification or
advance. Alternatively, the Indemnitee at his/her option may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association, such award to be made within sixty days
following the filing of the demand for arbitration. The Company shall not
oppose the Indemnitee's right to seek any such adjudication or award in
arbitration or any other claim. Such judicial proceeding or arbitration shall
be made de novo and the Indemnitee shall not be prejudiced by reason of a
-- ----
determination (if so made) that he/she is not entitled to indemnification. If a
determination is made or deemed to have been made pursuant to the terms of
Section 7 or Section 8 hereof that the Indemnitee is entitled to
indemnification, the Company shall be bound by such determination and is
precluded from asserting that such determination has not been made or that the
procedure by which such determination was made is not valid, binding and
enforceable. The company further agrees to stipulate in any such court or
before any such arbitrator that the Company is bound by all the provisions of
this Agreement and is precluded from making any assertions to the contrary. If
the court or arbitrator shall determine that the Indemnitee is entitled to any
indemnification hereunder, the Company shall pay all reasonable expenses
(including attorneys' fees) and costs actually incurred by the Indemnitee in
connection with such adjudication or award in arbitration (including, but not
limited to, any appellant proceedings).
SECTION 11. Notification and Defense of Claim. Promptly after
---------------------------------
receipt by the Indemnitee of notice of the commencement of any action, suit or
proceeding, the Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company in writing of the
commencement thereof; but the omission to so notify the Company will not relieve
it from any liability that it may have to the Indemnitee otherwise than under
this Agreement. Notwithstanding any other provision of this Agreement, with
respect to any such action, suit or proceeding as to which the Indemnitee
notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at
its own expense; and
E-30
<PAGE>
(b) Except as otherwise provided in this Section 11(b), to
the extent that it may wish, the Company, jointly with any other
indemnifying party similarly notified, shall be entitled to assume
the defense thereof, with counsel satisfactory to the Indemnitee.
After notice from the Company to the Indemnitee of its election to so
assume the defense thereof, the Company shall not be liable to the
Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as
otherwise provided below. The Indemnitee shall have the right to
employ his/her own counsel in such action, suit or proceeding, but
the fees and expense of such counsel incurred after notice from the
Company of its assumption of the defense thereof shall be at the
expense of the Indemnitee unless (i) the employment of counsel by the
Indemnitee has been authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of the
defense of such action or (iii) the Company shall not in fact have
employed counsel to assume the defense of the action, in each of
which cases the fees and expenses of counsel shall be at the expense
of the Company. The Company shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of
the Company or as to which the Indemnitee shall have made the
conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify the
Indemnitee under this Agreement for any amounts paid in settlement of
any action or claim effected without its written consent. The
Company shall not settle any action or claim in any manner that would
impose any penalty or limitation on the Indemnitee without the
Indemnitee's written consent. Neither the Company nor the Indemnitee
will unreasonably withhold their consent to any proposed settlement.
SECTION 12. Other Rights to Indemnification. The indemnification and
-------------------------------
advancement of expenses (including attorneys' fees) and costs provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of the By-
laws, agreement, provision of the Certificate of Incorporation of the Company,
vote of stockholders or Disinterested Directors, provision of law or otherwise.
SECTION 13. Attorneys' Fees and Other Expenses to Enforce Agreement.
-------------------------------------------------------
In the event that the Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce his/her rights under, or to
recover damages for breach of, this Agreement, the Indemnitee, if he/she
prevails in whole or in part in such action, shall be entitled to recover from
the Company and shall be indemnified by the Company against, any actual expenses
for attorneys' fees and disbursements reasonably incurred by the Indemnitee.
SECTION 14. Duration of Agreement. This Agreement shall continue
---------------------
until and terminate upon the later of: (a) ten years after the Indemnitee has
ceased to occupy any of the positions or have any relationships
E-31
<PAGE>
described in Sections 3 and 4 of this Agreement; and (b) the final termination
of all pending or threatened actions, suits, proceedings or investigations to
which the Indemnitee may be subject by reason of the fact that the Indemnitee is
or was a director, officer, employee, agent or fiduciary of the Company or is or
was serving at the request of the Company as a director, officer, employee,
agent or fiduciary of any other entity, including, but not limited to, another
corporation, partnership, joint venture or trust, or by reason of anything done
or not done by the Indemnitee in any such capacity. The indemnification provided
under this Agreement shall continue as to the Indemnitee even though he/she may
have ceased to be a director or officer of the Company. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to the
benefit of the Indemnitee and the Indemnitee's spouse, assigns, heirs, devises,
executors, administrators or other legal representatives.
SECTION 15. Severability. If any provision or provisions of this
------------
Agreement shall be held invalid, illegal or unenforceable for any reason
whatsoever (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifest by the provision held invalid, illegal or
unenforceable.
SECTION 16. Identical Counterparts. This Agreement may be executed
----------------------
in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
SECTION 17. Headings. The headings of the paragraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
SECTION 18. Definitions. For purposes of this Agreement:
-----------
(a) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the action, suit,
investigation or proceeding in respect of which indemnification is
being sought by the Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member
of a law firm that neither is presently nor in the past five years
has been retained to represent: (i) the Company or the Indemnitee in
any matter material to either such party, or (ii) any other party to
the action, suit, investigation or proceeding giving rise to a claim
for indemnification hereunder. Notwithstanding the foregoing, the
term "Independent Counsel" shall not include any person who, under
the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Company
or the Indemnitee
E-32
<PAGE>
in an action to determine the Indemnitee's right to indemnification
under this Agreement.
SECTION 19. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
SECTION 20. Notices. All notices, requests, demand or other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or if (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to the Indemnitee, to:
______________________________
c/o Life Technologies, Inc.
9800 Medical Center Drive
Rockville, Maryland 20850
(b) If to the Company, to:
Life Technologies, Inc.
9800 Medical Center Drive
Rockville, Maryland 20850
Attn: President
E-33
<PAGE>
with a copy to:
Mara Rogers, Esq.
Fulbright & Jaworski
666 Fifth Avenue
New York, New York 10103
or to such other address as may be furnished to the Indemnitee by the Company or
to the Company by the Indemnitee, as the case may be.
SECTION 21. Governing Law. The parties hereto agree that this
-------------
Agreement shall be governed by, construed and enforced in accordance with, the
Laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first written above.
LIFE TECHNOLOGIES, INC.
By: /s/ Joseph C. Stokes, Jr.
------------------------------
Joseph C. Stokes, Jr.
Senior Vice President &
Chief Financial Officer
___________________________________
Indemnitee
Address: Life Technologies, Inc.
9800 Medical Center Drive
Rockville, MD 20850
E-34
<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>
Canadian Life Technologies, Inc. 100% Ontario
GIBCO BRL India Pvt. Ltd. 100% (A) India
Laboratory Services Ltd. 100% New Zealand
Life Technologies A.G. 100% (B) Switzerland
Life Technologies A.S. 100% Denmark
Life Technologies B.V. 100% (B) Netherlands
Life Technologies do Brasil Ltda. 100% (C) Brazil
Life Technologies Foreign Sales Corp. 100% Barbados
Life Technologies Holdings, Unlimited 100% Scotland
Life Technologies Overseas GmbH 100% (B) Germany
Life Technologies Italia S.r.l. 100% Italy
Life Technologies Ltd. 100% (D) Scotland
Life Technologies Ltd. 100% New Zealand
Life Technologies Mauritius Ltd. 100% Mauritius
Life Technologies Overseas Ltd. 100% (D) Scotland
Life Technologies (Pacific) Ltd. 100% Hong Kong
Life Technologies Pty. Ltd. 100% Australia
Life Technologies S.A.R.L. 100% (B) France
Life Technologies Asia Pacific Inc. 100% Delaware, USA
N.V. Life Technologies S.A. 100% (B) Belgium
Serum Technologies (unincorporated joint venture) 40% (E) Maryland, USA
Life Technologies Sweden AB 100% Sweden
Life Technologies S.A. 100% Spain
Life Technologies Uruguay, S.A. 100% Uruguay
Custom Primers, Inc. 100% California, USA
Life Technologies Oriental K.K. 80% Japan
Life Technologies GIBCO BRL Co., Ltd. 51% Republic of China,
(Taiwan)
Serum Technologies Holdings, Inc. 100% Delaware, USA
</TABLE>
(A) Owned by Life Technologies Mauritius Ltd.
(B) Owned by Life Technologies Overseas Ltd.
(C) Owned 90% by Life Technologies, Inc. and 10% by Life Technologies
Mauritius Ltd.
(D) Owned by Life Technologies Holdings, Unlimited
(E) Owned by Serum Technologies Holdings, Inc.
E-35
<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. 333-
03773, Registration No. 333-28607, 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 22, 1999, on
our audits of the consolidated financial statements of Life Technologies, Inc.
and subsidiaries as of December 31, 1998 and 1997, and for the years ended
December 31, 1998, 1997 and 1996, which report is included in this Annual Report
on Form 10-K.
/s/ PricewaterhouseCoopers LLP
------------------------------
McLean, Virginia
March 9, 1999
E-36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, INCOME STATEMENT 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 56,047
<SECURITIES> 0
<RECEIVABLES> 69,753
<ALLOWANCES> 1,956
<INVENTORY> 74,319
<CURRENT-ASSETS> 220,155
<PP&E> 159,540
<DEPRECIATION> 52,166
<TOTAL-ASSETS> 353,587
<CURRENT-LIABILITIES> 59,752
<BONDS> 0
0
0
<COMMON> 249
<OTHER-SE> 275,859
<TOTAL-LIABILITY-AND-EQUITY> 353,587
<SALES> 361,726
<TOTAL-REVENUES> 364,206
<CGS> 167,862
<TOTAL-COSTS> 167,862
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> 51,115
<INCOME-TAX> 19,168
<INCOME-CONTINUING> 31,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,303
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.29
</TABLE>
