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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
Commission File No. 333-13523
DADE BEHRING INC.
(Formerly Dade International Inc.)
(Exact name of registrant as specified in its charter)
Delaware 36-3949533
(State or other jurisdiction of (I.R.S. EmployerIdentification No.)
incorporation or organization)
1717 Deerfield Road, Deerfield, 60015-0778
Illinois (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (847) 267-5300
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant as of March 19, 1999 was approximately zero. At March 19, 1999,
there were 1,000 shares of Common Stock outstanding, all held by the
registrant's parent, Dade Behring Holdings, Inc.
Documents Incorporated by Reference
NONE
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PART I
This information should be read in conjunction with the Consolidated
Financial Statements included herein. Certain statements included in this
discussion are forward-looking, such as statements relating to estimates of
operating and capital expenditure requirements, future revenue and operating
income levels, cash flow, Year 2000 remediation plans, and liquidity. Such
forward-looking statements are based on Management's current expectations and
are subject to a number of risks and uncertainties that could cause actual
results in the future to differ significantly from the results expressed or
implied in any forward-looking statements made by, or on behalf of, the
Company. These risks and uncertainties include, but are not limited to,
uncertainties relating to global economic and business conditions,
governmental and regulatory policies, Year 2000 remediation actions of
suppliers and others, and the competitive environment in which the Company
operates.
Item 1. Business.
History
The original predecessor company to Dade Behring Inc. ("Dade Behring" or
the "Company", formerly Dade International Inc.), the Baxter Diagnostics
division (the "Predecessor") of Baxter International Inc. ("Baxter"), was
established in 1949 as part of the Dade County Blood Bank in Florida. The
Predecessor initially distributed its blood products through American Hospital
Supply Corporation ("AHS") and was subsequently acquired by AHS in 1956.
Building upon its initial blood testing base, AHS initiated extensive research
and development efforts in the routine chemistry/immunoassay markets of the
emerging in vitro diagnostic testing industry. From 1983 to 1985, those R&D
efforts culminated in the product introductions of the Stratus and Paramax
instrument platform lines. AHS also expanded into the microbiology market and
established the MicroScan product line through a series of acquisitions in the
early 1980s. In 1985, Baxter acquired AHS.
In December 1994, Bain Capital, Inc. ("Bain Capital") and GS Capital
Partners, L.P. ("GS Capital") formed Dade Behring Holdings, Inc. ("Holdings",
formerly Diagnostics Holding, Inc.) and acquired the Predecessor from Baxter
(the "Dade Acquisition"), with the Company becoming a wholly-owned subsidiary
of Holdings. The Company held established leadership positions in hemostasis
and microbiology, strong routine chemistry/immunoassay market positions, and
an extensive sales and service organization.
In May 1996, the Company purchased (the "Chemistry Acquisition") the in
vitro diagnostics business from DuPont, which had entered into the automated
clinical chemistry market in 1968 with the introduction of the first random
access automated chemistry analyzer in the world and whose installed base of
routine chemistry instruments was and still is one of the largest in the
world. The Chemistry Acquisition also provided the Company with world-class
manufacturing capabilities, automation technology, and strong management
processes for operations planning and product development.
In October 1997, the Company acquired (the "Behring Combination") the in
vitro diagnostics business ("Behring") of Hoechst A.G and was renamed Dade
Behring. Behring was established in 1904 by Emil von Behring, the recipient of
the first Nobel Prize in medicine. The Behring Combination provided
complementary product lines for hemostasis and routine immunochemistry and
significantly broadened the overall product line portfolio by adding
leadership positions in plasma protein and drugs of abuse testing/therapeutic
drug monitoring. Behring also provided expanded technology capabilities in
platform development, assay development and the development of emerging
technologies. The acquisition of Behring also extended the geographic scope of
the Company's business.
Dade Behring, a corporation organized under the laws of Delaware, has its
principal executive offices located at 1717 Deerfield Road, Deerfield,
Illinois 60015-0778; its telephone number is (847) 267-5300.
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Industry--Overview
In vitro (literally, "in glass") diagnostic ("IVD") tests are conducted
outside the body and are used to identify and measure substances in patients'
bodily fluids such as whole blood, blood plasma, serum, or urine, which enable
physicians to diagnose, treat and monitor patients. The most common IVD tests
are traditional routine clinical chemistry tests which measure glucose,
cholesterol or sodium as part of routine blood checks. Other IVD tests measure
bodily functions such as blood clotting ability and cardiac function, or
measure the presence of infections or drugs. The wide range and important
nature of these tests have established IVD testing as an integral part of the
managed care environment, providing for accurate and timely patient diagnosis
and treatment. Increasingly, IVD testing is being recognized as making a
significant contribution to improving patient care and lowering total patient
costs. IVD tests are performed in a number of different clinical settings
including hospitals, reference laboratories, physicians' offices/ambulatory
care centers and consumers' homes.
The global IVD market is estimated at $18.4 billion, with the United States,
Western Europe and Japan comprising approximately 41%, 33% and 13%,
respectively. Management believes that the global IVD market will continue to
grow due to a number of key favorable industry trends: 1) Demographic shifts
resulting from the aging of the population and socio-economic improvements are
expected to increase the overall level of demand for diagnostic testing. 2)
Increased focus on lowering total healthcare expenditures will likely increase
demand for diagnostic testing as an effective tool to improve patient outcomes
and reduce the costs of misdiagnosis through earlier and more accurate
diagnosis and patient monitoring. 3) Emerging markets will provide additional
demand as economic improvements in these countries lead to increases in
healthcare expenditures. 4) Technology improvements in new tests, pathogens and
markers will result in the increased use of diagnostics to aid in the diagnosis
of diseases. 5) Improvements in lower cost point-of-care/near-patient testing
capabilities are expected to expand the application of diagnostic testing
capabilities into non-laboratory settings (e.g. operating room, emergency room,
acute care centers). 6) Increased automation of diagnostic instruments is
expected to lower the overall cost of diagnostic testing and thereby increase
accessibility and demand.
IVD systems are composed of instruments, reagents, consumables, service and
data management systems. Instruments typically have a five-year life and serve
to automate repetitive manual tasks, improve test accuracy and speed results
reporting. Reagents are liquid or powder chemical substances that react with
the patient sample to produce measurable, objective results. The consumable
accessories vary across application segments but are generally items such as
tubes and stoppers used during test procedures. Both reagents and consumables
are typically exclusive to their related instruments (thus, a "closed" system)
and, therefore, generate significant ongoing revenues for suppliers. Sample
handling and preparation devices, as well as data management systems are
becoming increasingly important components of the IVD system. These system
additions further reduce labor, improve safety and reduce cost through their
automation benefits. Providing a total integrated system solution that is
reliable and easy to use creates high switching costs and loyalty among
customers who value consistency and accuracy in test results.
Management believes that certain trends affecting the purchasers of IVD
instruments, as well as the maturation of many IVD testing applications will
drive further consolidation and globalization in the IVD industry. Over the
past several years, an increasing number of domestic hospitals have formed into
groups known as Integrated Health Systems in order to compete for patients,
develop strategic alliances with suppliers and leverage specialized
departments. The formation of these Integrated Health Systems, as well as the
consolidation occurring among competitors in the independent reference lab
market presents larger IVD suppliers with broad product and service offerings
and multiple leadership positions with the opportunity to drive standardization
of their products across all labs in a group. As testing applications mature in
these and other laboratories, IVD suppliers will need to increase the scale of
their operations and broaden the scope of their product lines in order to
leverage worldwide sales, service and research and development infrastructures.
Management believes that the Company, with its global reach and broad product
portfolio, is well positioned to take advantage of these trends.
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Industry--Served Markets
The Company is the largest supplier of IVD products and services to
clinical laboratories in the United States and the third largest IVD supplier
to clinical laboratories in the world. Of the total estimated $18.4 billion
global IVD market, the Company serves a $15.1 billion segment that consists of
IVD instruments, reagents, consumables, service and data management systems
targeted primarily at clinical laboratories and near-patient testing. Within
the Company's served markets, the Company has global market leadership
positions in six of the seven core product markets, which include routine
chemistry/immunoassay, cardiac, hemostasis, plasma protein, microbiology,
infectious disease diagnostics, and drugs of abuse testing /therapeutic drug
monitoring ("DAT/TDM").
IVD tests are conducted primarily in clinical laboratories, which include
primarily hospital-based laboratories and reference laboratories (independent
from hospitals). The Company's customer base consists of approximately 24,000
customers worldwide. The Company provides products and services to over 90% of
U.S. hospital-based clinical laboratories and to the majority of reference
laboratories worldwide.
The Company manufactures and markets a broad offering of IVD products and
services which includes: (i) instruments (approximately 11% of sales); (ii)
reagents and consumables (approximately 86% of sales); and (iii) services
(approximately 3% of sales). In total, the Company has a worldwide installed
base of approximately 38,400 instruments. With a typical instrument life of
five years, the Company's installed base of instruments generates annual
revenue of approximately $30,000 per instrument from ongoing sales of
reagents, consumables and service. More importantly, over 73% of the Company's
instrument systems are "closed" systems, which require the exclusive use of
Company reagents and consumables in order to run tests. As a result, the
Company generates an attractive, stable and recurring stream of revenue from
reagents, consumables and service contracts.
A description of the Company's served markets is as follows:
Routine Chemistry/Immunoassay
Routine chemistry tests measure substances found in large concentrations in
patients' blood, tissue, urine or other bodily fluids. These substances
include cholesterol, glucose, iron and sodium and their concentration levels
provide information on a patient's basic bodily functions. Routine immunoassay
testing relies upon the properties of antibodies and antigens in the immune
system as its key detection mechanism. Immunoassays (immunochemistry tests)
measure relatively low concentrations of these substances found in blood.
These tests are performed for pre- and post-surgical procedures and to monitor
a patient's response to treatment and therapy. Historically, analyzers had
been developed separately for routine chemistry and immunoassay testing.
Today, high-volume tests are rapidly being consolidated to a single,
heterogeneous platform which significantly improves overall laboratory
productivity and costs.
On average, hospitals operate two to three routine chemistry/immunoassay
analyzers, which serve such roles as routine, STAT and specialty testing.
These instruments are considered the workhorse of the clinical laboratory,
accounting for up to 40% of all IVD tests performed in such laboratories and
are characterized by their high throughput capabilities.
Dade Behring has a broad range of routine chemistry/immunoassay instrument
platforms, including the Dimension(R), Opus(TM), aca(R) and Paramax(R)
instruments. Dade Behring has been a leader in workstation consolidation with
the introduction of the heterogeneous module for the Dimension(R) RxL
instrument, which allows the integration of highly sensitive immunoassay
testing with routine chemistry onto one platform. With the Company's
leadership position in workstation consolidation, the continued consolidation
of routine chemistry/immunoassay testing onto a single platform represents a
significant growth opportunity for the Company. The Company has a
comprehensive test menu of approximately 100 tests and is currently developing
over 40 additional chemistry and immunoassay tests.
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Cardiac
The Company's cardiac business is focused on immunoassay platforms targeted
at cardiac diagnostics. The cardiac market is one of the highest growth
segments of the broader immunoassay market, growing at 22% annually. Dade
Behring is the global market share leader in the high growth cardiac segment
and was one of the first to introduce a widely adopted testing system for the
cardiac enzymes Troponin I, CKMB and Myoglobin. The combination of rapid and
accurate tests for Troponin I, CKMB and Myoglobin has allowed for rapid
diagnosis of cardiac disease and has enhanced the physician's ability for
triage and diagnosis of chest pain in patients. Through its 12-year research
collaboration with one of the leading U.S. cardiac marker institutions, George
Washington University, the Company continues to innovate and introduce new
products in the cardiac segment.
The Company's Stratus(R) CS Cardiac system, launched in late 1998,
represents the industry's first quantitative near-patient cardiac instrument.
The Stratus(R) CS system rapid result time (13 minutes), accuracy, test menu
breadth and its direct correlation to central laboratory test results on the
Dimension(R) and Opus(TM) instrument platforms creates a strong competitive
advantage for the Company. The Stratus(R) CS system also offers significant
cost savings for healthcare providers. Currently, the average cost to rule out
myocardial infarction in a patient with chest pain ranges from $1,300 to
$5,600. Stratus(R) CS can achieve a result in 13 minutes which saves
significant time over conventional diagnostic measures, which reduces hospital
lengths of stay, avoids unnecessary testing and thereby reduces healthcare
costs significantly. Additionally, the Stratus(R) CS system also reduces
expenses related to unstable angina, a very common form of cardiac disease, by
offering testing for a new, second-generation Troponin I marker which is a
highly sensitive marker of unstable angina. The new, second-generation Troponin
I marker can serve as a rule-in diagnostic procedure which would expedite
follow-up treatment. The Stratus(R) CS system positions the Company well in
both the near-patient and central laboratory cardiac market.
Plasma Protein
Plasma protein instrument systems test serum, plasma, urine or cerebral
spinal fluid to help both diagnose diseases such as coronary heart diseases and
rheumatic diseases as well as to detect disorders such as tumors, renal failure
and malnutrition. Plasma protein tests are conducted on two types of instrument
platforms. The majority of plasma protein tests are run on dedicated
nephelometers such as the Company's BN(TM)II instrument; some laboratories,
however, also run tests on routine chemistry/immunoassay analyzers such as the
Company's Dimension(R) instrument.
The Company is the market leader in the worldwide plasma protein market. The
Company offers four dedicated plasma protein instruments: the BN(TM)II and
BN(TM)A instruments, targeted at large, high volume hospital and commercial
laboratories; the BN100 instrument, sold to small to medium sized labs; and the
TurbiTime(TM)System, a manual instrument sold to small hospitals and private
labs. The BN(TM)II, a large, highly automated instrument, was released in late
1996 and has proven to be a successful upgrade path for former customers of the
BN(TM)A and BN(TM)100 instruments who are striving to reduce lab costs and
increase actual testing throughput. The Company's instruments offer up to 60
assays which cover the complete spectrum of plasma protein tests. The Company
is launching a new instrument in the fourth quarter of 1999, the BN
ProSpec(TM), which will be targeted at the small to medium size customer group.
The Company's focus on expanding its plasma protein business has led to the
development of the broadest portfolio of plasma protein products in the market,
allowing it to target customers of all sizes and usage profiles. In addition,
the Company has been able to further leverage its expertise in assay
development on dedicated nephelometers by offering plasma protein assays for
the routine chemistry/immunoassay analyzer market. The Company is also working
to grow the plasma protein market by developing new markers for disorders such
as malnutrition.
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Microbiology
Dade Behring's MicroScan business serves a market that consists of
identification/antimicrobial susceptibility testing ("ID/AST") instruments,
reagent panels, data management systems, disposable accessories and service.
Microbiology laboratories use ID/AST products to identify infection-causing
bacteria (e.g., strep and staph) and to determine the minimum concentration of
antibiotic (e.g., erythromycin and ampicillin) necessary to inhibit or kill the
bacteria. This information is critical to the optimum management of patient
therapy. Microbiology systems are "closed," meaning that reagents and
consumables can only be used on the instruments for which they were produced.
Continued evolutions in the microbiology testing market have been driven
primarily by advances in automation, new antibiotics, the complexity of various
microbes, and the increasing resistance of microbes to antibiotics.
The Company manufactures and markets both manual and automated ID/AST
products. MicroScan's premier instruments are the WalkAway(R)-40 and the
WalkAway(R)-96, fully automated instruments that use patented dry reagent
panels to conduct bacterial identification and susceptibility testing at the
same time.
The Company is the global leader in automated ID/AST microbiology systems
and has been able to maintain its leadership position in the microbiology
market by focusing on continuous instrument and panel product enhancement and
high growth international markets, as well as by upgrading its instruments to
help laboratories reduce their overall costs. In the United States, the Company
continues to secure business through the promotion of its conventional panels,
testing devices which produce more accurate results than competitive systems,
and through the placement of its pharmLINK(TM) systems, which provide
pharmacists, microbiologists and physicians with better information for the
management of antibiotic therapy. Because antibiotics represent approximately
30% of a typical hospital's drug budget, the potential for significant cost
savings will continue to drive the use of the pharmLINK(TM) system as an
important data management tool. In the future, the Company expects to continue
to aggressively develop international markets. Many international markets rely
predominately upon manual systems--creating a significant opportunity for
MicroScan as customers move to more efficient automated systems. In addition,
as hospitals outside the United States continue to build the necessary
information systems infrastructure, the Company expects to develop new versions
of the pharmLINK(TM) system that are specific to a country's needs.
Infectious Disease Diagnostics
Infectious disease instrument systems test serum, plasma or cerebral spinal
fluid for the presence of infectious microorganisms. This segment of Dade
Behring's business consists primarily of virology testing, including HIV and
hepatitis testing. The Company is devoting significant R&D investments in
infectious disease diagnostics in order to develop a next-generation infectious
disease diagnostics platform which will have the capability of leveraging both
immunoassay and nucleic acid diagnostic technology.
Dade Behring has a strong niche position in infectious disease diagnostics
as well as an aggressive ongoing development program in advanced diagnostics.
Dade Behring has also built strong market share positions in key European
markets. In addition, the Company possesses a strong intellectual property
position for HIV-O, a new variant of HIV recently discovered. Due to the
increased prevalence of HIV-O, any future HIV test platform will have to
include HIV-O to offer full HIV testing capability. The Company continues to
invest in expanded test menu capabilities on its existing instrument line and
has launched the new Quadriga(TM) platform, that allows the Company to better
serve the high volume customer segment. Finally, the Company has made
significant investments in nucleic acid diagnostic technologies, including
branch migration inhibition (BMI).
Hemostasis
Hemostasis testing measures a patient's ability to form and dissolve blood
clots, a critical factor in the stabilization of the cardiovascular system.
Hemostasis testing can be segmented into routine screening and specialty tests.
Routine hemostasis tests are typically performed before and during surgical
procedures.
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Hemostasis testing is also essential in post-surgical treatments for patients
with cardiovascular disorders (e.g., monitoring treatments to "thin" the blood)
and for patients with coagulation disorders (e.g., hemophilia). Specialty tests
are performed to further characterize congenital disease states. Market growth
is expected to come from a continued growth in the number of surgeries
performed as well as from new hemostasis tests which more accurately measure
blood clotting and provide for improved patient treatment.
The Company pioneered the field of hemostasis and continues to maintain a
global leadership position through its commitment to innovation and its
development of new and improved products and services. The Company offers the
industry's broadest range of instrument platforms and tests, both routine and
specialty, to meet the needs of customers from small hospitals to large
reference labs. The Company has a strong history of instrument product
development, and has introduced two new systems (the BCS and BCT) over the past
three years. The Company is capitalizing on an emerging near-patient technology
opportunity with the introduction of a novel system for monitoring platelet
function, which is an essential component of primary hemostasis. Platelet
testing today is performed manually, with Dade Behring offering the only
automated system in the market. The Company believes this will be a high-growth
market as new anti-platelet therapies are developed and introduced.
Drugs of Abuse Testing/Therapeutic Drug Monitoring ("DAT/TDM")
Drugs tests are used to measure the level of therapeutic drugs ("TDM") or
drugs of abuse ("DAT") in either blood or urine. TDM tests assist physicians in
ensuring that the level of therapeutic drugs patients receive do not exceed
safe ranges in the bloodstream. An example of a TDM application is testing
performed on transplant patients to monitor the level of immunosuppressive
drugs that they are given. Drugs of abuse tests screen for the use of illicit
substances such as cocaine and marijuana. Because of their range of
application, drugs tests are used at a variety of sites, from clinical
laboratories to employers' offices. Drugs tests are also conducted on multiple
platform types, including the Company's ETS(R) dedicated immunoassay instrument
platform, as well as its Dimension(R) clinical chemistry/immunoassay analyzers.
The Company manufactures a wide range of products under the Syva(R) brand
name in the drugs market, including both dedicated instruments, as well as a
line of over 40 reagents, which it markets to both clinical and non-clinical
laboratories. Syva(R) is the world leader in DAT testing and is also a leader
in DAT innovation, with the broadest menu of assays available and a large
pipeline of new tests. The Company's test for LSD was chosen over the
competition for use by the United States military. In order to increase the
convenience of testing for its customers, the Company is developing new DAT
sample collection technologies, such as a patch that detects drugs from sweat
rather than urine. In addition, the Company is taking advantage of the trend in
diagnostics toward testing at the point-of-care by launching the Syva(R) Rapid
Test(TM) product line, a self-contained, unitized test device. The Company also
has a strong position in the TDM market with an especially strong position in
the high growth immunosuppressives market. The Company has been successful at
developing tests for immunosuppressive drugs; it was the first to market a
research-use only test for MPA and acquired a license to test for FK506.
The Company's plans for growth in the drugs market center on expanding the
scope of its testing platforms and assays, as well as international expansion.
In order to take advantage of the growing need for drug tests, the Company has
been rapidly developing new sample collection methodologies and point-of-care
devices. The Company is also taking advantage of the market potential for tests
on non-dedicated platforms by extending its OEM relationships with
manufacturers of routine chemistry/immunoassay analyzers. In addition, growth
opportunities exist for the Company outside of the United States, where drug
testing is currently less well penetrated. For example, the Company has had
discussions with the governments of Germany and France to use its testing
devices on people involved in car accidents.
Other Served Markets
Immunohematology. Dade Behring immunohematology and related products are
typically used by hospital laboratories and blood donor centers to classify
blood products for use in transfusion procedures. The
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immunohematology line consists of immunohematology reagents and base laboratory
equipment such as cell washers and automated centrifuges.
Integrated Services(TM) Division. The Company believes its Integrated
Services(TM) Division ("ISD") organization is one of the largest service
organizations in the industry with over 1,200 product and service specialists
worldwide. This organization provides in-warranty and out-of-warranty service
on the Company's approximately 38,400 instruments and provides service on a
third-party basis to other medical instrument companies. All of the Company's
field service personnel are trained in the technical aspects of one or more of
the Company's major instrument systems. In the United States, this field
service organization provides rapid (usually within six hours), on-site service
to the Company's entire customer base. In the United States, the Company also
maintains a telephone-based, in-house technical support and customer service
group of over 160 people to provide troubleshooting and other user help, which
leverages the higher cost of on-site service.
Third Party Product Distribution. The Company distributes various products
for third party manufacturers in select markets where it can leverage its
existing distribution network.
Research and Development
Overview
Within the IVD industry, the Company has established a track record of
innovation and timely product introduction. The Company maintains an active
research and development program focused on the development and
commercialization of products which both complement and update its existing
product offerings. In each of its core product lines, research and development
was instrumental in the development of key technologies which have helped to
create strategic product advantages. At December 31, 1998, there were
approximately 675 employees involved in the Company's product development
efforts.
Dade Behring spent an average of 10% of revenues over the last three years
on R&D for its core product lines, with some product lines reaching 20% of
sales. Furthermore, the Company's hemostasis instrument manufacturing partners
have made considerable investments in instrument and technology upgrades in
collaboration with the Company.
The Company's project portfolio development process ensures that priority
spending is matched with strategies and core competencies. The project
development process employs a market-driven, milestone-based, phase gate
process to support projects from concept to post-commercialization. In
addition, the Company has a strong quality management system that is the
foundation of its technical product development capabilities.
To provide focus for growth and profit enhancement, research and development
activities are grouped into two primary categories: platform development and
test menu development across all product segments. In addition, Dade Behring
has identified specific growth opportunities in near-patient/point-of-care
testing and advanced diagnostics development.
In addition to the product development areas described below, Dade Behring
has an active program in place to seek and establish alliances. The Company has
an alliance with Sysmex Corporation (formerly TOA Medical Electromics Co.,
Ltd.), a leading Japanese manufacturer of medical instruments, to produce a
variety of hemostasis instruments.
Central Lab Platform Development
The Company is committed to continue investing in new platforms to maintain
and enhance its competitive advantage. Management believes that clinical
laboratories are increasingly looking to IVD suppliers to help them reduce
labor costs, the largest cost component in the laboratory. Among the activities
that drive labor costs are sample preparation, instrument setup, throughput and
maintenance, manual data entry and manipulation, and the verification and
reporting of results. The Company has been a leader in laboratory productivity
and workstation
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automation and is engaged in a broad range of platform development programs
that will further automate the laboratory and reduce total laboratory costs.
In the routine chemistry/immunoassay segment, the Company created the
industry's first platform capable of performing highly sensitive heterogeneous
immunoassays along with routine clinical chemistry, specialty tests,
electrolytes and metabolites with the Dimension(R) RxL instrument platform. The
Company is investing to maintain its leadership in laboratory productivity with
additional platform enhancements including an integrated centrifugation
technology to reduce excess sample handling and transportation time, sensor-
based technology to enhance instrument efficiency and a number of additional
features that will enhance the product offering.
The Company also markets two new high-end automated platforms, one for the
Plasma Protein product line, the second for the Hemostasis segment. Current new
product initiatives include platform systems that are designed to meet the
needs of the small to mid-size volume customer for the Plasma Protein and
Hemostasis product lines.
In addition to improvements in the existing portfolio of instruments, the
Company continues to seek out new opportunities through the focused development
of certain niche instruments. Such products include the recently introduced
Platelet Function Analyzer (PFA-100) instrument, which automates the testing
and quantifiable measurement of platelet function. Like most IVD instruments,
the PFA-100(R) instrument uses proprietary reagents and consumables designed
exclusively for this instrument. The Company has also developed and launched
the Stratus CS(R) instrument, which is designed to address the need for rapid
measurement of cardiac-specific markers in the emergency room and other near-
patient care environments, as well as in the central laboratory.
Test Menu Development
Once the Company places an instrument, the development of new reagents to
conduct additional tests represents a highly leveraged growth opportunity. The
Company's large installed base of approximately 38,400 instruments thus
represents significant potential for the Company's new reagent development
efforts. The Company is currently developing a series of highly sensitive
immunoassays for the Dimension(R) RxL instrument platform. It is also
increasing the specialty tests on this system with incremental plasma protein
methods as well as new drugs of abuse assays.
For the specialty and niche platforms a number of new tests are under
development. For example, additional acute care markers for the Stratus(R) CS
instrument, new protein markers such as soluble transferrin receptor, an
important new anemia test, for the plasma protein systems and new and updated
identification and antibiotic susceptibility panels for the microbiology
platforms are being developed. The Company also has a significant investment in
assays for the new infectious disease diagnostics platform. The Syva group is
developing a series of TDM assays for immunosuppressive drugs important for the
ongoing treatment and maintenance of organ transplant patients.
Near-Patient/Point-of-Care Development
Dade Behring has identified near-patient testing and point-of-care testing
as emerging growth opportunities in diagnostics. The Company invests
significantly across various segments of the near-patient market and has the
leadership position in the point-of-care cardiac segment today. Recent product
introductions include the successful 1997 launches of the Syva(R) Rapid Test,
the PFA-100(R) instrument and the recently launched next-generation Stratus(R)
CS cardiac instrument. Furthermore, Dade Behring is evaluating alternatives to
leverage its global hemostasis position in the point-of-care market.
Customers
The Company has a broad customer base that includes primarily hospital and
reference laboratories. The Company sells its products worldwide and derives
47% of its revenue from outside the United States. No end-consumer represents
more than 4% of the Company's sales. Sales to Allegiance Healthcare
Corporation, the Company's U.S. distributor for certain product lines,
represented 17% of the Company's sales.
8
<PAGE>
Sales, Distribution and Marketing
The Company maintains twelve sales offices in the U.S. and thirty-eight
sales offices outside the U.S. and employs over 2,300 people in its worldwide
sales group, comprised of field sales representatives, managers, clinical
application specialists ("CASs") and field service representatives. Field sales
representatives are the traditional salesforce and are organized by product
line. The CASs provide troubleshooting in the field, customer training, and
conduct workshops and seminars. The CASs are also organized by major product
lines. Field service representatives install instruments at customer locations
and provide maintenance and service work on the instruments. In addition, the
Company utilizes twelve distributors outside of the U.S.
The Company maintains a dedicated Health Systems sales team in the U.S. that
is exclusively focused on leveraging the Company's broad product line
capabilities with Integrated Health Systems. Integrated Health Systems are
large hospital networks in integrated delivery systems and represent an
increasingly important portion of the customer base. The Health Systems sales
team is focused on the top Integrated Health System accounts and provide
overlay support for the sales representatives.
In the United States, this sales organization works closely with the
Company's chief domestic distributor, Allegiance Healthcare Corporation
("Allegiance"). Allegiance provides routine distribution and delivery functions
such as order entry, invoicing, customer service, database management and
physical warehousing and delivery. Chemistry and Syva products are sold
directly to customers in the U.S. without a distributor.
In addition to its worldwide sales group, the Company employs approximately
350 marketing personnel worldwide with extensive knowledge and understanding of
industry issues, market trends, customer needs and competitive dynamics.
Instrument Placements
The Company's instruments range in retail price from $20,000 to $175,000.
Globally, approximately one-third of the Company's instrument placements in
1998 were sold to customers, approximately one-third were sold through third-
party lessors and the remainder were financed directly by the Company.
The Company offers customers a variety of financing options designed to
offset the large up-front capital outlay necessary to purchase an IVD
instrument. The two most common financing methods are (i) third-party leasing,
and (ii) reagent rental agreements in which Dade Behring retains title to the
instrument and recoups the cost via premiums on its reagents.
Intellectual Property
The Company owns over 3,750 United States and non-U.S. patents, and has
hundreds of patent applications currently pending in the United States and
abroad. These patents and patent applications cover a broad base of technology
relating to the Company's MicroScan(R), Stratus(R), Syva(R), Dimension(R),
Opus(TM), aca(R), Hemostasis and Plasma Protein product lines as well as
technology which has yet to be commercialized. The Company also licenses
certain patents and other intellectual property from third parties. In addition
to its extensive patent portfolio, the Company possesses a wide array of
unpatented proprietary technology and know-how.
The Company owns over 2,000 United States and non-U.S. registered trademarks
and service marks, including the Company's well known and respected Syva(R),
MicroScan(R), Stratus(R), and Dimension(R) brand names. In addition, the
Company has hundreds of applications for registration of trademarks and service
marks pending in the United States and abroad. The Company also owns several
United States copyright registrations.
In the aggregate, these patents, patent applications, trademarks, copyrights
and licenses are of material importance to the Company's business. However, the
Company believes that no single patent, trademark or copyright (or related
group of patents, trademarks or copyrights) is material in relation to the
Company's business as a whole.
9
<PAGE>
Employees
As of December 31, 1998 the Company had approximately 6,600 full-time and
part-time employees, 3,850 in the United States (including Puerto Rico), 2,200
in Europe, 250 in Japan and 300 in other locations around the world. The
Company also contracted with approximately 600 temporary employees as of
December 31, 1998.
Environmental, Health and Safety Matters
The Company is subject to Federal, state, local and foreign environmental
laws and regulations and is subject to liabilities and compliance costs
associated with the handling, processing, storing and disposing of hazardous
substances and wastes. The Company's operations are also subject to federal,
state, local and foreign occupational health and safety laws and regulations.
The Company devotes resources to maintaining environmental compliance and
managing environmental risk and believes that it conducts its operations in
substantial compliance with applicable environmental and occupational health
and safety laws and regulations. Nonetheless, from time to time, the operations
of the Company may result in noncompliance with environmental or occupational
health and safety laws or liability pursuant to such laws. The Company expects
to incur approximately $0.2 million in capital expenditures for environmental
controls in the current fiscal year to upgrade the heating plant at its
Dudingen facility in Switzerland to conform to local air emission limits. The
Company does not expect to incur material capital expenditures for
environmental controls in the succeeding fiscal year.
Item 2. Properties.
The Company provides its customers with high quality products by controlling
each stage of production. Below is an overview of the Company's manufacturing
facilities including key products manufactured:
<TABLE>
<CAPTION>
Floor
No. of Area (Sq.
Location Sites Ft.) Owned/Leased Products
-------- ------ --------- ------------ ------------------------------
<S> <C> <C> <C> <C>
Duedingen, Switzerland.. 2 184,700 1 Owned Immunohematology
1 Leased
Miami, Florida.......... 1 203,000 Owned Hemostasis,
Routine Chemistry/Immunoassay
Sacramento, California.. 2 236,900 1 Owned Microbiology
1 Leased
Glasgow, Delaware....... 1 447,000 Owned Cardiac,
Routine Chemistry/Immunoassay
Brookfield, Connecticut. 1 100,000 Leased Cardiac,
Routine Chemistry/Immunoassay
Cupertino, California... 1 110,000 Leased Drugs of Abuse Testing,
Therapeutic Drug Monitoring
Marburg, Germany........ 3 320,000 1 Owned Hemostasis, Plasma Protein,
2 Leased Infectious Disease Diagnostics
Kawagoe, Japan.......... 1 29,000 Leased Plasma Protein
--- ---------
12 1,630,600
=== =========
</TABLE>
Item 3. Legal Proceedings.
The Company is involved in a number of legal proceedings arising in the
ordinary course of its business, none of which is expected to have a material
adverse effect on the Company's business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
10
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
None.
Item 6. Selected Financial Data.
Set forth below are selected historical financial data of the Predecessor
and the Company as of the dates and for the periods shown. The selected
historical financial data, except for the Predecessor's data, were derived
from the Company's financial statements, which, except for data as of December
31, 1994, 1995 and 1996 and for the period from December 17, 1994 through
December 31, 1994 and the year ended December 31, 1995, are included elsewhere
in this Form 10-K. The selected historical financial data for the period from
January 1, 1994 through December 16, 1994 were derived from the Predecessor's
financial statements, which were audited and do not appear in this Form 10-K.
The selected historical financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and accompanying notes
thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
The
Predecessor(1) Company(1)
-------------- ---------------------------------------------------------------------
Period from
--------------------------------------------
1/1/94 to 12/17/94 to 1/1/94 to
12/16/94 12/31/94(2)(3) 12/31/94(2)(3) 1995(2)(3) 1996(6) 1997(7) 1998(8)
-------------- -------------- -------------- ---------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $650.6 $19.0 $669.6 $614.3 $ 795.8 $ 980.5 $1,285.2
Cost of goods sold...... $391.4 $18.6 $410.0 $368.6 $ 444.1 $ 654.1 $ 529.4
Gross profit............ $259.2 $ 0.4 $259.6 $245.7 $ 351.7 $ 326.4 $ 755.8
Marketing and
administration
expenses............... $173.2 $ 2.4 $175.6 $171.1 $ 255.5 $ 366.8 $ 513.9
Research and development
expenses............... $ 33.4 $ 1.1 $ 34.5 $ 26.5 $ 138.0 $ 61.7 $ 88.2
Goodwill amortization
expense (credit)....... $ 2.6 $(0.1) $ 2.5 $ (0.4) $ 3.3 $ 5.4 $ 5.4
Restructuring and
downsizing costs (4)... $ -- $ -- $ -- $ -- $ 15.0 $ 40.1 $ (4.5)
Income (loss) from
operations............. $ 50.0 $(3.0) $ 47.0 $ 48.5 $ (60.1) $ (147.6) $ 152.8
Extraordinary items (5). $ -- $ -- $ -- $ -- $ (25.0) $ -- $ --
Net income (loss)....... $ 35.8 $(1.9) $ 33.9 $ 12.7 $ (105.3) $ (142.6) $ 43.5
<CAPTION>
December 31,
------------------------------------------------------
1994 1995 1996 1997 1998
-------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets.......................................... $696.2 $550.9 $1,005.1 $1,510.4 $1,533.4
Long-term liabilities................................. $300.3 $297.9 $ 807.9 $ 875.1 $ 815.6
</TABLE>
- --------
(1) The financial data of the Predecessor and the Company were prepared on
different bases of accounting.
(2) Financial data for the period from December 17, 1994 to December 31, 1994
and for the year ended December 31, 1995 exclude the results of the
Burdick & Jackson and Bartels product lines, which were reflected as "Net
assets held for sale."
11
<PAGE>
(3) The Company's stockholder's equity and net loss for the period December 17,
1994 through December 31, 1994 includes a non-recurring pre-tax charge
relating to the application of purchase accounting for a partial write-off
of $5.6 million to cost of goods sold related to the write-off of the $46.0
million of allocated purchase price made to record acquired finished goods
and work-in-process inventory at fair market value. The Company's
stockholder's equity and net income for the year ended December 31, 1995
include the non-recurring pre-tax write-off of the remaining $40.4 million
of the inventory write-up discussed above.
(4) In 1996, a $15.0 million restructuring charge was recorded related to a
plan to eliminate redundancies and rationalize production capacity in
connection with the Chemistry Acquisition. In 1997, the Company recorded a
$40.1 million restructuring charge to consolidate manufacturing and
distribution operations and eliminate redundant sales, service and
administrative functions. In 1998, $4.5 million of the 1997 reserve was
determined to be excess and was reversed.
(5) Two extraordinary charges totaling $25.0 million after tax were made to
record the costs associated with the repurchase of the original 13% senior
subordinated notes due 2005 and the write-off of previously deferred
financing fees.
(6) The pre-tax loss for the year ended December 31, 1996 reflects the
following pre-tax charges resulting from purchase accounting for the
Chemistry Acquisition and other items: (i) a charge to cost of goods sold
for $24.8 million of allocated purchase price to record work-in-process and
finished goods inventories to fair market values, (ii) a $15.0 million
restructuring charge designed to lower operating costs, increase
efficiency, and eliminate redundant operations, (iii) a $98.1 million
charge to research and development expense for acquired research and
development projects which do not have alternative applications or
separable economic value, and (iv) a $9.5 million charge to cost of goods
sold to establish a reserve for excess spare parts inventories related to
the Paramax(R) product line.
(7) The net loss for the year ended December 31, 1997 reflects the following
pre-tax charges resulting from application of purchase accounting for the
Behring Combination related to the following: (i) a charge to cost of goods
sold for $171.4 million of allocated purchase price to record acquired
finished goods and work-in process inventories to fair market values, (ii)
a $40.1 million restructuring charge to consolidate manufacturing and
distribution operations and eliminate redundant sales, service and
administrative functions, (iii) a $1.1 million charge to research and
development expense for acquired research and development projects which do
not have alternative applications or separable economic value, (iv) $33.5
million of charges related to distribution costs, increased inventory
reserves resulting from plant closures and non-core product transition
costs, (v) $11.4 million of stock-based compensation charges related to
grants of stock options and purchase rights, and (vi) $2.0 million of
integration costs associated with the Behring Combination.
(8) Net income for the year ended December 31, 1998 reflects the following pre-
tax charges: (i) $13.1 million of stock-based compensation charges related
to grants of stock options and purchase rights, (ii) $24.6 million of
integration costs associated with the Behring Combination, and (iii) $5.4
million in non-recurring Year 2000 ("Y2K") costs.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparability
Comparisons drawn from the Company's Consolidated Financial Statements for
1996 through 1998 are impacted by the Chemistry Acquisition effective May 1,
1996 and the Behring Combination effective October 1, 1997. These transactions
were accounted for under the purchase method of accounting and accordingly,
their respective results have been included in the Consolidated Financial
Statements from the date of acquisition. Certain significant purchase
accounting-related and other items impacting comparability include, but may not
be limited to:
1998
. $13.1 million of stock-based compensation charges were recorded related
to grants of stock options and purchase rights.
. $24.6 million of integration costs associated with the Behring
Combination.
. $5.4 million of non-recurring Year 2000 ("Y2K") costs.
12
<PAGE>
1997
. A $171.4 million charge was recorded to cost of goods sold related to the
step-up to fair value of work-in-process and finished goods inventory in
connection with the purchase price allocation for the Behring
Combination.
. A $40.1 million restructuring charge was recorded to consolidate
manufacturing and distribution operations and eliminate redundant sales,
service and administrative functions.
. $1.1 million was charged to research and development expense upon
consummation of the Behring Combination pertaining to purchase price
allocated to acquired research and development projects that have no
alternative future use.
. $33.5 million of charges were recorded including $12.2 million charged to
cost of goods sold primarily for distribution costs and increased
inventory reserves resulting from the Miami plant closure actions and
$21.3 million charged to marketing and administrative expense related
primarily to the transition of the Stratus(R) non-cardiac and Paramax(R)
product lines.
. $11.4 million of stock-based compensation charges were recorded related
to grants of stock options and purchase rights.
. $2.0 million of integration costs associated with the Behring
Combination.
1996
. A $24.8 million charge was recorded to cost of goods sold related to the
step-up to fair value of work-in-process and finished goods inventory in
connection with the purchase price allocation for the Chemistry
Acquisition.
. A $15.0 million restructuring charge was recorded to operating expense in
connection with a restructuring plan designed to lower operating costs,
increase efficiency and eliminate redundant operations.
. The Company recorded a $98.1 million charge to research and development
expense upon consummation of the Chemistry Acquisition pertaining to
purchase price allocated to in-process research and development projects
that have no alternative future use.
. Two extraordinary charges totaling $25.0 million after-tax were made to
record the costs associated with the repurchase of the original 13%
senior subordinated notes due 2005 and the write-off of previously
deferred financing fees.
. A $9.5 million charge to cost of goods sold was recorded to establish a
reserve for excess spare parts inventories related to the Paramax(R)
product line. This non-cash charge was a direct result of the Chemistry
Acquisition and the decision to designate the Paramax(R) product line as
non-core.
. The elimination of the reporting period lag for the Company's
international operations added $12.3 million to the sales for the year
ended December 31, 1996. The change in reporting period did not
significantly impact earnings.
Results of Operations
1998 Compared to 1997
Net sales for 1998 totaled $1,285.2 million as compared to $980.5 million in
1997. The $304.7 million or 31.1% increase over 1997 was attributable primarily
to the inclusion of a full year of sales from the Behring
13
<PAGE>
Combination versus three months of sales in 1997. The strong U.S. dollar
reduced sales outside of the U.S. by $5.2 million in 1998 versus 1997.
Gross profit for 1998 totaled $755.8 million compared to $326.4 million in
1997. Excluding the $14.6 million of non-recurring costs related to the
Behring integration, 1998 gross profit was $770.4 million. Gross profit for
1997 totaled $510.0 million, exclusive of the $171.4 million purchase
accounting inventory step-up and the $12.2 million charge related primarily to
distribution costs and to increased inventory reserves resulting from the
Miami plant closure actions. Exclusive of the above impacts, gross profit
increased $260.4 million or 51.1% over 1997, with gross margins improving to
59.9% as compared to 52.0% in 1997. This increase was attributable primarily
to the inclusion of a full year of operations from the Behring Combination
versus three months of operations in 1997, the ongoing realization of
manufacturing cost reductions initiated as a result of the combination and a
favorable shift toward higher margin products.
Marketing and administrative expense for 1998 totaled $513.9 million as
compared to $366.8 million in 1997. During 1998 $8.6 million of non-recurring
costs related to the Behring integration were included in marketing and
administrative expenses. Marketing and administrative expense for 1997
included $21.3 million of non-recurring charges primarily related to the
transition of non-core product lines. Exclusive of the above impacts, the
$159.8 million or 46.3% increase over 1997 was attributable primarily to the
inclusion of a full year of operations from the Behring Combination versus
three months of operations in 1997, offset by cost reduction programs
initiated as a result of the combination.
Research and development expense for 1998 totaled $88.2 million, or $86.9
million exclusive of $1.3 million of non-recurring costs related to the
Behring integration. Research and development expense for 1997 totaled $60.6
million, exclusive of the $1.1 million purchase accounting write-off of in-
process research and development projects related to the Behring Combination.
Exclusive of the above impacts, the $26.3 million or 43.4% increase over 1997
was attributable primarily to the inclusion of a full year of operations from
the Behring Combination versus three months of operations in 1997, and
increased investment in new products offset by cost synergies related to
eliminating overlapping or redundant R&D projects. Research and development
expenditures are primarily focused on the development of new instrument
platforms, expansion of test menus and investment in advanced diagnostics and
point-of-care technologies.
The restructuring credit of $4.5 million in 1998 related to the reversal of
excess severance charges initially established in 1997, as a result of higher
than projected levels of employee turnover at the Company's Miami facility
(see also Note 10 to the Consolidated Financial Statements).
Net interest expense for 1998 totaled $80.5 million as compared to $87.8
million in 1997. The $7.3 million or 8.3% decrease was attributable primarily
to lower borrowing rates.
Other income of $5.6 million in 1998 includes gains of $2.4 million for the
sale of two non-strategic businesses and $2.9 million for the sale of a former
manufacturing facility in Miami.
Pre-tax net income for 1998 totaled $77.9 million as compared to a pre-tax
net loss of $226.4 million in 1997. The pre-tax net loss in 1997 was
attributable primarily to the effects of purchase accounting, restructuring
charges, non-recurring operating charges, incremental and duplicative
operating costs and integration costs.
Income tax expense of $34.4 million (an effective rate of 44.2%) was
recorded in 1998. At December 31, 1998, the Company had net deferred tax
assets of $375.3 million. In assessing the realizability of the deferred tax
asset, management has analyzed the Company's forecast of future taxable income
by jurisdiction and other relevant factors and has concluded that
recoverability of the net deferred tax asset is more likely to occur than not.
14
<PAGE>
For the year ended December 31, 1998, the Company had net income of $43.5
million, as compared to a net loss of $142.6 million in 1997. The net loss in
1997 reflects the impacts of purchase accounting, restructuring charges, non-
recurring operating charges, incremental and duplicative operating and
integration costs.
Earnings before interest, taxes, depreciation, amortization, non-cash
stock-based compensation expense, non-recurring integration expenses, other
non-recurring operating charges and other non-cash charges (EBITDA) for 1998
totaled $258.6 as compared to $176.0 million in 1997. The $82.6 million or
46.9% increase over 1997 was attributable primarily to the inclusion of a full
year of operations from the Behring Combination versus three months of
operations in 1997 and realization of cost synergies from the integration of
Behring operations. EBITDA, which is a widely accepted financial indicator of
a company's ability to service and/or incur indebtedness, represents the sum
of net income, depreciation and amortization, non-cash stock-based
compensation expense, non-recurring integration expenses, and other non-
recurring operating charges and other non-cash charges. EBITDA should not be
considered as a substitute for net income as a measure of a Company's
operating results or to cash flows as a measure of liquidity.
1997 Compared to 1996
Net sales for 1997 were $980.5 million, an increase of $184.7 million or
23.2% over 1996. The increase was attributable primarily to the inclusion of
sales from the Behring Combination during the three months of ownership in
1997 and the inclusion of twelve months of sales from the Chemistry
Acquisition (versus eight months of sales in 1996). The strong U.S. dollar
reduced international sales by $45.3 million in 1997 versus 1996.
Gross profit for 1997 totaled $510.0 million as compared to $386.0 million
in 1996, after adjusting for the following items impacting comparability; in
1996, the $24.8 million purchase accounting inventory step-up impact, and the
$9.5 million charge to establish a reserve for excess Paramax(R) spare parts
inventories recorded and in 1997, the $171.4 million purchase accounting
inventory step-up and the $12.2 million charge related primarily to
distribution costs and to increased inventory reserves resulting from the
Miami plant closure actions recorded in 1997. The $124.0 million increase in
gross profit over 1996 exclusive of the above impact was due to the inclusion
of twelve months of results of the Chemistry Acquisition, as compared to only
eight months of activity in 1996, three months of results of the Behring
Combination, as well as the ongoing realization of manufacturing cost
reduction initiatives and a shift toward higher margin products. The strong
U.S. dollar reduced gross profit by $24.9 million in 1997 versus 1996. Gross
margins for 1997 improved to 52.0% as compared to 48.5% in 1996 exclusive of
the above adjustments.
Marketing and administrative expense for 1997 totaled $345.5 million,
excluding $21.3 million of non-recurring charges primarily related to the
transition of non-core product lines, as compared to $255.5 million in 1996.
The increase is due to the inclusion of twelve months of activity from the
Chemistry Acquisition as compared to only eight months of activity in 1996 and
the inclusion for 1997 of three months of operations from the Behring
Combination and non-recurring costs related to the integration of Behring,
offset by cost reduction programs and lower international expenses resulting
from the strength of the U.S. dollar.
Research and development increased by $20.7 million or 51.9% in 1997 as
compared to 1996 exclusive of $98.1 million purchase accounting write-off of
in-process research and development projects related to the Chemistry
Acquisition in 1996 and the $1.1 million purchase accounting write-off of in-
process research and development projects related to the Behring Combination
in 1997. The increase is attributable to twelve months of operations from the
Chemistry Acquisition as compared to only eight months of activity in 1996,
three months of operations from the Behring Combination, offset partially by
realized cost synergies. Research and development expenditures are primarily
focused on supporting projects that are expanding test menus, developing the
next generation Dimension(R) RxL clinical chemistry instrument platform and
developing a new point-of-care cardiac instrument platform.
During 1997, the Company recorded a $40.1 million restructuring charge and
allocated $77.7 million of the Behring Combination purchase price related to a
restructuring plan to consolidate manufacturing and distribution
15
<PAGE>
operations and eliminate redundant sales, service and administrative
functions. The restructuring plans include actions to close the Miami and
Westwood manufacturing facilities, consolidate and reorganize the global
sales, marketing and R&D organizations and eliminate administrative
redundancies.
Net interest expense for the year ended December 31, 1997 was $87.8 million
as compared to $65.6 million for 1996. The increase is attributable to a full
year of Chemistry Acquisition debt service recorded (versus eight months in
1996), offset partially by lower borrowing rates.
Other income of $9.0 million in 1997 includes a gain of $9.5 million for a
settlement with a supplier for non-performance under a contractual agreement
partially offset by foreign currency transaction losses.
An income tax benefit of $83.8 million (an effective rate of 37%) was
recorded in 1997. The Company's pre-tax loss of $226.4 million was caused by
purchase accounting related adjustments of $171.4 million for inventory step-
up and $1.1 million for the write-off of in-process research and development
projects with no alternative future use, the restructuring charge of $40.1
million and the other non-recurring charges of $33.5 million. At December 31,
1997, the Company had a net deferred tax asset of $380.2 million. In assessing
the realizability of the deferred tax asset, management has analyzed the
Company's forecast of future taxable income by jurisdiction and other relevant
factors and has concluded that recoverability of the net deferred tax asset is
more likely to occur than not. The realization of the deferred tax asset is
not dependent upon material improvement over the Company's forecast level of
pre-tax income, significant changes in the current relationship between income
reported for financial and tax purposes, or material asset sales or other
transactions not in the normal course of business.
For the year ended December 31, 1997, the Company had a net loss of $142.6
million as compared to a net loss of $105.3 million in 1996. The net loss in
1997 was due to the effects of purchase accounting, restructuring charges,
increased interest expense related to a full year of Chemistry Acquisition
debt service, non-recurring operating charges, incremental and duplicative
operating costs and integration costs.
For the year ended December 31, 1997, the Company's EBITDA was $176.0
million, as compared to $126.5 million for 1996. The increase over 1996 is
attributable to the full year of operations from the Chemistry Acquisition and
three months of operations from the Behring Combination and realization of
cost synergies from the integration of the Chemistry and Behring operations.
Foreign currency exchange rate fluctuations had an adverse impact of $9.2
million on EBITDA during 1997 versus 1996. EBITDA, which is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness, represents the sum of net loss, depreciation and amortization,
the purchase accounting write-offs related to inventory step-up and in-process
research and development with no alternative future use, non-cash stock-based
compensation expense, integration expenses, restructuring and other non-
recurring operating charges and other non-cash charges. EBITDA should not be
considered as a substitute for net income as a measure of a Company's
operating results or to cash flows as a measure of liquidity.
Financial Condition and Liquidity
The Company's primary liquidity requirements are for working capital,
capital expenditures, restructuring expenditures and debt service. Working
capital at December 31, 1998 totaled $260.8 million. At December 31, 1998, the
Company had utilized $19.0 million of its $105.0 million revolving credit
facility and had $151.6 million available under various non-U.S. credit lines.
Capital expenditures, including instrument placements in customer
locations, totaled $139.0 million in 1998 compared to $68.4 million in 1997.
The increase reflects the impact of a full year of Behring operations,
integration-related investments for stand-alone infrastructure of $8.8
million, and integration-related expenditures for information systems of $15.6
million. Capital expenditures in 1999 are expected to approximate 1998 levels.
Management believes cash from operating activities and the Company's
available credit facilities will be sufficient to permit the Company to meet
its financial obligations and fund its operations and planned investments.
16
<PAGE>
Inflation affects the cost of goods and services used by the Company.
Inflation has been modest in recent years. Overall product prices have been
relatively stable during the past three years and the Company continues to
mitigate the adverse effects of inflation primarily through new product
offerings, improved productivity and cost containment and improvement
programs.
Outlook
Management expects sales and operating income growth in 1999, reflecting
the impact of new product introductions and the continued realization of
synergies from the integration of Behring operations into the Company, offset
partially by managed declines in certain mature product lines. Management
believes the Company's broad product line offering and extensive sales and
service infrastructure position it well to compete globally. Sales results
outside the United States are subject to significant influence by foreign
currency exchange rates.
Continued growth from new products is anticipated as the Company continues
to benefit from new platform launches and continued expansion of test menus
and investments in near-patient products. Key products include the
Dimension(R), Stratus(R) CS, Hemostasis, Sysmex(R) CA-500, Sysmex(R) CA-1500,
and BN ProSpec(TM) instruments, Infectious Disease Diagnostics Quadriga
platform as well as a wide range of new assays. Management expects to continue
to aggressively manage the decline across mature product lines (such as
Paramax(R) and Stratus(R) non-cardiac) as the Company continues its successful
strategy of migrating customers from these non-core product lines to newer
platforms (e.g. Dimension(R)).
The Company expects to achieve additional productivity gains in 1999 from
the integration of the Behring Combination. Synergies will be achieved from
the final closure of the Miami, Florida facility; closure of the Kawagoe,
Japan manufacturing facility; elimination of certain transition services from
Hoechst A.G. and Baxter as stand-alone systems and infrastructure projects are
completed; achieving a full-year benefit from 1998 actions including the
closure of the Westwood, Massachusetts facility; consolidation of country
sales and service organizations; and elimination of duplicative administrative
functions.
Other Matters
Year 2000 Readiness
Certain information systems in use today may not be able to interpret dates
after December 31, 1999 because such systems allow only two digits to indicate
the year in a date. As a result, such systems are unable, for example, to
distinguish January 1, 2000 from January 1, 1900. Such inability to properly
distinguish between dates could have adverse consequences on the operations of
a business and the integrity of information processing. This potential problem
is commonly referred to as the "Year 2000" or "Y2K" issue.
The Company has completed a review of substantially all of its information
systems and product offerings for Year 2000 issues. The scope of this review
included information technology infrastructure components (such as hardware,
operating systems and communication equipment), business application software,
production and research equipment, laboratory products and associated
applications, buildings' and facilities' systems, personal computers, and the
status of all key suppliers' Year 2000 remediation efforts.
Based on the results of the review, a formal plan has been established by
the Company to address Year 2000 issues. The Plan is monitored by the
Company's Year 2000 Program Office, comprised of senior management in key
functional areas, which reports on a regular basis to executive management on
the plan's status. Although the identification and successful remediation of
all Year 2000 issues cannot be assured with absolute certainty, the Company
expects a successful execution of its Year 2000 plan. The inability of the
Company or third parties on which it relies to resolve Year 2000 issues could
have a material adverse effect on the Company's results of operations and
financial condition.
17
<PAGE>
The plan, which provides a process for periodic progress reporting on a
site and region basis, prioritizes mission critical and urgent Year 2000
issues. Progress against the plan is meeting interim mileposts. As of December
31, 1998, remediation plans for 98% of our products have been developed, with
the remaining 2% completed in the first quarter of 1999. Approximately 46% of
all identified internal applications requiring remediation have been made
ready as of December 31, 1998. The majority of mission critical and urgent
Year 2000 product and internal systems issues are planned to be remedied by
the end of the second quarter of 1999, and all are expected to be resolved no
later than the end of the third quarter of 1999. Contingency plans, as
necessary, will be fully established beginning in the first quarter of 1999.
In connection with the resolution of Year 2000 issues, the Company incurred
expenses of approximately $5.4 million in 1998 and expects to incur expenses
of approximately $30.0 million in 1999; expenses in 2000 are expected to be
immaterial. However, there can be no assurance that these costs will not be
greater than anticipated.
New Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1,
2000 for the Company). SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction.
Management of the Company anticipates that, due to its limited use of
derivative instruments, the adoption of SFAS 133 will not have a significant
effect on the Company's results of operations or its financial position.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The information below about the Company's market sensitive financial
instruments constitutes a "forward-looking statement." Actual results in the
future may differ materially from projected results due to actual developments
in the global financial markets. The methods used by the Company to assess and
mitigate risk should not be considered projections of future events or losses.
The Company enters into contracts with major financial institutions, thereby
minimizing the risk of credit loss. Although the Company does not anticipate
nonperformance by counterparties, nonperformance would expose the Company to
credit loss.
In the ordinary course of business, the Company utilizes various financial
instruments that inherently have some degree of market risk. The principle
market risks to which the Company is exposed are changes in interest rates and
foreign currency exchange rates. The Company does not enter into contracts for
speculative or trading purposes. Contract periods are consistent with related
underlying exposures and do not constitute positions independent of those
exposures. The qualitative and quantitative information presented below
summarizes the Company's market risks associated with debt obligations and
other significant financial instruments outstanding at December 31, 1998. Fair
values included herein have been determined based on quoted market prices. The
information presented below should be read in conjunction with Note 3 to the
Consolidated Financial Statements.
Interest Rate Risk
The Company is subject to interest rate risk on its long-term variable
interest rate debt. The Company enters into debt obligations primarily to
support general corporate purposes, including capital expenditures and working
capital needs. To manage a portion of its exposure to interest rate increases
on its outstanding debt, the Company uses purchased interest rate caps, for
which the Company will receive cash payments from the counterparty if an
indexed rate of interest is exceeded. These agreements effectively change the
Company's exposure on its debt obligations with variable interest rates to a
fixed interest rate ("strike price") of 8.5% to 9%, based on three-month LIBOR
rates. Interest rates at December 31, 1998 were below the strike prices of
these contracts.
18
<PAGE>
At December 31, 1998, the Company had outstanding three interest rate cap
agreements having notional principal amounts of $50 million each and one
interest rate cap agreement having a notional principal amount of $80 million.
The interest rate cap agreements mature on June 14, 1999, July 23, 1999, July
30, 1999, and August 6, 1999, respectively. The following table sets forth, as
of December 31, 1998, the Company's principal cash flows for its long-term
debt obligations under its bank credit agreement, related weighted average
interest rates, and the notional amounts and weighted average interest rates
of the Company's interest rate caps, by expected maturity dates (U.S. dollars
in millions):
<TABLE>
<CAPTION>
Expected Maturity Dates Estimated
---------------------------------------------- Fair Value at
1999 2000 2001 2002 2003 Thereafter Total December 31, 1998
------ ----- ----- ----- ----- ---------- ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term variable rate
debt $ 13.0 $40.7 $84.8 $89.8 $87.4 $70.3 $386.0 $386.0
Weighted average
interest rate 7.4% 7.4% 7.7% 7.5% 7.9% 8.2%
Variable to fixed caps $230.0 $ -- $ -- $ -- $ -- $ -- $230.0 $ --
Weighted average receive
rate 8.7% -- -- -- -- --
</TABLE>
Foreign Currency Risk
The Company is subject to foreign currency risk on certain short-term
intercompany borrowing arrangements denominated in foreign currencies. The
Company enters into these arrangements primarily to support the underlying
working capital needs of non-U.S. subsidiaries. At December 31, 1998, the
Company's non-U.S. short-term borrowings totaled $96.4 million. In addition,
the Company is subject to foreign currency risk on trade accounts payable and
receivable, primarily intercompany, where the receivable or payable is
denominated in a currency other than the functional currency of the entity. To
manage a portion of these exposures to foreign currency fluctuations, the
Company uses forward currency exchange contracts.
At December 31, 1998, the Company had outstanding 26 short-term forward
currency exchange contracts denominated in Australian, Canadian, Dutch,
Filipino, French, Italian, Japanese, Singapore, Swiss, and U.S. dollar
currencies having a total notional contract amount of $89.7 million. The
contracts mature between January and July, 1999. The cost to settle the
contracts, which is not material to any individual contract, was $5.0 million
at December 31, 1998. The following table sets forth, as of December 31, 1998,
the contract amounts at the contract exchange rates as of the contract
maturity dates for significant forward currency exchange contracts outstanding
(U.S. dollars in millions). Due to the short-term nature of these contracts,
contract amounts approximated fair values, and contract exchange rates
approximated weighted average contract foreign currency exchange rates at
December 31, 1998.
<TABLE>
<CAPTION>
Contract Contract Estimated Fair Value
Amount Rate at December 31, 1998
-------- -------------- --------------------
<S> <C> <C> <C>
Receive U.S. Dollar/Pay:
Australian Dollar.......... $ (2.6) 0.6415-0.64175 $ (2.5)
Canadian Dollar............ $ (4.9) 1.54177-1.549 $ (4.9)
Swiss Franc................ $(18.3) 1.3317-1.376 $(18.0)
French Franc............... $(25.7) 5.526-5.687 $(25.5)
Italian Lira............... $ (5.1) 1678.9 $ (5.1)
Japanese Yen............... $(26.7) 125.53-134.15 $(30.3)
Dutch Guilder.............. $ (1.4) 1.99009 $ (1.4)
Philipine Peso............. * 49.85 *
Singapore Dollar........... $ (2.2) 1.6433-1.608 $ (2.2)
Pay U.S. Dollar/Receive:
Swiss Franc................ $ 0.7 1.36 $ 0.7
French Franc............... $ 1.8 5.4968 $ 1.8
Singapore Dollar........... $ 0.3 1.594 $ 0.3
</TABLE>
--------
*Less than $0.1 million
19
<PAGE>
Item 8. Financial Statements.
See the attached Consolidated Financial Statements (pages F-1 through F-29).
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.
Executive officers and directors of Dade Behring are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Steven W. Barnes.......... 38 President, Chief Executive Officer and Director
James W. P. Reid-Anderson. 39 Chief Administrative Officer, Chief Financial
Officer and Director
Robert W. Brightfelt...... 56 Group President, Chemistry and Director
Friedhelm Blobel.......... 50 Group President, Microbiology, Syva, and
Advanced Diagnostics
Donal Quinn............... 43 Group President, Biology
Robert W. Kleinert........ 47 Executive Vice President, U.S. Region
Marc N. Casper............ 31 Executive Vice President, Europe, Asia, and
Intercontinental Region
Thomas E. Hill............ 49 Senior Vice President, Human Resources
Scott T. Garrett.......... 49 Director
Mark E. Nunnelly.......... 40 Director
Stephen G. Pagliuca....... 44 Director
Adam Kirsch............... 37 Director
John P. Connaughton....... 33 Director
Joseph H. Gleberman....... 40 Director
</TABLE>
Mr. Barnes was appointed President and Chief Executive Officer and Director
in 1997. Prior to this assignment, he served as the Company's President of
Global Products and Chief Operating Officer since 1996. In 1996 and 1997, Mr.
Barnes was Executive Vice President of Bain Venture Capital, where he was
responsible for several portfolio companies, including Dade Behring Inc.,
Miltex Inc. and Claricom Inc., where he served as President and Director. From
1988 to 1996, Mr. Barnes served in various positions, including President and
Director of Holson Burnes Group Inc., a publicly traded consumer products
company. From 1982 to 1988, Mr. Barnes served in various positions with Price
Waterhouse. Mr. Barnes is also currently a Director of Miltex, Inc.
Mr. Reid-Anderson was appointed Chief Administrative Officer and Chief
Financial Officer in 1997 and is also a Director of the Company. In this role,
he has global responsibility for all administrative functions, including
Finance, Human Resources (HR), Legal, Business Development, Information
Technology, Staff Operations, Bank/Investor/Analyst Relations, Staff Research
and Development (R&D) and Regulatory Affairs/Quality Assurance (RA/QA). Prior
to this assignment, Mr. Reid-Anderson was Executive Vice President and Chief
Financial Officer for Dade International since 1996. Prior to joining the
Company, he was Chief Operating Officer and Chief Administrative Officer of
Wilson Sporting Goods in addition to running Wilson's international unit. Mr.
Reid-Anderson also served in various financial positions of increasing
responsibility for Pepsico Inc., Diageo PLC (formerly Grand Metropolitan PLC)
and Mobil Oil Corporation in Europe, Asia and North America. Mr. Reid-Anderson
is also currently a Director of Epoch Senior Living.
20
<PAGE>
Mr. Brightfelt was appointed Group President, Chemistry in 1997 and is also
a Director of the Company. In this role, he is responsible for the worldwide
operations of Dade Behring's Chemistry business. Prior to this assignment, Mr.
Brightfelt was Executive Vice President of Dade Behring Chemistry Systems
since 1996. From 1967 to 1995, he served in a number of executive positions
for the DuPont Company in a variety of areas, including Business Director of
the Diagnostics Business; Worldwide Marketing Manager, IVD; IVD New Products
Manager; Manager of Product Management and Strategic Planning; and Production
Control and Planning. Mr. Brightfelt is also a Director of Molecular
BioSystems and the Health Industry Manufacturing Association (HIMA).
Dr. Blobel was appointed Group President, Microbiology, Syva, and Advanced
Diagnostics in 1998. In this role, he is responsible for the Microbiology,
Syva (DAT/TDM) and Infectious Disease Diagnostics businesses. In addition, he
manages the Corporate Advanced Development R&D center. Prior to this
assignment, Dr. Blobel was Group President, Biology since 1997. Previously, he
was Chief Technology Officer and Head of Worldwide Product Supply for Dade
Behring Diagnostics since 1995. From 1977 to 1995, he served in several
executive capacities for Boehringer Mannheim GmbH Germany.
Mr. Quinn was appointed Group President, Biology in 1998. In this role, he
is responsible for the worldwide management of the Hemostasis and Plasma
Protein product lines as well as for the Marburg site. Prior to joining the
Company, Mr. Quinn was employed by Mallinckrodt Medical in a number of
executive positions since 1982, including Vice President and General Manager
for Anesthesiology, Europe; Vice President and Managing Director Europe and
Hemocue; and Vice President and Managing Director, Critical Care Division.
Mr. Kleinert was appointed Executive Vice President, U.S. Region in 1997.
In this role, he is responsible for all commercial activities in the U.S.,
including sales, commercial marketing, service, national accounts and customer
support. Prior to this assignment, he was Executive Vice President, Worldwide
Field Operations for the Dade organization since 1994. Prior to joining the
Company, Mr. Kleinert worked for Baxter Healthcare Corporation in a series of
executive roles, including President, Clintec Nutrition; President, Baxter
Diagnostics, Europe; and President, MicroScan Division.
Mr. Casper was appointed Executive Vice President, Europe, Asia and
Intercontinental Region in 1997. In this role, he is responsible for sales and
operations outside the U.S. Prior to joining the Company, Mr. Casper was an
associate of Bain Venture Capital and worked with the Company since 1995 as a
member of Bain Venture Capital's Portfolio Management Group. Mr. Casper also
worked as a strategic consultant for Bain and Company, where he held several
positions of increasing responsibility.
Dr. Hill was appointed Senior Vice President, Human Resources in 1994. In
this role, he is responsible for all human resource activities, including
corporate employee benefits, compensation, HR development and planning, and
employee relations. Prior to joining the Company, Dr. Hill worked for Baxter
Healthcare Corporation in several executive HR positions of increasing
responsibility. These positions included Director of Corporate Compensation;
Director of Compensation and Benefits for Global Businesses; Vice President,
Human Resource Planning; Corporate Human Resource Planning and Staffing; and
Vice President, Human Resources, Baxter Diagnostics, Inc.
Mr. Garrett joined Baxter in 1975 as a product development engineer and
served in a number of research, strategic planning and management positions.
Mr. Garrett was named Vice President and General Manager of Baxter
Diagnostics, Inc.'s European operations in 1987 and was named President of the
Paramax(R) Systems Division in 1989. Mr. Garrett became Executive Vice
President of Baxter Diagnostics, Inc. in 1990, with responsibility for all
divisions and operations associated with manufactured product lines. Mr.
Garrett served as Chief Executive Officer from 1994-1997. Mr. Garrett is a
member of the American Association for Clinical Chemistry and also currently
serves on the Health Industry Manufacturers Association Board of Directors. He
is also a Director of Sunol Molecular Corporation. Mr. Garrett resigned from
the Company effective October 31, 1997.
21
<PAGE>
Mr. Nunnelly has been a Managing Director of Bain Venture Capital since May
1993 and a general partner of Bain Venture Capital since 1990. Prior to
joining Bain Venture Capital, Mr. Nunnelly was a partner at Bain & Company,
where he managed several relationships in the manufacturing sector and served
with Procter and Gamble in product management. He is also a Director of
Corporate Software and Technology, The Learning Company, SR Research and
DoubleClick.
Mr. Pagliuca has been a Managing Director of Bain Venture Capital since May
1993 and a general partner of Bain Venture Capital since 1989. Prior to
joining Bain Venture Capital, Mr. Pagliuca was a partner at Bain & Company,
where he worked extensively in the healthcare arena. Mr. Pagliuca also worked
as a senior accountant and international tax specialist for Peat Marwick
Mitchell & Company in the Netherlands. He is also a Director of Gartner Group,
Coram Healthcare, Epoch Senior Living, Wesley Jessen and Vivra Specialty
Partners.
Mr. Kirsch has been a Managing Director of Bain Venture Capital since May
1993 and a general partner of Bain Venture Capital since 1990. Mr. Kirsch
joined Bain Venture Capital in 1985 as an associate. Prior to joining Bain
Venture Capital, Mr. Kirsch was a consultant at Bain & Company, where he
worked in mergers and acquisitions. He is also a Director of Therma Wave,
Wessley Jessen, Stage Stores and Brookstone.
Mr. Connaughton has been a Managing Director of Bain Venture Capital since
1997 and a member of the firm since 1989. Prior to joining Bain Venture
Capital, Mr. Connaughton was a consultant at Bain & Company, where he worked
in consumer products and healthcare strategy consulting. Following the
Chemistry Acquisition, Mr. Connaughton became a Director of the Company. Mr.
Connaughton is also currently a Director of Epoch Senior Living.
Mr. Gleberman is a Managing Director in the Principal Investment Area of
Goldman, Sachs & Co. He joined Goldman Sachs in 1982 in the Mergers and
Acquisitions Department. In 1990 he became head of Mergers and Acquisitions
for Asia and moved to Tokyo. Mr. Gleberman joined the Principal Investment
Area in 1993 and returned to New York. He is also a Director of Applied
Analytical Industries Inc., Biofield Corporation and several privately held
companies.
22
<PAGE>
Item 11. Executive Compensation.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------- ----------------------------------------
Name and Principal Options/SAR LTIP Payment All Other
Position Year Salary($) Bonus($) (#)(1) ($)(8) Compensation($)
------------------ ---- --------- -------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven W. Barnes........ 1998 365,038 525,000 -- -- 100,000(10)
President, Chief 180,000 652(3)
Executive Officer 1997 -- -- -- --
and Director (6)
Friedhelm Blobel........ 1998 270,000 180,000 -- 108,000 3,200(2)
Group President, 4,990(3)
Microbiology, 3,575(9)
Syva, and Advanced 13,542(11)
Diagnostics (7) -- 125,000(12)
7,500(13)
1997 -- -- 64,000
James W.P. Reid- 1998 352,132 450,000 -- -- 3,200(2)
Anderson............... 13,001(3)
Chief Administrative 1,385(4)
Officer, 28,388(5)
Chief Financial Officer 7,500(9)
and Director 1997 330,000 178,500 49,850 -- 3,200(2)
5,506(3)
29,230(5)
1996 116,769 148,500 69,000 -- --
Robert W. Kleinert...... 1998 270,609 170,000 -- -- 3,200(2)
Executive Vice 12,221(3)
President, U.S. 8,080(4)
Region 7,500(9)
1997 240,824 85,000 17,910 -- 3,200(2)
8,798(3)
7,756(4)
1996 202,862 32,680 -- -- 4,500(2)
11,836(3)
6,300(4)
Marc N. Casper.......... 1998 262,239 240,000 -- -- 3,027(2)
Executive Vice 5,777(3)
President, Europe, 10,800(4)
Asia, and 7,500(9)
Intercontinental Region 1997 190,903 107,500 55,000 -- 9,969(4)
</TABLE>
- --------
(1) The options were granted under Holdings' Executive Management Equity
Plan.
(2) Reflects amounts contributed by Dade Behring for the benefit of the named
executive officers under the Savings Investment Plan.
(3) Reflects amounts contributed by Dade Behring for the benefit of the named
executive officers under the Deferred Compensation Plan and related
interest.
(4) Reflects amounts contributed by the company for an automobile allowance.
(5) Reflects amounts provided by the company for a home leave allowance.
(6) Mr. Barnes became CEO on November 1, 1997. Mr. Barnes did not receive any
cash remuneration from the company during 1997.
23
<PAGE>
(7) Mr. Blobel became an employee of the company on October 1, 1997. He
continued to be paid by Hoechst for the balance of 1997.
(8) Reflects amounts received by Mr. Blobel under the Hoechst BDI LTI plan.
(9) Reflects amounts provided by the company for a personal financial
planning allowance.
(10) Reflects amounts received by Mr. Barnes as a sign on bonus when he became
an employee of the company.
(11) Reflects amounts received as cost of living allowance under the Hoechst
relocation policy.
(12) Reflects amounts received by Mr. Blobel under the Hoechst BDI Stay Bonus
program.
(13) Reflects amounts received by Mr. Blobel under the Hoechst BDI Executive
Allowance program.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------- Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise or of Option Terms
Options Employees in Base Price ----------------------------
Name Granted Fiscal Year ($/Sh) Expiration Date 5% 10%
- ---- ---------- ------------ ----------- --------------- -- --------------
<S> <C> <C> <C> <C> <C> <C>
None
</TABLE>
The following table sets forth information concerning the option grants by
Holdings in 1998 to each of the named executive officers:
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Company Options/SARs the-Money Options/SARs
------------------------ ------------------------- -------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven W. Barnes........ -- $--
Time options........... 135,000 45,000 $5,602,500 $1,867,500
Friedhelm Blobel........ -- --
Time options........... 12,800 51,200 294,400 1,177,600
James W.P. Reid-
Anderson............... -- --
Time options........... 57,800 9,200 2,912,300 432,200
Performance options.... -- 51,850 -- 2,385,100
Robert W. Kleinert...... -- --
Time options........... 3,900 1,300 222,300 74,100
Performance options.... -- 40,910 -- 1,881,860
Marc N. Casper.......... -- $--
Time options........... 5,000 20,000 237,000 948,000
Performance options.... -- 30,000 -- 1,380,000
</TABLE>
Pension Plan Benefits
Dade Behring maintains a defined benefit pension plan (the "Plan") for the
benefit of its U.S. employees. Under the Dade Behring cash balance formula
design, credits to an eligible participant's account are posted to a notional
account based on eligible compensation and service. Moreover, interest credits
are posted to each notional account as of the end of each quarter at the
prevailing rate of return for 10-year U.S. Treasury bills at the end of the
previous quarter.
Cash Balance Formula Design
The cash balance formula design became effective January 1, 1997 when Dade
Behring transitioned its pension plan from a final average pay formula design
to a cash balance formula design. Employees with an accrued benefit under the
final average pay formula design as of December 31, 1996 were credited with an
opening cash balance based on the lump-sum present value of the final average
pay formula accrued benefit. In addition, the present value of the
aforementioned accrued benefit was increased by a transitional benefit
supplement expressed as a percentage multiplier. This transitional benefit
supplement recognized the sum of age and service as of December 31, 1996, as
follows:
<TABLE>
<CAPTION>
Transitional Benefit
Points for Age Plus Service Supplement
--------------------------- --------------------
<S> <C>
less than 35......................................... 110%
35 to 44............................................. 115%
45 to 54............................................. 120%
55 or more........................................... 125%
</TABLE>
24
<PAGE>
As of January 1, 1997, the named executive officers had transitional benefit
supplements as follows: Mr. Kleinert, $54,197. These transitional benefits
include supplements to the qualified and non-qualified pension plans. Mr.
Barnes, Mr. Blobel, Mr. Reid-Anderson, and Mr. Casper did not participate in
the Plan as of December 31, 1996.
The following table sets forth the annual credits posted to cash balance
accounts:
<TABLE>
<CAPTION>
Company Credits
Points for Age plus Service as of as a Percent of
December 31 of the Previous Plan Year Pay
------------------------------------- ---------------
<S> <C>
Less than 35.............................................. 4%
35 to 44.................................................. 5%
45 to 54.................................................. 6%
55 to 64.................................................. 7%
65 to 74.................................................. 8%
75 to 84.................................................. 9%
85 or more................................................ 10%
</TABLE>
The named executive officers had 1998 company and interest credits as
follows: Mr. Reid-Anderson, $27,537, Mr. Kleinert, $46,613, and Mr. Casper,
$12,941. These credits were posted to the qualified and non-qualified pension
plans. Mr. Barnes and Mr. Blobel did not participate in the Plan as of December
31, 1998.
Final Average Pay Formula Design
Individuals participating in the Plan under the final average pay formula
design as of December 31, 1996 continue to accrue service and have their
benefits calculated under both the final average pay formula and the cash
balance formula through June 30, 1999.
Of the named executive officers, one participated in the Plan as of December
31, 1996. The following table sets forth anticipated annual pension plan
benefits under the final average pay formula of the Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Plan Participation
--------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
125,000............................ $ 32,810 $ 43,750 $ 54,680 $ 65,620 $ 76,560
150,000............................ 39,370 52,500 65,620 78,750 91,870
175,000............................ 45,930 61,250 76,560 91,870 107,180
200,000............................ 52,500 70,000 87,500 105,000 122,500
225,000............................ 59,060 78,750 98,430 118,120 137,810
250,000............................ 65,620 87,500 109,370 131,250 153,120
300,000............................ 78,750 105,000 131,250 157,500 183,750
400,000............................ 105,000 140,000 175,000 210,000 245,000
450,000............................ 118,120 157,500 196,870 236,250 275,620
500,000............................ 131,250 175,000 218,750 262,500 306,250
</TABLE>
The above estimated pension benefit amounts assume that benefit payments
begin at age 65 under a single life annuity form. Such amounts do not reflect
the social security offset incorporated by the pension benefit formula. The
social security offset amount is determined by a participant's social security
earnings history and normal retirement date of age 65. The estimated pension
amounts include benefits payable from the qualified and non-qualified pension
plans. The non-qualified pension plan provides benefits derived by the
qualified plan's formula that exceed legal maximum benefit limitations. The
pension benefit formula is:
25
<PAGE>
1.75% of "final average pay" multiplied by the number of years of plan
participation, minus
1.75% of "social security primary insurance amount ("PIA")" multiplied by
the number of years of plan participation (social security offset not to
exceed 60% of PIA)
where "final average pay" is defined as a participant's five highest
consecutive calendar year earnings (base salary and bonus) out of the last ten
calendar years before retirement.
As of January 1, 1999, the eligible named executive officers' years of plan
participation and final average pay for purposes of calculating pension
benefits payable under the Plan under the final average pay formula design are
as follows: Mr. Kleinert, 24 years and $300,066. Mr. Barnes, Mr. Blobel, Mr.
Reid-Anderson, and Mr. Casper did not participate in the former Plan as of
December 31, 1996.
Compensation of Directors
Directors are not entitled to receive any compensation for serving on Dade
Behring's Board of Directors. Directors are reimbursed for their out-of-pocket
expenses incurred in connection with such services.
Item 12. Security Ownership of Management and Directors.
Dade Behring is a wholly owned subsidiary of Holdings. The common stock of
Holdings consists of Common Stock, par value $.01 per share (the "Common
Stock"), and Class L Common Stock, par value $.01 per share (the "Class L
Common"). The holders of Class L Common have no voting rights except as
required by law. The holders of the Common Stock are entitled to one vote per
share on all matters to be voted upon by the stockholders of Holdings,
including the election of directors. Bain Capital and its related investors, GS
Capital and its related investors, and Hoechst A.G. own 35.9%, 17.9%, and
31.2%, respectively, of the Common Stock and are parties to a stockholder
agreement regarding the ownership (including the voting) of such stock. By
virtue of such stock ownership and stockholder agreement, Bain Capital, GS
Capital, and Hoechst A.G. have the power to control all matters submitted to a
vote of stockholders of, and to elect all directors of, Holdings and,
indirectly, to elect all directors of Dade Behring. In 1996, 1997 and 1998,
certain members of Dade Behring's management acquired voting common stock of
Holdings, and members of Dade Behring's management are eligible to receive
additional common stock of Holdings in part based upon the operating
performance of Dade Behring.
The following tables set forth certain information as of December 31, 1998
regarding the beneficial ownership of (i) voting common stock by each person
(other than directors and executive officers of Dade Behring) known to Dade
Behring to own more than 5% of the outstanding voting common stock of Holdings
and (ii) voting and non-voting common stock by each director of Dade Behring,
each named executive officer and all of Dade Behring's directors and executive
officers as a group. To the knowledge of Dade Behring, each of such
stockholders has sole voting and investment power as to the shares shown unless
otherwise noted.
Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Common Stock (Voting)
---------------------------------
Percentage
Number of Percentage of Class--
Name and Address of Beneficial Owner Shares of Class(1) Undiluted(2)
- ------------------------------------ --------- ---------- -----------
<S> <C> <C> <C>
Bain Capital Entities (3)................... 5,960,000 35.9% 40.4%
c/o Bain Capital
Two Copley Place
Boston, Massachusetts 02116
Hoechst A.G................................. 5,188,609 31.2% 35.2%
Bruningstrasse 50
D-65929 Frankfurt a. M.
Germany
The Goldman Sachs Group, L.P. and related 2,980,000 17.9% 20.2%
investors (4)..............................
85 Broad Street
New York, New York 10004
</TABLE>
26
<PAGE>
- --------
(1) The percentages assume that all options held by Dade Behring's management
have been exercised. Certain of the options held by Dade Behring's
management are exercisable in accordance with certain time and performance
criteria. Excludes warrant held by Hoechst A.G. to purchase 1,275,816
shares of voting Common Stock.
(2) The percentages are based on ownership of outstanding shares as of
December 31, 1998.
(3) Amounts shown represent the aggregate number of shares held by Bain
Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates and
BCIP Trust Associates, L.P. (the "Bain Capital Entities").
(4) Includes shares beneficially owned by certain investment limited
partnerships of which affiliates of the Goldman Sachs Group, L.P. ("GS
Group") are the general partners or the managing general partners. GS
Group disclaims beneficial ownership of shares held by such investment
partnerships to the extent partnership interests in such partnerships are
held by persons other than GS Group and its affiliates.
Security Ownership of Management and Directors
<TABLE>
<CAPTION>
Class L Common Stock
Common Stock (Voting) (Non-voting)
-------------------- -----------------------
Number of Percentage Number of Percentage
Name of Beneficial Owner Shares of Class Shares of Class
------------------------ --------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Steven W. Barnes (1).............. 180,000 1.1% -- --
Robert W. Kleinert (1)............ 92,410 0.6% 5,000 0.3%
James W.P. Reid-Anderson (1)...... 122,450 0.7% 400 --
Marc N. Casper (1)................ 66,250 0.4% 1,250 0.1%
Friedhelm Blobel (1).............. 64,000 0.4% -- --
Scott T. Garrett (2).............. 253,876 1.5% 8,900 0.6%
Mark E. Nunnelly (3).............. 5,960,000 35.9% 662,222.22 42.7%
Stephen G. Pagliuca (3)........... 5,960,000 35.9% 662,222.22 42.7%
Adam Kirsch (3)................... 5,960,000 35.9% 662,222.22 42.7%
John P. Connaughton (3)........... 5,960,000 35.9% 662,222.22 42.7%
Joseph H. Gleberman (4)........... 2,980,000 17.9% 331,111.11 21.3%
All executive officers and
directors of Dade Behring as a
group (10 people)................ 9,718,986 58.5% 1,008,833.33 65.0%
</TABLE>
- --------
(1) The number of shares held by management and the percentages assume that
all options held by management have been exercised. Certain options held
by management are exercisable in accordance with certain time and
performance criteria.
(2) The number of shares held by Scott T. Garrett and the percentages assume
that all his options have been exercised.
(3) All shares shown are held by the Bain Capital Entities. Messrs. Kirsch,
Nunnelly, Connaughton and Pagliuca, who serve as directors of Dade
Behring, and are managing directors of Bain Capital, which is the general
partner of certain of the Bain Capital Entities, and are limited partners
of Bain Capital Partners IV, L.P., the general partner of certain of the
Bain Capital Entities. Accordingly, Messrs. Kirsch, Nunnelly, Connaughton
and Pagliuca may be deemed to share voting and dispositive power as to the
shares held by the Bain Capital Entities. Messrs. Kirsch, Nunnelly,
Connaughton and Pagliuca disclaim beneficial ownership of such shares.
(4) Mr. Gleberman is a general partner of Goldman, Sachs, & Co. The shares
reported herein include shares beneficially owned by certain investment
limited partnerships of which affiliates of GS Group are the general
partners or the managing general partners. Mr. Gleberman disclaims
beneficial ownership of such shares.
27
<PAGE>
Item 13. Certain Relationships and Related Transactions.
Management Services Agreements
The Company and Holdings entered into five-year Management Services
Agreements with Bain Capital and Goldman, Sachs & Co. (an affiliate of GS
Capital). Pursuant to these agreements, they will pay Bain Capital and
Goldman, Sachs & Co., subject to compliance with the terms of the indenture
governing the 11 1/8% senior subordinated notes, an aggregate annual fee of up
to $3.0 million plus their respective out-of-pocket expenses in return for
management consulting in the areas of corporate finance; corporate strategy;
investment analysis; market research and business development; advisory
services and support, negotiation; analysis of financial alternatives,
acquisitions and dispositions; and other services. The Company believes that
the fees paid for the professional services rendered are at least as favorable
to the Company as those that could be negotiated with an unaffiliated third
party. For the year ended December 31, 1998, the Consolidated Statement of
Operations and Comprehensive Income includes advisory fees and related
expenses of $3.3 million incurred under these agreements.
Stockholders Agreement
On December 20, 1994, Holdings, Bain Capital Fund IV, L.P., Bain Capital
Fund IV-B, L.P., GS Capital Partners, L.P. and certain other parties signatory
thereto entered into a Stockholders Agreement (the "Stockholders Agreement")
whereby prior to the fifth anniversary of the date of the Stockholders
Agreement, if Holdings requires certain services of an investment banking
firm, Holdings agrees to retain Goldman, Sachs & Co. to provide such services
unless Holdings' Board of Directors determines that the retention of another
investment banking firm would provide a material additional benefit to
Holdings.
On October 31, 1997, Holdings, Hoechst, Bain Capital Fund IV, L.P., Bain
Capital Fund IV-B, L.P., GS Capital Partners, L.P. and certain other parties
signatory thereto entered into an Amended and Restated Stockholders Agreement
(the "Amended and Restated Stockholders Agreement"). The Amended and Restated
Stockholders Agreement provides certain conditions in connection with the
election of directors, transfer of stock, sale of the Company and certain
restrictions on Dade Behring's activities.
Transition Service Agreements
Pursuant to Transition Services Agreements dated September 30, 1997,
Hoechst provides the Company with certain support services including
administrative support, warehousing and distribution services, human resource
support, information systems support, accounting support and office space. The
Transition Services Agreements have various terms from October 1, 1997 through
December 31, 1999. The Company paid $12.1 million to Hoechst related to these
agreements for the year ended December 31, 1998.
Other Agreements
Hoescht subleases office space to the Company pursuant to a sublease dated
October 1, 1997. Rent expense related to this sublease totaled $3.5 million
for the year ended December 31, 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this report.
(i) See "Index to Financial Statements and Schedule" on page F-1 hereof.
(ii) See "Index to Exhibits" on page X-1 hereof.
(b) Reports on Form 8-K.
None.
28
<PAGE>
DADE BEHRING INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and December 31, 1998. F-3
Consolidated Statements of Operations and Comprehensive Income for the
three years ended December 31, 1998...................................... F-4
Consolidated Statements of Cash Flows for the three years ended December
31, 1998................................................................. F-5
Consolidated Statements of Changes in Stockholder's Equity (Deficit) for
the three years ended December 31, 1998.................................. F-6
Notes to Consolidated Financial Statements................................ F-7
Financial Statements Schedule (Schedule II)............................... F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Dade Behring Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and comprehensive income, of
cash flows and of changes in stockholder's equity (deficit) present fairly, in
all material respects, the financial position of Dade Behring Inc. (a wholly-
owned subsidiary of Dade Behring Holdings, Inc.) and its subsidiaries (the
Company) at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 19, 1999
F-2
<PAGE>
DADE BEHRING INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except share-related data)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1997 1998
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 20.5 $ 25.8
Restricted cash.................................... 3.7 --
Accounts receivable, net........................... 359.6 353.5
Inventories........................................ 272.5 265.9
Prepaid expenses and other current assets.......... 11.9 7.3
Deferred income taxes.............................. 97.0 76.8
-------- --------
Total current assets............................. 765.2 729.3
-------- --------
Property, plant and equipment, net................... 214.5 304.7
Debt issuance costs, net............................. 37.0 31.2
Goodwill, net........................................ 135.6 126.5
Deferred income taxes................................ 286.1 269.7
Other assets......................................... 72.0 72.0
-------- --------
Total assets..................................... $1,510.4 $1,533.4
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt.................. $ 3.7 $ 13.0
Short-term debt.................................... 54.4 96.4
Accounts payable................................... 89.2 130.7
Accrued liabilities................................ 283.9 228.4
-------- --------
Total current liabilities........................ 431.2 468.5
-------- --------
Long-term debt, less current portion................. 416.9 373.0
Senior subordinated notes............................ 350.0 350.0
Other liabilities.................................... 108.2 92.6
-------- --------
Total liabilities................................ 1,306.3 1,284.1
-------- --------
Commitments and contingencies (Note 18).............. -- --
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares
authorized, issued and outstanding................ -- --
Additional paid-in capital......................... 490.2 493.0
Unearned stock-based compensation.................. (21.8) (11.5)
Notes receivable on capital contribution........... (0.7) (0.2)
Accumulated deficit................................ (252.9) (209.4)
Accumulated other comprehensive income (loss)...... (10.7) (22.6)
-------- --------
Total stockholder's equity....................... 204.1 249.3
-------- --------
Total liabilities and stockholder's equity....... $1,510.4 $1,533.4
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
DADE BEHRING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in millions)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Net sales.......................................... $ 795.8 $ 980.5 $1,285.2
------- ------- --------
Operating costs and expenses:
Cost of goods sold............................... 444.1 654.1 529.4
Marketing and administrative expenses............ 255.5 366.8 513.9
Research and development expenses................ 138.0 61.7 88.2
Goodwill amortization expense.................... 3.3 5.4 5.4
Restructuring expenses........................... 15.0 40.1 (4.5)
------- ------- --------
Income (loss) from operations...................... (60.1) (147.6) 152.8
Other income (expense):
Interest expense, net............................ (65.6) (87.8) (80.5)
Other............................................ -- 9.0 5.6
------- ------- --------
Income (loss) before income taxes.................. (125.7) (226.4) 77.9
Income tax expense (benefit)....................... (45.4) (83.8) 34.4
------- ------- --------
Income (loss) before extraordinary items........... (80.3) (142.6) 43.5
Extraordinary items (net of tax benefit of $14.7):
Write-off of deferred financing fees............. (11.4) -- --
Premium on purchase of 13% senior subordinated
notes........................................... (13.6) -- --
------- ------- --------
Net income (loss).................................. $(105.3) $(142.6) $ 43.5
------- ------- --------
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments......... (2.5) (8.6) (11.6)
Unrealized gain (loss) on marketable securities.. 1.2 (0.2) (0.3)
------- ------- --------
Other comprehensive income (loss).................. (1.3) (8.8) (11.9)
Income tax expense (benefit) related to items of
comprehensive income.............................. -- -- --
------- ------- --------
Other comprehensive income (loss), net of tax...... (1.3) (8.8) (11.9)
------- ------- --------
Comprehensive income (loss)........................ $(106.6) $(151.4) $ 31.6
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
DADE BEHRING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net income (loss)................................ $ (105.3) $ (142.6) $ 43.5
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Write-off of in-process research and
development................................... 98.1 1.1 --
Depreciation and amortization expense.......... 44.1 56.6 56.7
Stock-based compensation expense............... -- 11.4 13.1
Other non-cash charges......................... -- 37.1 3.8
Write-off of deferred financing fees........... 18.1 -- --
Amortization of inventory step-up.............. 24.8 171.4 --
Restructuring expenses......................... 15.0 40.1 --
Non-cash write-off of excess spare parts....... 9.5 -- --
Loss on sale of "Net asset held for sale"...... 2.8 -- --
Loss on write-down of marketable equity
securities.................................... 2.7 -- 0.3
Gain on sales of assets........................ -- -- (5.3)
Premium on purchase of 13% senior subordinated
notes......................................... 21.6 -- --
Deferred income taxes.......................... (48.2) (86.1) 29.6
Changes in balance sheet items:
Accounts receivable, net..................... 1.0 (3.3) 1.5
Inventories.................................. (6.9) (6.3) (30.5)
Accounts payable............................. 1.5 (11.0) 42.1
Accrued liabilities.......................... (34.2) (66.0) (21.3)
Other liabilities............................ (0.4) 86.9 (63.9)
Other, net................................... (11.4) (33.1) (2.3)
-------- -------- -------
Net cash flow provided by operating
activities................................. 32.8 56.2 67.3
-------- -------- -------
Investing Activities:
Acquisitions and purchase price adjustments, net
of acquired cash................................ (522.5) (0.9) 30.5
Capital expenditures............................. (57.3) (68.4) (139.0)
Proceeds from sale of assets..................... -- 0.7 36.2
Proceeds from Baxter for purchase price
adjustments..................................... 9.7 -- --
-------- -------- -------
Net cash flow utilized by investing
activities................................. (570.1) (68.6) (72.3)
-------- -------- -------
Financing Activities:
Proceeds from sale of "Net assets held for sale". 54.8 -- --
Proceeds from issuance of short-term debt, net of
repayments...................................... 15.7 (0.5) 44.3
Cash dividend to parent for Behring Combination.. -- (34.8) --
Proceeds from revolving credit facility.......... 205.0 259.4 94.0
Repayment of borrowings under revolving credit
facility........................................ (205.0) (259.4) (75.0)
Proceeds from issuance of 11 1/8% senior
subordinated notes.............................. 350.0 -- --
Repayment of borrowings and premium paid on 13%
senior subordinated notes....................... (141.6) -- --
Proceeds from issuance of long-term loans........ 460.0 50.0 --
Repayment of borrowings under long-term loans.... (183.5) (69.4) (53.6)
Contribution from parent......................... 0.4 88.4 --
Debt issuance costs.............................. (46.2) (0.4) --
-------- -------- -------
Net cash flow provided by financing
activities................................. 509.6 33.3 9.7
-------- -------- -------
Effect of foreign exchange rates on cash.......... (0.2) (0.4) 0.6
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents................................ (27.9) 20.5 5.3
Cash and Cash Equivalents:
Beginning of period.............................. $ 27.9 $ -- $ 20.5
-------- -------- -------
End of period.................................... $ -- $ 20.5 $ 25.8
======== ======== =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest......... $ 62.0 $ 92.2 $ 77.3
======== ======== =======
Cash paid during the period for income taxes..... $ 2.4 $ 7.8 $ 4.6
======== ======== =======
Non Cash Supplemental Disclosure of Cash Flow
Information:
Acquired company contributed by parent........... $ -- $ 316.0 $ --
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
DADE BEHRING INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
(Dollars in millions)
<TABLE>
<CAPTION>
Notes Accumulated Total
Common Stock Additional Receivable Unearned Other Stockholder's
------------- Paid-in on Capital Stock-Based Accumulated Comprehensive Equity
Shares Amount Capital Contribution Compensation Deficit Income (Loss) (Deficit)
------ ------ ---------- ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 1,000 $-- $ 87.0 $(0.2) $ -- $ (5.0) $ (0.6) $ 81.2
----- ---- ------ ----- ------ ------- ------ -------
Net loss................ (105.3) (105.3)
Forgiveness of
shareholder debt....... 0.1 0.1
Payments on notes
receivable............. 0.1 0.1
Capital contribution
from parent............ 0.4 0.4
Recognition of other
than temporary
impairment of
marketable equity
securities............. 1.1 1.1
Unrealized gain on
marketable equity
securities............. 0.1 0.1
Cash dividend to parent
on common stock........ (0.2) (0.2)
Cumulative translation
adjustment............. (2.5) (2.5)
----- ---- ------ ----- ------ ------- ------ -------
Balance at December 31,
1996................... 1,000 -- 87.2 -- -- (110.3) (1.9) (25.0)
----- ---- ------ ----- ------ ------- ------ -------
Net loss................ (142.6) (142.6)
Capital contribution
from parent (Note 4)... 404.6 404.6
Notes receivable on
capital contribution... (0.7) (0.7)
Cash dividend to parent
on common stock........ (34.8) (34.8)
Issuance of unearned
stock-based
compensation........... 33.2 (33.2) --
Amortization of unearned
stock-based
compensation........... 11.4 11.4
Unrealized loss on
marketable equity
securities............. (0.2) (0.2)
Cumulative translation
adjustment............. (8.6) (8.6)
----- ---- ------ ----- ------ ------- ------ -------
Balance at December 31,
1997................... 1,000 -- 490.2 (0.7) (21.8) (252.9) (10.7) 204.1
----- ---- ------ ----- ------ ------- ------ -------
Net income.............. 43.5 43.5
Payments on notes
receivable............. 0.5 0.5
Issuance of unearned
stock-based
compensation........... 3.6 (3.6) --
Adjustment of unearned
stock-based
compensation........... (0.8) 0.8 --
Amortization of unearned
stock-based
compensation........... 13.1 13.1
Unrealized loss on
marketable equity
securities............. (0.3) (0.3)
Cumulative translation
adjustment............. (11.6) (11.6)
----- ---- ------ ----- ------ ------- ------ -------
Balance at December 31,
1998................... 1,000 $-- $493.0 $(0.2) $(11.5) $(209.4) $(22.6) $ 249.3
===== ==== ====== ===== ====== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business
Dade Behring Inc. (the "Company"), formerly Dade International Inc., was
incorporated in Delaware in 1994 and is a wholly-owned subsidiary of Dade
Behring Holdings, Inc. ("Holdings"), formerly Diagnostics Holding Inc. Bain
Capital, Inc., GS Capital Partners, L.P. (an affiliate of Goldman Sachs Group,
L.P.), their respective related investors, Hoechst A.G. and certain of its
affiliates ("Hoechst") and the management of the Company own substantially all
of the capital stock of Holdings. The Company develops, manufactures and
markets in vitro diagnostic equipment, reagents, consumable supplies and
services worldwide.
Effective December 16, 1994, the Company acquired (the "Dade Acquisition")
the worldwide in vitro diagnostics products manufacturing and services
businesses and net assets of Baxter Diagnostics Inc. and certain of its
affiliates, from Baxter International Inc. and its affiliates ("Baxter"). The
Dade Acquisition was accounted for as a purchase.
Effective May 1, 1996, the Company acquired (the "Chemistry Acquisition")
the worldwide in vitro diagnostics business ("Dade Chemistry") of E.I. du Pont
de Nemours and Company. The operating results and acquired assets and assumed
liabilities of the Chemistry Acquisition, which was accounted for as a
purchase, have been reflected in the Company's consolidated financial
statements since May 1, 1996.
Effective October 1, 1997, Holdings acquired (the "Behring Combination")
the stock and beneficial interests of various subsidiaries of Hoechst that
operated its worldwide in vitro diagnostic business ("Behring"). The stock and
beneficial interest was contributed to the Company effective October 1, 1997.
The operating results and acquired assets and assumed liabilities of the
Behring Combination, which was accounted for as a purchase, have been
reflected in the Company's consolidated financial statements since October 1,
1997.
2. Change in Non-U.S. Reporting Period
Prior to 1996, the Company's non-U.S. operations reported financial results
on a fiscal year ending November 30. Effective January 1, 1996, the Company's
non-U.S. operations changed to a calendar year-end. As a consequence, the
Company's results of operations for 1996 include 13 months of non-U.S.
operations' results. The Company has designated the month of December 1995 as
the "lag month" for purposes of comparability to future periods. Non-U.S.
operations during the lag month reported net sales of approximately $12.3
million, thus increasing consolidated net sales by this amount for the year
ended December 31, 1996. The impact on net income was not significant.
3. Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the accompanying consolidated financial
statements. These policies are in conformity with generally accepted
accounting principles and have been applied consistently unless otherwise
noted.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures. Actual results could differ from those
estimates.
Principles of Consolidation
The consolidated financial statements include all majority owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
F-7
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition
Revenues for products sold are recognized upon shipment of products to
customers and are recorded on the basis of the sales price to such customers.
Revenues for products that are subject to a distribution agreement in the
United States are recognized upon shipment of products to the distributor or
direct shipment of the products by the Company to third party customers. Such
revenues are recorded on the basis of the estimated sales price to third party
customers (i.e., generally the end consumer) less a contractual distribution
discount to the distributor. The estimated discount recorded by the Company may
be revised in the future as actual selling price information becomes available.
Revenues under product service contracts, which are generally for one year,
are deferred and recognized ratably over the term of the contract.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
demand deposits and cash equivalents which are highly liquid instruments with
maturities of three months or less at the time of purchase and are held to
maturity. Cash equivalents included $10.1 million invested in short-term money
market investments at December 31, 1997. Cash equivalents were immaterial at
December 31, 1998.
Accounts Receivable
Accounts receivable are net of bad debt reserves of $27.7 million and $18.0
million at December 31, 1997 and 1998, respectively. Accounts receivable are
unsecured.
Research and Development Expenses
Expenditures by the Company for research and development are expensed as
incurred.
In 1997, in connection with the Behring Combination (Note 4), $1.1 million
of the purchase price was allocated to acquired in-process research and
development for projects which have no alternative future use. Such costs were
expensed immediately following consummation of the Behring Combination.
In conjunction with the Chemistry Acquisition in 1996 (Note 5), $98.1
million of the purchase price was allocated to acquired in-process research and
development projects which have no alternative future use. Accordingly, such
costs were expensed immediately following the consummation of the Chemistry
Acquisition.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes materials, labor and manufacturing overhead costs. Market
for raw materials is based on replacement costs and, for other inventory
classifications, on net realizable value. Appropriate consideration is given to
deterioration, obsolescence and other factors in evaluating net realizable
value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided for financial reporting purposes principally on the
straight-line method over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Machinery and equipment..................................... 3 to 10 years
Equipment placed with customers............................. 5 years
</TABLE>
F-8
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Assets recorded under capital leases are amortized over the life of the
lease. Leasehold improvements are capitalized and amortized over their
estimated useful lives or over the terms of the related leases, if shorter.
Goodwill
Goodwill represents primarily the excess cost over the fair value of net
assets acquired in connection with the Chemistry Acquisition. Goodwill at
December 31, 1997 aggregated $135.6 million, net of $9.4 million of
accumulated amortization, and reflects the finalization of the Chemistry
Acquisition purchase price allocation. Goodwill at December 31, 1998
aggregated $126.5 million, net of $14.8 million of accumulated amortization.
Goodwill is being amortized using the straight-line method over 25 years.
Negative goodwill arising from the Behring Combination, aggregated $17.9
million at December 31, 1998, net of $0.7 of accumulated amortization, and is
amortized on the straight-line basis over 25 years. Negative goodwill is
classified in other long-term liabilities. The carrying value of goodwill and
other long-lived assets are reviewed for impairment when events or changes in
circumstances indicate the carrying value of the asset may not be recoverable.
This review compares projected future undiscounted cash flows before interest
to the carrying value of the asset.
Patents and Trademarks
Patents and trademarks are being amortized over their legal or estimated
useful lives, whichever is shorter (generally not exceeding 17 years). Patents
and trademarks totaled $26.8 million and $23.5 million, net of accumulated
amortization of $5.3 million and $8.6 million, at December 31, 1997 and 1998,
respectively.
Debt Issuance Costs
Debt issuance costs, which are being amortized over the applicable terms of
the Bank Credit Agreement (7 years weighted average) and 11 1/8% senior
subordinated notes (10 years), totaled $37.0 million at December 31, 1997, net
of accumulated amortization of $9.6 million, and $31.2 million at December 31,
1998, net of accumulated amortization of $15.4 million.
Income Taxes
Deferred tax assets and liabilities are recognized at current tax rates for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Deferred tax
assets are recognized, net of any valuation allowance, for the estimated
future tax effects of deductible temporary differences and tax operating loss
and credit carryforwards. Additionally, the Company provides deferred tax
liabilities for the eventual tax effect of repatriating unremitted earnings of
certain non-U.S. subsidiaries. The Company's operations are included in
Holdings' consolidated United States Federal and state income tax returns.
Foreign Currency Translation
The Company has determined that the local currencies of its non-U.S.
operations are their functional currencies. Assets and liabilities of the non-
U.S. subsidiaries are translated at the year-end exchange rates. Revenues and
expenses are translated at average rates of exchange in effect during the
year.
Derivative Financial Instruments
The Company utilizes derivative financial instruments for purposes other
than trading, specifically to manage its exposure to foreign currency and
interest rate fluctuations.
F-9
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company enters into forward currency exchange contracts with highly
rated counterparties to manage its exposure to foreign currency fluctuations
on short-term intercompany borrowing arrangements denominated in foreign
currencies. The intercompany borrowing arrangements support the underlying
working capital needs of non-U.S. subsidiaries. Premiums and discounts on
forward rate option contracts are deferred and amortized to other income over
the life of the contract. Gains and losses on forward contracts resulting from
revaluations are recorded to other income. At the maturity of the forward
contracts the currencies involved are exchanged based on the contracted
exchange rate. At December 31, 1997 and December 31, 1998, the replacement
value of "in-the-money" contracts was not significant. Total notional contract
value of foreign currency exchange contracts outstanding were as follows (in
millions):
<TABLE>
<CAPTION>
December 31,
------------
1997 1998
------ -----
<S> <C> <C>
Forward purchases............................................ $ 79.0 $ 2.9
Forward sales................................................ $139.2 $87.2
</TABLE>
The Company also utilizes purchased interest rate caps, for which the
Company will receive cash payments from the counterparty if an indexed rate of
interest is exceeded, to manage a portion of its exposure to interest rate
increases on its outstanding debt. The notional value of these caps was $230.0
million at December 31, 1997 and 1998. Premiums paid for the purchase of the
caps are recorded to interest expense over the life of the caps. Amounts
received, if any, are recorded as a reduction of interest expense over the
related period. As of December 31, 1997 and 1998, capitalized amounts relating
to the caps are not material to the consolidated financial statements.
Earnings (Loss) Per Share
Earnings (loss) per share is not presented for the Company, as its common
stock is not publicly traded.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of trade accounts receivable. A large
percentage of U.S. accounts receivable was generated by the Company's sales to
Allegiance Healthcare Corporation ("Allegiance"). This credit risk is
mitigated due to the large number of entities comprising Allegiance's
worldwide customer base and their dispersion across different regional
economies.
A number of the Company's customers operate in the hospital and reference
laboratory market, which may be subject to legislated healthcare reforms.
Additionally, at December 31, 1997 and 1998, approximately $59.9 million or
17% and $68.0 million or 29%, respectively, of the Company's non-U.S. accounts
receivable were geographically concentrated in Italy. The Company does not
expect these risk factors to have a material adverse impact on its results of
operations, financial position or liquidity.
Fair Value of Financial Instruments
The carrying values of cash equivalents and other current assets and
liabilities approximate fair value at December 31, 1997 and 1998 because of
the short maturity of these instruments.
The excess of the fair values of derivative financial instruments over
carrying values aggregated $1.7 million at December 31, 1997. The excess of
the carrying values of derivative financial instruments over fair values
aggregated $3.0 million at December 31, 1998. Fair values are based upon year-
end published exchange rates.
F-10
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The carrying value of the long-term debt of $416.9 million and $373.0
million at December 31, 1997 and 1998, respectively, approximates fair value as
the interest rate on each instrument adjusts based upon market interest rate
changes. The fair value of the $350.0 million 11 1/8% senior subordinated notes
was $390.3 million and $379.2 million at December 31, 1997 and 1998,
respectively, based on the trading value at that date.
Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation", encourages, but does not require, the use of a
fair value method for recording compensation expense for stock-based
compensation plans. The Company has elected to continue to account for its
stock-based compensation plans using the intrinsic value method in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. Under the intrinsic value method,
compensation cost for stock options is based on the excess, if any, of the fair
value of the stock at the date of the grant over the amount the employee must
pay to acquire the stock (see Note 14).
Reclassifications
Certain reclassifications have been made to prior period balances to conform
to the current year presentation.
4. Behring Combination
Effective October 1, 1997, Holdings completed its acquisition of Behring
from Hoechst. As consideration for the acquisition, Holdings issued equity
securities to Hoechst providing Hoechst with a 32.5% interest in Holdings and
paid $0.1 million to Hoechst at closing. Subsequent to closing, Hoechst paid
Holdings $54.8 million related to certain adjustments and changes in the Net
Assets (as defined in the Agreement and Plan of Contribution related to the
acquisition) of Behring, which were treated as a reduction to the final
purchase price. The equity securities issued to Hoechst comprise 5,702,383
shares of Holdings' Common Stock and a warrant expiring October 1, 1999 to
acquire 1,403,663 additional shares of Holdings' Common Stock for $80.0
million. The issued shares and warrant were valued by independent appraisal at
$352.8 million and $16.1 million, respectively, as of October 1, 1997. Holdings
contributed Behring to the Company effective October 1, 1997 and the Company
recorded in 1997 a capital contribution of $404.6 million, representing the
aforementioned appraised values and direct costs of the acquisition. The
transaction was accounted for as a purchase and, accordingly, the operating
results of Behring have been included in the consolidated operating results
since October 1, 1997. The purchase price has been allocated to assets acquired
and liabilities assumed based on fair market values at the date of acquisition.
Since the estimated fair values of the net assets acquired exceeded total
acquisition cost, the allocation of purchase price resulted in a pro rata
write-off of non-current assets, including in-process research and development
projects and the establishment of $18.6 million of negative goodwill, which is
being amortized using the straight-line method over 25 years.
The summary of assets acquired, liabilities assumed and the purchase price
paid is as follows (in millions):
<TABLE>
<S> <C>
Consideration: stock and warrant issued, net of purchase price
adjustments..................................................... $314.1
Costs of acquisition............................................. 37.9
------
352.0
Liabilities assumed.............................................. 349.0
------
Costs of assets acquired......................................... $701.0
======
</TABLE>
F-11
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following represents the unaudited pro forma results of operations of
the Company as if the Behring Combination had occurred on January 1, 1996 and
January 1, 1997, respectively, after giving effect to the following
adjustments: write-off of in-process research and development, write-off of
inventory step-up, decreased depreciation of property, plant and equipment,
decreased amortization of intangibles, decreased amortization of goodwill, and
related income tax effects of these adjustments (in millions):
<TABLE>
<CAPTION>
Pro forma
Year ended December
31,
----------------------
1996 1997
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales......................................... $1,449.4 $1,412.1
======== ========
Loss from operations.............................. $ (186.5) $ (109.4)
======== ========
Loss before extraordinary items................... $ (163.9) $ (116.9)
======== ========
Net loss.......................................... $ (188.9) $ (116.9)
======== ========
</TABLE>
The unaudited pro forma results of operations presented above are not
necessarily indicative of the results that would have been obtained if the
Behring Combination had actually occurred on January 1, 1996 and January 1,
1997 and are not intended to be a projection of future results or trends.
Loss from operations includes the following significant items:
<TABLE>
<CAPTION>
Year ended December
31,
----------------------
1996 1997
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
Write-off of in-process research and
development.................................... $ 99.2 $ 1.1
Write-off of inventory step-up.................. 196.2 171.4
Restructuring costs............................. 55.5 51.1
Stock-based compensation expense................ -- 11.4
Behring transaction related employee expenses... -- 13.9
International lag month......................... (2.4) --
Non-cash charge for excess spare parts.......... 9.5 --
Other charges................................... -- 33.5
------- -------
358.0 282.4
Pro forma loss from operations, as above.... (186.5) (109.4)
------- -------
$ 171.5 $ 173.0
======= =======
</TABLE>
The pro forma results of operations excludes the $9.0 million of other
income recorded in 1997 and includes incremental and duplicative expenses
associated with the development of stand-alone infrastructure in the areas of
information systems, finance and human resources as the Company prepares for
the termination of the transition service agreements with Baxter, DuPont and
Hoechst. Additionally, the Company was adversely impacted by foreign currency
exchange rates during 1997. Moreover, the synergistic savings that are
expected to be realized as a result of the Behring Combination are not
reflected in the unaudited pro forma results presented above.
F-12
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Dade Chemistry Acquisition
Effective May 1, 1996, the Company completed the acquisition of Dade
Chemistry from DuPont, which was accounted for as a purchase. Accordingly, the
purchase price and the direct costs of the Chemistry Acquisition, which
aggregated $585.9 million, were allocated to the assets acquired and the
liabilities assumed based upon their fair market values at the date of the
acquisition. The Chemistry Acquisition was financed principally by the issuance
of $350.0 million of senior subordinated notes, a refinancing of bank debt and
cash. Since the purchase price exceeded the fair market value of the net assets
acquired, the residual, aggregating $145.0 million, was recorded as goodwill.
During 1998, $5.0 million of remaining unused restructuring reserves were
charged against goodwill and $7.3 million of liabilities established in
purchase accounting were not ultimately funded and were reversed to income. The
estimated fair values, which were finalized during 1997, are based on
independent appraisals, management estimates and arms-length negotiations with
DuPont.
The summary of assets acquired, liabilities assumed and the purchase price
paid is as follows (in millions):
<TABLE>
<S> <C>
Cash consideration................................................ $504.1
Costs of acquisition.............................................. 19.3
------
523.4
Liabilities assumed............................................... 62.5
------
Costs of assets acquired.......................................... $585.9
======
</TABLE>
The Company's allocation of the Dade Chemistry purchase price includes $98.1
million of costs attributed to in-process research and development projects
that have no alternative future use. Accordingly, such costs were expensed upon
the consummation of the Chemistry Acquisition. During the fourth quarter of
1996, the Company recorded a non-cash charge of $9.5 million to cost of goods
sold to provide for excess spare parts for the Paramax(R) product line. This
non-cash charge, which was a direct result of the designation of the Paramax(R)
product line as non-core due to the Chemistry Acquisition, appropriately
relates to the second quarter of 1996.
The following represents the unaudited pro forma results of operations of
the Company as if the Chemistry Acquisition had occurred on January 1, 1995 and
January 1, 1996, respectively, after giving effect to the following
adjustments: write-off of in-process research and development, write-off of
inventory step-up, increased depreciation of property, plant and equipment,
increased amortization of intangibles, increased amortization of goodwill,
increased interest expense on acquisition debt, refinancing charges, and
related income tax effects of these adjustments (in millions):
<TABLE>
<CAPTION>
Pro forma
Year ended December 31,
-----------------------
1995 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales......................................... $ 959.0 $ 910.6
======= =======
Loss before extraordinary items................... $ (89.2) $ (83.6)
======= =======
Net loss.......................................... $(114.2) $(108.6)
======= =======
</TABLE>
The unaudited pro forma results of operations presented above are not
necessarily indicative of the results that would have been obtained if the
Chemistry Acquisition had actually occurred on January 1, 1995 and January 1,
1996 and are not intended to be a projection of future results or trends. The
decline in net sales for the year ended December 31, 1996 is primarily due to
the rationalization of overlapping product lines and product repositioning
following the integration of Dade Chemistry. The losses for both periods
include a $98.1 million charge related to the write-off of in-process research
and development projects that have no alternative future use and the $24.8
million write-off of inventory step-up. In addition, results for 1996 include
$15.0 million
F-13
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of restructuring costs, a $9.5 million non-cash charge for excess spare parts
as well as incremental and duplicative expenses associated with the
development of stand-alone infrastructure in the areas of information systems,
finance and human resources as the Company prepared for the termination of the
transition service agreements with Baxter and DuPont. Moreover, the
synergistic savings that are expected to be realized as a result of the
Chemistry Acquisition and the adjustment for the differences in reporting
periods for the Company's non-U.S. operations are not reflected in the
unaudited pro forma results presented above.
6. Dade Acquisition
Effective December 16, 1994, the Company, in separate transactions,
acquired certain net assets and businesses of the Predecessor, including the
stock of various non-U.S. subsidiaries. The Dade Acquisition was recorded in
accordance with the purchase method of accounting. In January 1996, the
Company received a $9.7 million purchase price adjustment from Baxter, which
was charged against negative goodwill in the finalization of acquisition
accounting.
7. Inventories
Inventories consist of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Raw materials............................................... $ 59.5 $ 48.8
Work-in-process............................................. 64.0 52.3
Finished products........................................... 149.0 164.8
------ ------
Total inventories....................................... $272.5 $265.9
====== ======
</TABLE>
8. Net Assets Held for Sale
Baxter operated a business (Burdick & Jackson) which was identified, along
with certain excess land and warehouse facilities at another location, as
operations and assets to be sold. The Company recorded "Net assets held for
sale," which represented the estimated proceeds to be received from the sale
of this business and the excess land and warehouse facilities, plus expected
operating cash flow during the holding period. The excess land facilities were
sold during the first quarter of 1996 for the expected net proceeds of $10.8
million. Burdick & Jackson was sold during the fourth quarter of 1996 for cash
proceeds of $44.0 million, which resulted in a pre-tax loss of $2.8 million.
9. Property, Plant and Equipment
Property, plant and equipment consist of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
------- -------
<S> <C> <C> <C> <C>
Land........................................... $ 6.3 $ 6.8
Buildings and leasehold improvements........... 29.5 46.0
Machinery and equipment........................ 45.1 100.3
Equipment placed with customers................ 226.8 281.6
Construction in progress....................... 26.5 57.1
Capitalized software........................... 16.9 40.9
------- -------
Total property, plant and equipment, at cost... 351.1 532.7
Accumulated depreciation and amortization...... (136.6) (228.0)
------- -------
Net property, plant and equipment.......... $ 214.5 $ 304.7
======= =======
</TABLE>
F-14
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Equipment placed with customers includes instruments provided at no charge
in exchange for contractual commitments for ongoing reagent revenues. The net
book value of this equipment was $82.9 million and $102.9 million at December
31, 1997 and 1998, respectively. Management believes the carrying value of
this equipment is recoverable from the revenues anticipated from future
reagent sales.
10. Restructuring
In connection with the Behring Combination in 1997, the Company recorded a
$40.1 million restructuring charge and allocated $74.3 million ($77.7 million
was allocated in connection with the preliminary allocation of purchase price)
of the Behring Combination purchase price for a restructuring plan to
consolidate manufacturing and distribution operations and eliminate redundant
sales, service and administrative functions. These restructuring actions
include the closure of the Company's Miami, Florida and Behring's Westwood,
Massachusetts manufacturing facilities, the exit from the San Jose
administrative/research facility, the consolidation and reorganization of the
global sales, marketing and research and development organizations and
elimination of administrative redundancies. The actions are expected to be
substantially completed within two years. A total of 1,528 employees were
identified for termination resulting from these initiatives, 824 of which were
employees of the Company prior to the Behring Combination. Of the $40.1
million restructuring charge, $26.4 million relates to employee severance and
$13.0 million relates to lease terminations and facility dispositions with the
remainder relating to other exit costs. The Behring Combination reserve
includes $26.7 million related to employee severance and relocation and $47.6
million related to facility exit costs with the remainder relating to other
exit costs. As of December 31, 1997, 69 of the 824 identified Company
employees described above had been severed, while 58 of the 704 identified
Behring employees had been severed. During 1997, an aggregate of $3.7 million
was paid for severance and $9.0 million was paid for exit costs. The reserve
as of December 31, 1997 for these restructuring actions was $105.1 million. As
of December 31, 1998, 410 of the 824 identified Company employees described
above had been severed, while 525 of the 704 identified Behring employees had
been severed. During 1998, an aggregate of $26.6 million was paid for
severance and relocation and $27.5 million was paid for facility exit and
other exit costs. In 1998, excess severance reserves of $4.5 million,
resulting from higher than projected employee turnover at the Miami facility,
were identified and credited to income. The reserve as of December 31, 1998
for these restructuring actions was $43.2 million, $24.0 million of which is
classified in other long-term liabilities.
11. Accrued Liabilities
Accrued liabilities consist of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Salaries, wages, commissions, withholdings and other
payroll taxes............................................ $ 64.7 $ 77.5
Restructuring............................................. 55.6 19.2
Property, sales and use and other taxes................... 12.2 22.0
Deferred service contract revenue/warranty................ 16.7 14.1
Interest payable.......................................... 11.1 10.6
Vendor lease obligations.................................. 42.7 --
Other..................................................... 80.9 85.0
------ ------
$283.9 $228.4
====== ======
</TABLE>
F-15
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Debt
Long-term debt consists of the following (in millions):
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Revolver.................................................. $ -- $ 19.0
Bank Credit Agreement:
A Term Loan............................................. 124.5 109.6
B Term Loan............................................. 104.8 91.1
C Term Loan............................................. 104.8 91.1
D Term Loan............................................. 86.5 75.2
11 1/8% Senior Subordinated Notes......................... 350.0 350.0
------ ------
770.6 736.0
Less current portion.................................. (3.7) (13.0)
------ ------
$766.9 $723.0
====== ======
</TABLE>
To fund the Chemistry Acquisition, the Company refinanced its then existing
indebtedness by entering into a new credit agreement with a number of banks
("Bank Credit Agreement"), which provided for borrowing up to $585.0 million,
issued $350.0 million of 11 1/8% senior subordinated notes, and repurchased
its $120.0 million 13% senior subordinated notes.
The Company filed a registration statement on Form S-1 in October 1996
under the Securities Act of 1933, to register $350.0 million of its Series B
11 1/8% senior subordinated notes due 2006, which were exchanged for its then
outstanding 11 1/8% senior subordinated notes due 2006.
Bank Credit Agreement
The Bank Credit Agreement initially consisted of $460.0 million in term
loans and $125.0 million in a revolving credit facility ("Revolver"). The
borrowings are guaranteed by Holdings and the Company's domestic subsidiaries,
and substantially all the domestic assets of the Company are pledged as
collateral.
At December 31, 1996, term-loan indebtedness under the Bank Credit
Agreement bore interest at (i) the Base Rate (as defined) plus margins ranging
from 1.75% to 2.75% or (ii) the Eurodollar Rate plus margins ranging from
2.75% to 3.75%. At December 31, 1996, the Company funded its borrowings using
the Eurodollar Rate. The Eurodollar Rate in effect at December 31, 1996 was
5.94% in respect of A Term Loan, 5.56% in respect of B Term Loan, 5.56% in
respect of C Term Loan, and 5.63% in respect of D Term Loan.
In 1997, the Company amended the Bank Credit Agreement to consist of $460.0
million in term loans and $105.0 million in a Revolver. In addition, the term-
loan interest rates were amended to (i) the Base Rate (as defined) plus
margins ranging from 1.25% to 2.00% or (ii) the Eurodollar Rate plus margins
ranging from 2.25% to 3.00%. At December 31, 1997, the Company funded the
borrowings using the Eurodollar Rate. The Eurodollar Rate in effect at
December 31, 1997 was 5.75% in respect of A Term Loan, 5.88% in respect of B
Term Loan, 5.88% in respect of C Term Loan, and 5.88% in respect of D Term
Loan.
During 1998, the Company amended certain terms of the Bank Credit
Agreement. Under the amended terms, term-loan borrowings between January 8 and
October 31, 1998 bore interest at (i) the Base Rate (as defined) plus margins
ranging from 1.00% to 2.00% or (ii) the Eurodollar Rates plus margins ranging
from 2.00% to 3.00%. Effective November 1, 1998, term-loan interest rates
reverted to rates in effect during 1997. At December 31, 1998, the Company
funded the borrowings using the Eurodollar Rate. The Eurodollar Rate in effect
at December 31, 1998 was 5.06% in respect of A Term Loan, 4.99% in respect of
B Term Loan, 5.13% in respect of C Term Loan, and 5.19% in respect of D Term
Loan.
F-16
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Bank Credit Agreement contains various restrictive covenants including
mandatory repayments under certain conditions, minimum levels of earnings
before interest, taxes, depreciation and amortization (as defined therein),
minimum interest coverage, maximum leverage ratios, and other covenants which,
among other things, limit the incurrence of additional indebtedness,
dividends, transactions with affiliates, asset purchases and sales,
acquisitions, mergers and consolidations, prepayments of other indebtedness,
(including the 11 1/8% Senior Subordinated Notes), liens and encumbrances and
other matters customarily restricted in such agreements.
Under the terms of the Bank Credit Agreement, the Company is required to
maintain specified levels of interest rate protection. The Company has
purchased a series of interest rate caps under which the Company will receive
cash payment from the counterparties if certain indexed rates of interest are
exceeded. Premiums paid for the purchase of the caps are capitalized and
amortized to interest expense over the life of the cap.
The Revolver may be repaid and reborrowed at any time and is due December
31, 2001. Borrowings bear interest at the Prime Rate plus a 1.25% margin; at
December 31, 1998 the interest rate on the Revolver was 9.0%. The Company is
required to pay to the lenders under the Bank Credit Agreement (as amended) a
commitment fee equal to 1/2 of 1% per annum, payable on a quarterly basis, on
the daily unused portions of the Revolving Credit Facility during such
quarter.
The A, B, C, and D Term Loans mature on December 31, 2001, 2002, 2003, and
2004, respectively.
Senior Subordinated Notes
Interest on the 11 1/8% senior subordinated notes due 2006 accrues from the
date of issuance and is payable semi-annually on May 1 and November 1. The 11
1/8% senior subordinated notes are redeemable in whole or in part, at the
Company's option commencing May 1, 2001. The 11 1/8% senior subordinated notes
contain restrictive covenants that include, among others, the incurrence of
additional debt, mergers and change of control.
In connection with the 1996 debt refinancing and purchase of the 13% senior
subordinated notes due 2005, $18.1 million ($11.4 million net of tax) and
$21.6 million ($13.6 million net of tax) of premiums were recognized as
extraordinary items.
Other Credit Facilities
At year-end December 31, 1998, the Company's non-U.S. subsidiaries had
credit lines from various financial institutions totaling $248.0 million.
These credit lines do not have significant commitment fees. These credit lines
are principally to provide working capital financing for local operations.
The Company had utilized $96.4 million of these credit lines at December
31, 1998 at the prevailing local market interest rates.
Aggregate Maturities of Long-Term Debt
The aggregate maturities of long-term debt at December 31, 1998 are as
follows (in millions):
<TABLE>
<S> <C>
1999.............................. $ 13.0
2000.............................. 40.7
2001.............................. 84.8
2002.............................. 89.8
2003.............................. 87.4
Thereafter........................ 420.3
------
$736.0
======
</TABLE>
F-17
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Income Taxes
Income (loss) before income tax expense is as follows (in millions):
<TABLE>
<CAPTION>
Years ended December
31,
-----------------------
1996 1997 1998
------- ------- -----
<S> <C> <C> <C>
U.S. (including Puerto Rico)..................... $(103.8) $(184.9) $45.3
Non-U.S.......................................... (21.9) (41.5) 32.6
------- ------- -----
Income (loss) before income tax expense.......... $(125.7) $(226.4) $77.9
======= ======= =====
</TABLE>
Tax Expense (Benefit)
Income tax expense (benefit) consists of the following (in millions):
<TABLE>
<CAPTION>
Years ended
December 31,
---------------------
1996 1997 1998
------ ------ -----
<S> <C> <C> <C>
Current
U.S.
Federal........................................ $ -- $ 0.2 $ --
State and local (including Puerto Rico)........ 2.6 0.9 0.3
Non-U.S.......................................... 0.2 1.2 4.5
------ ------ -----
Current income tax expense..................... 2.8 2.3 4.8
------ ------ -----
Deferred
U.S.
Federal........................................ (35.2) (58.2) 10.2
State and local (including Puerto Rico)........ (9.8) (14.7) 3.6
Non-U.S.......................................... (3.2) (13.2) 15.8
------ ------ -----
Deferred income tax expense (benefit).......... (48.2) (86.1) 29.6
------ ------ -----
Total income tax expense (benefit)........... $(45.4) $(83.8) $34.4
====== ====== =====
</TABLE>
Tax Rates
Differences between income taxes computed using the U.S. Federal income tax
statutory rate of 35% and income tax expense recorded by the Company are
attributable to the following (in millions):
<TABLE>
<CAPTION>
Years ended
December 31,
---------------------
1996 1997 1998
------ ------ -----
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate.... $(44.0) $(79.3) $27.3
Tax exempt operations............................. (2.9) (3.0) --
Nondeductible (non-taxable) goodwill.............. 0.5 0.4 (0.2)
Nondeductible items............................... 1.4 1.1 1.7
State and local taxes (net of Federal benefit).... (4.5) (8.3) 2.7
Valuation allowances.............................. 6.3 2.8 3.3
Tax on unremitted foreign earnings................ (0.1) 0.7 1.0
Excess foreign tax charge (benefit)............... (2.9) (1.1) 1.4
Adjustment for prior year items................... -- -- (3.1)
Other factors..................................... 0.8 2.9 0.3
------ ------ -----
Income tax expense (benefit)...................... $(45.4) $(83.8) $34.4
====== ====== =====
</TABLE>
F-18
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred Taxes
Deferred tax assets (liabilities) are comprised of the following (in
millions):
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Gross deferred tax liabilities........................... $(17.1) $(33.5)
------ ------
Property, plant and equipment basis differences.......... 76.4 53.5
Trade receivables basis difference....................... 17.1 10.5
Inventory basis difference............................... 28.5 30.5
Accrued liabilities not currently deductible............. 85.1 57.1
Intangible assets basis difference....................... 122.2 69.6
Net operating loss carryforwards......................... 123.8 202.2
Other.................................................... 9.4 8.1
------ ------
Gross deferred tax assets................................ 462.5 431.5
Valuation allowance...................................... (65.2) (56.2)
------ ------
Net deferred tax assets.................................. 397.3 375.3
------ ------
$380.2 $341.8
====== ======
</TABLE>
In assessing the realizability of the gross deferred tax assets at December
31, 1998, management analyzed the Company's forecast for future taxable
earnings (and losses) by jurisdiction and other relevant factors and concluded
that recoverability of the deferred tax asset of $375.3 million, net of a
$56.2 million valuation allowance, was more likely than not. This analysis
also supported the release in 1998 of $6.2 million and $1.0 million of
valuation allowances previously established against deferred tax assets
arising in France and Belgium, respectively.
The Company received a tax exemption grant from Puerto Rico during 1996
which provided that its manufacturing operations be partially exempt from
local Puerto Rico taxes until the year 2014. The tax benefit of this local
grant was approximately $4.1 million for the year ended December 31, 1997.
The Company has also filed an election to be taxed under Section 936 for
its Puerto Rico operations for Federal income tax purposes. The total Federal
income tax benefit of Section 936 treatment was approximately $3.0 million for
the year ended December 31, 1997.
The company ceased its manufacturing operations in Puerto Rico in the first
quarter of 1998. Accordingly, no local or Federal tax benefits were recorded
for these operations in 1998. Appropriate taxes have been provided for the
cost of repatriation of all available earnings generated prior to the closing
of these operations.
At December 31, 1997 and 1998, the Company had net operating loss
carryforwards available in the United States for Federal income tax return
purposes of $254.5 million and $367.8 million, respectively, which expire
during 2004 through 2013. United States tax rules impose limitations on the
use of net operating losses and excess tax bases following certain changes in
ownership. If such a change were to occur, the limitation could reduce the
amount of these benefits that would be available to offset future taxable
income, starting with the year of ownership change. The $367.8 million of net
operating loss carryforward at December 31, 1998 includes $77.9 million of
United States net operating loss carryforward from the pre-combination Behring
entity. Since the use of these loss carryforwards is subject to the change in
ownership limitation, a full deferred tax valuation has been recorded.
Additionally, at December 31, 1998, the Company had net operating loss
carryforwards available in countries outside of the United States of $126.6
million with various dates of expiration. Since a use of a portion of these
benefits is subject to statutory carryforward limitations, valuation
allowances on $57.0 million of net operating loss carryforwards from outside
the U.S. have been recorded at December 31, 1998.
Deferred United States Federal income taxes and non-U.S. withholding taxes
have been provided on the undistributed earnings of certain subsidiaries
deemed available for dividend repatriations, principally Puerto
F-19
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Rico, Switzerland and the United Kingdom. In other foreign jurisdictions with
accumulated earnings, it is management's intent to permanently reinvest
earnings locally or use available cash to pay down local debt. No provision
has been made for non-U.S. withholding taxes or U.S. Federal or state taxes on
undistributed earnings of approximately $0.2 million and $1.7 million at
December 31, 1997 and 1998, respectively. Should such earnings be remitted to
the Company, there would be limited use of credits, if any, which could be
used to offset the U.S. taxes due upon repatriation.
14. Stockholder's Equity
Common Stock
The Company's Common Stock consists of 1,000 authorized shares of $.01 par
value stock with voting rights, of which 1,000 shares were issued and
outstanding at December 31, 1997 and 1998. All outstanding shares at December
31, 1997 and 1998 were owned by Holdings.
Stock Purchase and Option Plans
Holdings has various stock purchase and option plans ("Plans") principally
for the benefit of the Company's employees. The Plans provide for the sale of
53,594 shares of Holdings' Class L Common Stock and the sale or granting of
options of 2,823,402 shares of Holdings' Common Stock. The stock options are
exercisable either over time (Time Options) or upon the achievement of certain
investment return levels by certain owners of Holdings (Performance Options).
All stock options vest within ten years of the date of grants.
During 1996 and 1997, 6,050 shares of Holdings' Class L Common Stock and
54,450 shares of Holdings' Common Stock were sold at $44.00 and $4.00 per
share, respectively. Management believes the purchase prices for these stock
purchases reasonably approximated the fair market value of the stock at the
respective dates of sale. Additionally, during 1997, 24,000 shares of
Holdings' Common Stock were acquired by certain executives of the Company at a
price $32.50 below the fair market value of Holdings' Common Stock at that
date, as established by an independent valuation. Stock compensation expense
of $0.8 million was recorded by the Company in 1997 related to these stock
purchases. No shares of Holdings' Class L Common Stock or of Holdings' Common
Stock were sold during 1998.
All stock options granted during 1996 have exercise prices that management
believes equaled or exceeded the fair market value of the Holdings' Common
Stock on the dates of the grants. During 1997 and 1998, certain option grants
were made with exercise prices below fair market values of Holdings' Common
Stock, based on independent valuations. Time Options generally vest ratably
over a five-year period and have a ten-year term. Performance Options become
exercisable at $7 or $16 per share either within ten years of grant or earlier
if investment returns (as defined) of three times or five times, respectively,
the total investment (as defined) of the original investors of the Company is
achieved. Stock option activity during 1996, 1997, and 1998 was as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- --------- ---------
<S> <C> <C> <C>
Outstanding at January 1................... 629,170 684,170 1,782,450
Time Options
Granted.................................. 84,000 994,400 182,000
Exercised................................ (54,900) (40,840) (15,100)
Forfeited................................ (9,500) (59,340) (49,676)
Performance Options
Granted.................................. 60,400 262,574 --
Exercised................................ -- -- --
Forfeited................................ (25,000) (58,514) (18,076)
------- --------- ---------
Outstanding at December 31................. 684,170 1,782,450 1,881,598
======= ========= =========
Exercisable at December 31................. 62,740 114,080 632,033
Available for grant at December 31......... 22,500 336,912 222,664
</TABLE>
F-20
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Weighted average option exercise price information for 1996, 1997 and 1998
is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Time Options
Outstanding at January 1.......................... $ 0.50 $ 1.40 $15.97
Granted........................................... $ 4.00 $19.36 $37.72
Exercised......................................... $ 0.50 $ 1.35 $ 1.68
Forfeited......................................... $ 0.50 $ 1.25 $21.18
Outstanding at December 31........................ $ 1.40 $15.97 $18.96
Exercisable at December 31........................ $ 0.50 $ 1.94 $12.59
Performance Options
Outstanding at January 1.......................... $11.50 $11.50 $11.50
Granted........................................... $11.50 $11.50 $ --
Exercised......................................... $ -- $ -- $ --
Forfeited......................................... $11.50 $11.50 $11.50
Outstanding at December 31........................ $11.50 $11.50 $11.50
Exercisable at December 31........................ $ -- $ -- $ --
</TABLE>
Effective April 1, 1997, 46,500 Time Options with an exercise price of
$4.00, 99,787 Performance Options with an exercise price of $7.00 and 99,787
Performance Options with an exercise price of $16.00 were granted, which
represented discounts of $14.00, $11.00 and $2.00, respectively, below fair
market value of Holdings' Common Stock at that date, as established by an
independent valuation. Effective October 1, 1997, 860,900 Time Options with
exercise prices of $0.50-$34.50 were granted, which represented a discount of
$23.00-$57.00 from fair market value of Holding's Common Stock at that date,
as established by an independent valuation. Accordingly, stock compensation
expense of $10.6 million was recorded by the Company in 1997 related to these
grants. Between March and October 1998, 182,000 Time Options with exercise
prices of $34.50-$51.75 were granted, which represented a discount of $5.75-
$23.00 from the approximate fair market value of Holdings' Common Stock at
those dates. Accordingly, stock compensation expense of $1.5 million was
recorded by the Company in 1998 related to these grants.
Significant option groups outstanding at December 31, 1998 and related
weighted average price and life information is as follows:
<TABLE>
<CAPTION>
Exercisable
Options Outstanding Options
-------------------------------- ----------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
of Contractual Exercise of Exercise
Grant Date Shares Life (in years) Price Shares Price
---------- ------- --------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Time Options--7/31/95..... 192,440 7 $ 1.35 145,500 $ 1.53
Time Options--7/31/96..... 54,000 8 $ 4.00 16,800 $ 4.00
Time Options--2/5/97-
8/25/97.................. 86,500 9 $ 4.00 17,300 $ 4.00
Time Options--10/1/97..... 823,304 9 $21.48 416,233 $15.19
Time Options--3/98-10/98.. 182,000 10 $37.72 36,200 $35.26
Performance Options--
7/31/95.................. 130,950 7 $ 7.00 -- $ --
Performance Options--
7/31/95.................. 130,950 7 $16.00 -- $ --
Performance Options--
7/31/96.................. 23,200 8 $ 7.00 -- $ --
Performance Options--
7/31/96.................. 23,200 8 $16.00 -- $ --
Performance Options--
2/5/97-8/25/97........... 117,527 9 $ 7.00 -- $ --
Performance Options--
2/5/97-8/25/97........... 117,527 9 $16.00 -- $ --
</TABLE>
F-21
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As Holdings' Common Stock is not publicly traded, the fair value of options
was estimated using the minimum value method as prescribed in SFAS No. 123,
using the following assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Expected life (years):
Time Options............................................ 5 5 5
Performance Options..................................... 3 2 --
Interest rate:
Time Options............................................ 5.5% 5.7% 5.4%
Performance Options..................................... 5.4% 5.6% --
Dividend yield:
Time Options............................................ 0.0% 0.0% 0.0%
Performance Options..................................... 0.0% 0.0% --
</TABLE>
The fair values at the date of grant of the Time Options and Performance
Options granted during 1996 were $0.1 million and $0.1 million, respectively.
No stock-based compensation expense was recorded in 1996. Pro forma stock-
based compensation would not have been significant in 1996 had the fair value
of options granted in 1996 been recognized as compensation expense on a
straight-line basis over the vesting of the grants. The fair values at the
date of grant of the Time Options and Performance Options granted during 1997
were $36.1 million and $1.6 million, respectively. Pro forma stock-based
compensation for 1997 would not be materially different from the recorded
expense had the fair value of the options granted in 1996 and 1997 been
recognized as compensation expense on a straight-line basis over the vesting
of the grants. The fair values at the dates of grant of the Time Options
granted during 1998 were $5.2 million. Pro forma stock-based compensation for
1998 would have been $2.2 million higher than the recorded expense had the
fair value of the options granted in 1996 through 1998 been recognized as
compensation expense on a straight-line basis over the vesting of the grants.
15. Transactions with Baxter and Allegiance
Commencing in December 1994, the Company and Baxter entered into a
distribution agreement within the United States. The U.S. Distribution
Agreement, which became effective at the closing of the Dade Acquisition, gave
Baxter's U.S. Distribution Division the right, generally on an exclusive
basis, to sell the Predecessor's domestic products in the areas in which
Baxter's U.S. Distribution Division previously sold the Predecessor's
products. Effective October 1, 1996, Baxter "spun-off" its distribution
business as Allegiance and Allegiance assumed the Company's Distribution
Agreement. The term of this agreement, as amended, extends to December 31,
2000. Allegiance may terminate the agreement at any time after the four-year
anniversary date by providing the Company with at least six months prior
written notice. The Company may also terminate the agreement at any time after
the eighteen-month anniversary with at least six months prior written notice.
Net sales to Baxter's U.S. Distribution Division aggregated $221.8 million for
the year ended December 31, 1996. Net sales to Allegiance totaled $72.2
million, $257.5 million, and $230.7 million for the years ended December 31,
1996, 1997, and 1998, respectively. At December 31, 1997 and 1998, receivables
from Allegiance totaled $67.8 million and $51.0 million, respectively.
16. Related Party Transactions
The Company and Holdings entered into five-year Management Services
Agreements with Bain Capital and Goldman, Sachs & Co. (an affiliate of GS
Capital). Pursuant to these agreements, they will pay Bain Capital and
Goldman, Sachs & Co., subject to compliance with the terms of the indenture
governing the 11 1/8% senior subordinated notes, an aggregate annual fee of up
to $3.0 million plus their respective out-of-pocket expenses in return for
management consulting in the areas of corporate finance; corporate strategy;
investment analysis;
F-22
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
market research and business development; advisory services and support,
negotiation; analysis of financial alternatives, acquisitions and
dispositions; and other services. In connection with the Chemistry Acquisition
(Note 5), the Company paid $11.4 million for advisory fees and expenses to
Bain Capital and $3.6 million to Goldman, Sachs & Co. The Company paid, in the
aggregate, $18.8 million to Bain Capital, Goldman, Sachs & Co. and Hoechst in
connection with the Behring Combination (Note 4).
Included in marketing and administrative expense for the years 1996, 1997
and 1998 are advisory fees and expenses paid to Bain Capital and Goldman,
Sachs & Co. totalling $3.0 million, $1.7 million and $3.3 million,
respectively. Also in 1998, strategic consulting fees of $0.9 million were
paid to Bain and Company, an affiliate of Bain Capital.
Pursuant to Transition Services Agreements dated September 30, 1997,
Hoechst provides the Company with certain support services including
administrative support, warehousing and distribution services, human resource
support, information systems support, accounting support and office space. The
Transition Services Agreements have various terms from October 1, 1997 through
December 31, 1999. The Company paid $7.9 million and $12.1 million to Hoechst
related to these agreements for the three months ended December 31, 1997 and
for the year ended December 31, 1998, respectively.
Hoechst subleases office space to one of the Company's former Behring sites
pursuant to a sublease dated October 1, 1997. Rent expense related to this
sublease totaled $0.9 million and $3.5 million for the three months ended
December 31, 1997 and for the year ended December 31, 1998, respectively.
Net sales to Hoechst totaled $14.1 million and $52.7 million for the three
months ended December 31, 1997 and for the year ended December 31, 1998,
respectively. At December 31, 1997 and 1998, receivables from Hoechst totaled
$21.3 million and $11.7 million, respectively. At December 31, 1997 and 1998,
payables to Hoechst totaled $12.4 million and $13.9 million, respectively.
17. Retirement Programs
Pension Plans
The Company maintains non-contributory defined benefit pension plans
covering substantially all employees in the United States and Puerto Rico
("U.S. Plans") and a combination of contributory and non-contributory plans in
certain non-U.S. locations ("Non-U.S. Plans"). Through December 31, 1996, the
U.S. Plans' benefits are based on years of service and the employees'
compensation during five of the last ten years of employment as defined by the
plans. Effective January 1, 1997, the Company amended its pension plan
covering U.S. employees to change to a cash balance formula. The Company's
funding policy is to make contributions to the trusts of the plans that meet
or exceed the minimum requirements of the Employee Retirement Income Security
Act of 1974 ("ERISA").
Under the terms of the Behring Combination (Note 4), effective January 1,
1998, the employees' pension assets and liabilities of Behring were
transferred into various Company Plans and the Company assumed responsibility
for the liability for future benefits payable under the terms of the Company's
Plans for those employees as of January 1, 1998. The Company reimbursed
Hoechst for the service costs of those Plans for the period October 1, 1997
through December 31, 1997.
F-23
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Under the terms of the Chemistry Acquisition (Note 5), the transferred
DuPont employees' pension assets and liabilities were transferred directly
into the existing Domestic Plans and the Company assumed responsibility for
the liability for future benefits payable under the terms of the Company's
plan for those employees as of the Chemistry Acquisition date.
Under the terms of the Dade Acquisition (Note 6), Baxter retained liability
for future benefits payable to existing retirees and non-transferred employees
of the Predecessor as of the Dade Acquisition date, and the Company
established new plans for retained active employees. During 1995,
substantially all of the assets were transferred to the new plans. At December
31, 1997 and December 31, 1998, plan assets primarily consist of stocks, bonds
and contracts with insurance companies.
<TABLE>
<CAPTION>
1997 1998
---------------- -----------------
U.S. Non-U.S. U.S. Non-U.S.
------ -------- ------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year... $ 73.2 $ 23.9 $ 90.9 $ 52.0
Service cost.............................. 7.6 1.8 10.2 2.2
Interest cost............................. 6.7 1.2 7.6 1.7
Plan participants' contributions.......... -- -- -- --
Amendments................................ -- -- -- --
Actuarial (gain) loss..................... 7.0 1.1 6.8 (0.9)
Acquisition............................... -- 22.7 -- --
Curtailments.............................. -- -- 0.2 (0.4)
Benefits paid............................. (3.6) (1.1) (8.7) (1.4)
Foreign currency changes.................. -- 2.4 -- 3.8
------ ------ ------- ------
Benefit obligation at end of year........... $ 90.9 $ 52.0 $ 107.0 $ 57.0
------ ------ ------- ------
Change in plan assets:
Fair value of plan assets at beginning of
year..................................... $104.1 $ 14.5 $ 112.0 $ 24.2
Actual return on plan assets.............. 11.6 1.1 5.0 0.3
Acquisition............................... -- 22.7 -- --
Employer contribution..................... -- -- -- 0.2
Plan participants' contributions.......... -- -- -- --
Benefits paid............................. (3.6) (0.7) (8.7) (0.6)
Foreign currency changes.................. -- (13.4) -- 1.7
------ ------ ------- ------
Fair value of plan assets at end of year.. $112.1 $ 24.2 $ 108.3 $ 25.8
------ ------ ------- ------
Funded status at end of year:
Accumulated benefit obligation............ $(87.2) $ 41.5 $(102.8) $ 49.0
------ ------ ------- ------
Funded status............................. $ 20.9 $(27.1) $ 1.2 $(24.7)
Unrecognized net actuarial (gain) loss.... 9.2 1.3 21.4 (0.7)
Unrecognized prior service cost........... (8.7) -- (7.1) --
Foreign currency changes.................. -- 3.6 -- (5.0)
------ ------ ------- ------
Net amount recognized--(accrued) prepaid
at end of year........................... $ 21.4 $(22.2) $ 15.5 $(30.4)
------ ------ ------- ------
</TABLE>
F-24
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
1997 1998
------------- -------------
Non- Non-
U.S. U.S. U.S. U.S.
----- ------ ----- ------
<S> <C> <C> <C> <C>
Amounts recognized in the statement of financial
position consist of:
Prepaid benefit cost (accrued benefit
liability)................................... $21.0 $(23.7) $21.4 $(22.2)
Net periodic pension cost..................... 3.6 (2.3) (6.0) (5.2)
Intangible asset.............................. 0.3 -- -- (0.3)
Accumulated other comprehensive income........ 0.1 -- -- --
Company contributions......................... -- -- -- 1.1
SFAS 88 adjustment............................ -- -- -- (0.7)
Benefits paid................................. (3.6) -- 0.1 2.3
Foreign currency charges...................... -- 3.8 -- (5.4)
----- ------ ----- ------
Net amount recognized--(accrued) prepaid at
end of year.................................. $21.4 $(22.2) $15.5 $(30.4)
----- ------ ----- ------
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998
---------------- ---------------- ----------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
----- --------- ----- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average
assumptions as of
December 31:
Discount rate......... 7.75% 5.0% 7.75% 3.5%-6.5% 7.00% 3.5%-6.0%
Expected return on
plan assets.......... 9.50% 5.4% 9.50% 3.5%-5.5% 9.50% 3.0%-5.5%
Rate of compensation
increase............. 4.50% 3.25%-4.0% 4.50% 3.25%-4.0% 4.50% 2.5%-4.0%
Components of net
periodic benefit cost:
Service cost.......... $ 5.6 $ 1.8 $ 7.6 $ 1.8 $ 10.2 $ 2.9
Interest cost......... 5.1 0.7 6.8 1.2 7.6 2.2
Expected return on
plan assets.......... (8.0) (0.8) (9.7) (0.7) (10.4) (0.8)
Amortization of prior
service cost......... 1.5 -- (1.1) -- (1.1) 0.1
Recognized net
actuarial loss....... -- -- -- -- -- --
----- --------- ----- --------- ------ --------
SFAS 87 cost.......... 4.2 1.7 3.6 2.3 6.3 4.4
----- --------- ----- --------- ------ --------
SFAS 88 charges:
Curtailment charge
(credit)............. (2.3) 0.2 -- -- (0.3) 0.8
----- --------- ----- --------- ------ --------
Total net periodic
benefit cost....... $ 1.9 $ 1.9 $ 3.6 $ 2.3 $ 6.0 $ 5.2
===== ========= ===== ========= ====== ========
</TABLE>
Savings Plan
Most U.S. employees are eligible to participate in a Company sponsored
qualified 401(k) plan. Participants may contribute up to 12% of their annual
compensation, up to certain limits, to the 401(k) plan and the Company matches
the participants' contributions, up to 2% of compensation. Matching
contributions made by the Company were $3.2 million for the year ended
December 31, 1996, $2.9 million for the year ended December 31, 1997, and $3.6
million for the year ended December 31, 1998.
18. Commitments and Contingencies
Legal Proceedings
The Company is a party in a number of legal proceedings. Based on the
advice of legal counsel, management believes that any potential liability
relative to the various legal proceedings pending against the Company will not
have a material adverse effect on the Company's conduct of its business, its
results of operations, its financial position or its liquidity.
Letters of Credit
As of December 31, 1998, the Company has letters of credit outstanding of
approximately $8.5 million.
F-25
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Operating Leases
The Company leases certain facilities and equipment under operating leases
expiring at various dates. Many of these operating leases contain renewal
options. Future minimum lease payments under noncancelable operating leases at
December 31, 1998 are as follows (in millions):
<TABLE>
<S> <C>
1999.............................. $ 43.7
2000.............................. 37.6
2001.............................. 34.2
2002.............................. 31.0
2003.............................. 25.9
Thereafter........................ 68.2
------
Total......................... $240.6
======
</TABLE>
Total expense for all operating leases was $14.1 million for the year ended
December 31, 1996, $22.9 million for the year ended December 31, 1997, and
$43.9 million for the year ended December 31, 1998.
19. Business Segment and Geographic Information
The business of the Company is in vitro diagnostic ("IVD") products. The
operating segments derive substantially all their revenues from the
manufacture and marketing of IVD products and services. The Company's
operating structure includes the following operating segments: United States,
Germany, Other Europe, Asia-Pacific, and All Other.
Management evaluates the performance of its operating segments separately
to individually monitor the different factors affecting financial performance.
Management evaluates segment performance based upon EBITDA, which is a widely
accepted measure of a company's ability to incur and/or service indebtedness.
EBITDA represents the sum of net income, depreciation and amortization
expense, non-cash stock-based compensation expense, non-recurring integration
expenses, and other non-recurring operating charges and other non-cash
charges. EBITDA includes substantially all cost of goods sold, marketing and
administrative expenses, and research and development expenses. EBITDA for the
U.S. and Germany includes research and development costs for products that are
sold by all operating segments.
F-26
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Financial information by segment for the years ended December 31, 1996,
1997 and 1998 is summarized as follows (in millions):
<TABLE>
<CAPTION>
United States Germany Other Europe Asia-Pacific All Other(2) Total
------------- ------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 and the year then ended (1)
Revenue from external customers. $ 559.5 $ 48.3 $100.8 $ 69.3 $ 17.9 $ 795.8
Intersegment revenues........... 61.0 -- 1.5 -- -- 62.5
Interest expense................ 66.1 0.1 0.5 0.2 -- 66.9
Segment EBITDA.................. 84.0 6.4 4.4 12.0 19.7 126.5
Segment assets.................. 1,491.9 27.4 162.1 52.2 0.5 1,734.1
December 31, 1997 and the year then ended
Revenue from external customers. 649.1 71.7 145.8 82.6 31.3 980.5
Intersegment revenues........... 111.9 15.1 12.3 -- -- 139.3
Interest expense................ 86.6 -- 2.1 0.6 0.3 89.6
Segment EBITDA.................. 117.7 27.3 22.0 6.0 3.0 176.0
Segment assets.................. 1,482.3 189.6 243.8 74.5 34.4 2,024.6
Expenditures for segment assets. 39.9 4.0 19.5 4.3 0.7 68.4
December 31, 1998 and the year then ended
Revenue from external customers. 687.2 158.6 293.9 111.7 33.8 1,285.2
Intersegment revenues........... 74.1 182.0 108.6 1.3 -- 366.0
Interest expense................ 78.0 3.1 0.9 0.8 0.8 83.6
Depreciation and amortization... 28.2 13.6 25.0 5.2 (13.2) 58.8
Segment EBITDA.................. 100.0 26.3 108.7 17.9 5.7 258.6
Segment assets.................. 2,048.5 491.7 233.3 90.0 (696.2) 2,167.3
Expenditures for segment assets. $ 57.6 $ 26.4 $ 42.8 $ 12.0 $ 0.2 $ 139.0
</TABLE>
- --------
(1) Expenditures for segment assets for the year ended December 31, 1996 are
not presented due to impracticality.
(2) Includes the effects of purchase accounting which have not been reflected
in segment accounting records. Consequently, asset write-downs resulting
from bargain purchases are reflected in the All Other column.
F-27
<PAGE>
DADE BEHRING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Reconciliation of reportable segments:
Revenues
Total revenue for reportable segments........... $ 840.4 $1,088.5 $1,617.4
Other revenues.................................. 17.9 31.3 33.8
Elimination of intersegment revenues............ (62.5) (139.3) (366.0)
-------- -------- --------
Total consolidated revenues................. $ 795.8 $ 980.5 $1,285.2
-------- -------- --------
EBITDA
Total EBITDA from reportable segments........... $ 106.8 $ 173.0 $ 252.9
Other EBITDA.................................... 19.7 3.0 5.7
-------- -------- --------
Total EBITDA................................ $ 126.5 $ 176.0 $ 258.6
-------- -------- --------
EBITDA to Income (Loss) Before Taxes
Total EBITDA.................................... $ 126.5 $ 176.0 $ 258.6
Less: Depreciation and amortization............. (38.4) (50.7) (56.7)
Interest expense, net........................ (65.6) (87.8) (80.5)
Purchase accounting related charges.......... (122.9) (172.5) --
Restructuring (charges) credits.............. (15.0) (40.1) 4.5
Non-recurring charges and other.............. (10.3) (37.9) (10.3)
Stock-based compensation..................... -- (11.4) (13.1)
Integration costs............................ -- (2.0) (24.6)
-------- -------- --------
Income (loss) before taxes...................... $ (125.7) $ (226.4) $ 77.9
======== ======== ========
Assets
Total assets for reportable segments............ $1,733.6 $1,990.2 $2,863.5
Other assets.................................... 0.5 34.4 (696.2)
Elimination of intercompany receivables......... (729.0) (514.2) (633.9)
-------- -------- --------
Total consolidated assets................... $1,005.1 $1,510.4 $1,533.4
======== ======== ========
</TABLE>
F-28
<PAGE>
DADE BEHRING INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in millions)
<TABLE>
<CAPTION>
Additions
-----------------
Balance Charged Balance
at to costs Charged at
Beginning and to other End of
of Period expenses accounts Deductions Period
--------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for bad debts.... $ 6.8 8.1 (5.3) $ 9.6
Income tax valuation
allowance................. $ 13.6 6.3 (0.8)(1) $19.1
Year ended December 31, 1997
Allowance for bad debts.... $ 9.6 17.0 6.3 (2) (5.2) $27.7
Income tax valuation
allowance................. $ 19.1 9.0 45.2 (2) (6.2) $65.2
(1.9)(1)
Year ended December 31, 1998
Allowance for bad debts.... $ 27.7 4.0 1.3 (15.0) $18.0
Income tax valuation
allowance................. $ 65.2 3.3 1.2 (1) (13.5)(3) $56.2
</TABLE>
- --------
(1) Impact of foreign currency translation.
(2) Acquired in the Behring combination.
F-29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, in the City of Deerfield, State of Illinois, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 24, 1999.
/s/ Steven W. Barnes
By: _________________________________
Steven W. Barnes
President and Chief Executive
Officer
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 in the capacities indicated on March 24, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Steven W. Barnes President, Chief Executive Officer and
___________________________________________ Director
Steven W. Barnes (principal executive officer)
/s/ James W. P. Reid-Anderson Chief Administrative Officer, Chief
___________________________________________ Financial Officer and Director (principal
James W. P. Reid-Anderson financial officer)
/s/ Glenn R. Richter Senior Vice President/Controller
___________________________________________ (principal accounting officer)
Glenn R. Richter
/s/ Robert W. Brightfelt Group President, Chemistry and Director
___________________________________________
Robert W. Brightfelt
/s/ Mark E. Nunnelly Director
___________________________________________
Mark E. Nunnelly
/s/ Stephen G. Pagliuca Director
___________________________________________
Stephen G. Pagliuca
/s/ Adam Kirsch Director
___________________________________________
Adam Kirsch
/s/ John P. Connaughton Director
___________________________________________
John P. Connaughton
/s/ Joseph H. Gleberman Director
___________________________________________
Joseph H. Gleberman
/s/ Scott T. Garrett Director
___________________________________________
Scott T. Garrett
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S> <C>
3.1 Certificate of Incorporation of the Company. Incorporated by
reference to Exhibit 3.1 to the Company's Form S-1
Registration Statement under the Securities Act of 1933, as
filed on October 4, 1996.
3.2 Amendment to Certificate of Incorporation of the Company.
3.3 Amended and Restated By-laws of the Company. Incorporated by
reference to Exhibit 3.2 to the Company's Form 10-K under the
Securities Exchange Act of 1934, as filed on March 31, 1998.
4.1 Indenture dated as of May 7, 1996 between the Company and IBJ
Schroeder Bank & Trust Company. Incorporated by reference to
Exhibit 4.1 to the Company's Form S-1 Registration Statement
under the Securities Act of 1933, as filed on October 4, 1996.
4.2 Amended and Restated Registration Agreement dated as of
October 1, 1997 among Dade Behring Holdings, Inc., Hoechst AG
and other parties signatory thereto.
10.1 Amended and Restated Credit Agreement dated as of April 29,
1997 among Diagnostics Holding, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.5 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on May 15, 1997.
10.2 First Amendment to Credit Agreement dated as of September 11,
1997 among Diagnostics Holding, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.1 to the Company's
Form 8-K under the Securities Exchange Act of 1934, as filed
on October 20, 1977.
10.3 Second Amendment to Credit Agreement dated as of December 12,
1997 among Dade Behring Holdings, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
10.4 Third Amendment to Credit Agreement dated as of January 8,
1998 among Dade Behring Holdings, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on May 15, 1998.
10.5 Fourth Amendment and Waiver to Credit Agreement dated as of
March 22, 1998 among Dade Behring Holdings, Inc., the Company,
various lending institutions and Bankers Trust Company, as
Agent. Incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q under the Securities Exchange Act of 1934,
as filed on May 15, 1998.
10.6 Fifth Amendment to Credit Agreement dated as of April 30, 1998
among Dade Behring Holdings, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on August 14, 1998.
10.7 Sixth Amendment to Credit Agreement dated as of April 30, 1998
among Dade Behring Holdings, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.2 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on August 14, 1998.
10.8 Seventh Amendment to Credit Agreement dated as of July 8, 1998
among Dade Behring Holdings, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.3 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on August 14, 1998.
</TABLE>
X-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S> <C>
10.9 Eighth Amendment to Credit Agreement dated as of October 16,
1998 among Dade Behring Holdings, Inc., the Company, various
lending institutions and Bankers Trust Company, as Agent.
Incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on November 16, 1998.
10.10 Security Agreement dated as of May 7, 1996 among Diagnostics
Holding, Inc., the Company, certain subsidiaries of the
Company and Bankers Trust Company, as Collateral Agent.
Incorporated by reference to Exhibit 10.2 to the Company's
Form S-1 Registration Statement under Securities Act of 1933,
as filed on October 4, 1996.
10.11 Pledge Agreement dated as of May 7, 1996 among Diagnostics
Holding, Inc., the Company, various subsidiaries of the
Company and Bankers Trust Company, as Collateral Agent.
Incorporated by reference to Exhibit 10.3 to the Company's
Form S-1 Registration Statement under the Securities Act of
1933, as filed on October 4, 1996.
10.12 Asset Purchase and Sale Agreement dated December 11, 1995, as
amended and restated on May 7, 1996, between E.I. du Pont de
Nemours and Company and Dade Chemistry Systems Inc.
Incorporated by reference to Exhibit 2.1 to the Company's Form
8-K under the Securities Exchange Act of 1934, as filed on May
22, 1996 (No. 33-90462).
10.13 Agreement and Plan of Combination by and between Diagnostics
Holding, Inc. and Hoechst A.G. dated as of June 24, 1997 and
supplemented on July 2, 1997 and as further supplemented on
September 29, 1997 and September 30, 1997. Incorporated by
reference to Exhibit 2.1 to the Company's Form 8-K under the
Securities Exchange Act of 1934, as filed on October 20, 1997.
10.14 Cooperation and Collaboration Agreement executed as of October
1, 1997 between Dade Behring Holdings, Inc. and Hoechst AG.
Incorporated by reference to Exhibit 10.18 to the Company's
Form 8-K under the Securities Exchange Act of 1934, as filed
on October 20, 1997.
10.15 Transition Services Agreement dated as of September 30, 1997
between Diagnostics Holding, Inc. and Hoechst AG.
10.16 Amended and Restated Stockholders Agreement dated as of
October 1, 1997 between Dade Behring Holdings, Inc. and the
other parties signatory thereto. Incorporated by reference to
Exhibit 10.7 to the Company's Form 8-K under the Securities
Exchange Act of 1934, as filed on October 20, 1997.
10.17 Management Services Agreement dated as of December 20, 1994 by
and among the Company and Bain Capital, Inc. Incorporated by
reference to Exhibit 10.7 to the Company's Form S-4
Registration Statement under the Securities Act of 1933, as
filed on March 20, 1995 (No. 33-90462) as amended by Amendment
No. 1 to Management Services Agreement dated as of May 7,
1996. Incorporated by reference to Exhibit 10.8 to the
Company's Form S-1 Registration Statement under the Securities
Act of 1933, as filed on October 4, 1996.
10.18 Management Services Agreement dated as of December 20, 1994 by
and among the Company and Goldman, Sachs & Co. Incorporated by
reference to Exhibit 10.8 to the Company's Form S-4
Registration Statement under the Securities Act of 1933, as
filed on March 20, 1995 (No. 33-90462).
10.19 Tax Law Change Indemnification dated as of December 16, 1994
between Baxter International Inc. and Diagnostics Holding,
Inc. Incorporated by reference to Exhibit 10.9 to the
Company's Form S-4 Registration Statement under the Securities
Act of 1933, as filed on March 20, 1995 (No. 33-90462).
</TABLE>
X-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S> <C>
10.20 Amended and Restated Exclusive Distribution Agreement dated as
of September 15, 1995, by and between the Company and Baxter
Healthcare Corporation as amended on September 26, 1996.
Incorporated by reference to Exhibit 10.11 to the Company's
Form S-1 Registration Statement under the Securities Act of
1933, as filed on October 4, 1996.
10.21 Second Amendment to Amended and Restated Exclusive
Distribution Agreement made and entered into as of October 1,
1997 by and between the Company and Allegiance Healthcare
Corporation. Incorporated by reference to Exhibit 10.11 to the
Company's Form 8-K under the Securities Exchange Act of 1934,
as filed on October 20, 1997.
10.22 Third Amendment to the Amended and Restated Exclusive
Distribution Agreement dated as of May 27, 1998 between the
Company and Allegiance Healthcare Corporation.
10.23 1995 Executive Stock Purchase and Option Plan. Incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q
Registration Statement under the Securities Exchange Act of
1934, as filed on August 14, 1995 (No. 33-90462).
10.24 1995 Management Stock Option Plan. Incorporated by reference
to Exhibit 10.2 to the Company's Form 10-Q under the
Securities Exchange Act of 1934, as filed on August 14, 1995
(No. 33-90462).
10.25 Form of Agreement under 1995 Executive Stock Purchase and
Option Plan. Incorporated by reference to Exhibit 10.3 to the
Company's Form 10-Q under the Securities Exchange Act of 1934,
as filed on August 14, 1995 (No. 33-90462).
10.26 Form of Agreement under 1995 Management Stock Option Plan.
Incorporated by reference to Exhibit 10.4 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on August 14, 1995 (No. 33-90462).
10.27 1996 Executive Stock Purchase and Option Plan. Incorporated by
reference to Exhibit 10.16 to the Company's Form S-1
Registration Statement under the Securities Act of 1933, as
filed on October 4, 1996.
10.28 Form of Agreement under 1996 Executive Stock Option Plan.
Incorporated by reference to Exhibit 10.17 to the Company's
Form S-1 Registration Statement under the Securities Act of
1933, as filed on October 4, 1996.
10.29 1997 Executive Stock Purchase and Option Plan. Incorporated by
reference to Exhibit 10.1 to Company's Form 10-Q under the
Securities Exchange Act of 1934, as filed on May 15, 1997.
10.30 Form of Agreement under 1997 Executive Stock Purchase and
Option Plan. Incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q under the Securities Exchange Act of 1934,
as filed on May 15, 1997.
10.31 1997 Management Stock Option Plan. Incorporated by reference
to Exhibit 10.3 to the Company's Form 10-Q under the
Securities Exchange Act of 1934, as filed on May 15, 1997.
10.32 Form of Agreement under 1997 Management Stock Option Plan.
Incorporated by reference to Exhibit 10.4 to the Company's
Form 10-Q under the Securities Exchange Act of 1934, as filed
on May 15, 1997.
10.33 1997 Executive Stock Purchase and Option Plan. Incorporated by
reference to Exhibit 10.23 to the Company's Form 10-K under
the Securities Exchange Act of 1934, as filed on March 31,
1998.
</TABLE>
X-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S> <C>
10.34 Employment Agreement effective as of October 1, 1997 between
the Company and Steve Barnes. Incorporated by reference to
Exhibit 10.3 to the Company's Form 10-Q under the Securities
Exchange Act of 1934, as filed on May 15, 1998.
10.35 Employment Agreement Addendum effective October 1, 1997
between the Company and Steve Barnes. Incorporated by
reference to Exhibit 10.4 to the Company's Form 10-Q under the
Securities Act of 1934, as filed on May 15, 1998.
10.36 Employment letter dated August 1, 1996 between the Company and
James Reid-Anderson.
10.37 Managing Director-Employment Agreement dated August 19, 1998
between Dade Behring Holding GmbH and Friedhelm Blobel.
10.38 Employment letter dated January 8, 1997 between the Company
and Marc Casper.
10.39 Separation Agreement dated July 20, 1998 between the Company
and Marc Casper.
10.40 Executive Agreement dated as of October 1, 1997 between Dade
Behring Holdings, Inc. and Steve Barnes.
10.41 Executive Agreement dated as of October 1, 1997 between Dade
Behring Holdings, Inc. and James Reid-Anderson.
21.1 Subsidiaries of the Company.
23.1 Report of Independent Accountants on Financial Statement
Schedule.
27.1 Financial Data Schedule.
</TABLE>
X-4
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
DADE INTERNATIONAL INC.
*********************************
Adopted in accordance with the
provisions of Section 242 of the
State of Delaware
*********************************
Steven W. Barnes, being the President of Dade International Inc., a
corporation organized and existing under any and by virtue of the laws of the
State of Delaware (the "Corporation"), does hereby certify as follows:
FIRST: That the Board of Directors of the Corporation, by the
unanimous written consent of its members, filed with the minutes of the board,
duly adopted resolutions. The resolutions setting forth the proposed amendment
is as follows:
RESOLVED, effective January 1, 1998 and subject to the approval of the
sole stockholder, Article 1 of the Certificate of Incorporation of Dade
International Inc. be amended so that, as amended, Article I shall read as
follows:
"1. The Name by which the Corporation shall be known is Dade Behring
Inc."
FURTHER RESOLVED, that this amendment be submitted to the sole
stockholder for approval and adoption; and
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, and upon written consent of the sole stockholder of said Corporation,
with notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware, as required by statue was voted in favor of the amendments.
1
<PAGE>
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned, being the President hereinabove
named, for the purpose of amending the Certificate of Incorporation of the
Corporation , pursuant to the General Corporation Law of the State of Delaware,
under penalties of perjury does hereby declare and certify that this is the act
and deed of the Corporation and the facts stated herein are true and accordingly
have hereunto signed this Certificate of Amendment of Certificate of
Incorporation this 18th day of December 1997.
DADE INTERNATIONAL INC.
a Delaware Corporation
/s/
-------------------------------
Steven W. Barnes
President
2
<PAGE>
Exhibit 4.2
AMENDED AND RESTATED REGISTRATION AGREEMENT
-------------------------------------------
THIS AGREEMENT dated as of October 1, 1997, is made by and among Dade
Behring Holdings, Inc., a Delaware corporation ("Holdings"), Hoechst AG, a
German corporation ("Hoechst"), the Persons listed on Schedule A attached hereto
(the "Bain Stockholders"), and the Persons listed on Schedule B attached hereto
(the "GS Stockholders"). Hoechst, the Bain Stockholders and the GS Stockholders
are collectively referred to herein as the "Stockholders," and individually as a
"Stockholder."
The Bain Stockholders, the GS Stockholders and Holdings are parties to
a Stock Purchase Agreement dated December 20, 1994 (the "Purchase Agreement")
and a Registration Agreement, dated December 20, 1994 (the "Old Registration
Agreement"). Hoechst and Holdings are parties to an Agreement and Plan of
Combination, dated as of June 24, 1997 (the "Combination Agreement"). The Bain
Stockholders, the GS Stockholders, Hoechst and Holdings are parties to an
Amended and Restated Stockholders Agreement, dated as of the date hereof (the
"Stockholders Agreement"). The Bain Stockholders, the GS Stockholders and
Holdings desire to amend and restate the Old Registration Agreement to provide
the registration rights set forth in this Agreement. Unless otherwise provided
in this Agreement, capitalized terms used herein shall have the meanings set
forth in paragraph 9 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
---------------------
(a) Requests for Registration. Subject to the covenants set forth in
the following subparagraphs of this paragraph 1 and, if required by paragraph
10(a) of the Stockholders Agreement, subject, in the case of an Initial Public
Offering, to the GS Stockholders' prior written consent to such offering, the
holders of a majority of (i) the Bain Registrable Securities (ii) the GS
Registrable Securities or (iii) the Hoechst Registrable Securities may each
request registration under the Securities Act of all or part of their
Registrable Securities on Form S-1 or any similar long-form registration ("Long-
Form Registrations") or, if available, on Form S-2 or S-3 or any similar short-
form registration ("Short-Form Registrations"). Each request for such
registration (a "Demand Registration") shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, Holdings will give written notice of such requested registration to all
other holders of Registrable Securities and, subject to paragraph l(f) below,
will include in such registration all Registrable Securities with respect to
which Holdings has received written requests for inclusion therein within 15
days after the receipt of Holdings's notice.
(b) Bain Registrations. The holders of a majority of the Bain
Registrable Securities will be entitled to request three Long-Form Registrations
in which Holdings will pay
-1-
<PAGE>
all Registration Expenses (a "Bain Demand"). A registration will not count as a
Bain Demand until it has become effective, and the last Bain Demand will not
count as a Bain Demand unless the holders of Bain Registrable Securities
requesting such registration have been able to register and sell at least 90% of
the Bain Registrable Securities initially requested to be registered by such
holders; provided that in any event Holdings will pay all Registration Expenses
in connection with any registration initiated as a Bain Demand whether or not it
has become effective.
(c) Short-Form Registrations. In addition to the Bain Demands
provided pursuant to paragraph 1(b), the holders of a majority of the Bain
Registrable Securities will be entitled to request unlimited Short-Form
Registrations in which Holdings will pay all Registration Expenses. Demand
Registrations will be Short-Form Registrations whenever Holdings is permitted to
use any applicable short form (unless the underwriter of such offering requests
Holdings to use a Long-Form Registration in order to sell all of the Registrable
Securities requested to be sold). After Holdings has become subject to the
reporting requirements of the Securities Exchange Act, Holdings will use its
best efforts to make Short-Form Registrations available for the sale of
Registrable Securities provided that Holdings will not be obligated to effect
such a Short-Form Registration unless holders of Bain Registrable Securities
request to include at least the lesser of 1,500,000 Bain Registrable Securities
(such number to be adjusted for equity securities (other than Non-Participating
Securities) issued by way of stock dividend, stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization) or such number of Bain Registrable Securities then owned by the
holders of the Bain Registrable Securities.
(d) GS Demand Registrations. After the earlier of (i) Holdings's
Initial Public Offering (as defined in Paragraph 9 below) and (ii) December 20,
2002, the holders of a majority of the GS Registrable Securities will be
entitled to request two Demand Registrations (a "GS Demand"); provided that
there will be no GS Demand prior to Holdings's Initial Public Offering if the GS
Stockholders and their Affiliates (other than Holdings or its Subsidiaries) have
received from Holdings, its Subsidiaries or the Persons who were not Affiliates
of the GS Stockholders aggregate proceeds of at least $14.9 million with respect
to the GS Registrable Securities initially purchased by the GS Stockholders
pursuant to the Purchase Agreement (whether by dividend, distribution,
redemption, repurchase, sale or otherwise). A registration will not count as one
of the GS Demands until it has become effective, and the last GS Demand will not
count as one of the GS Demands unless the holders of GS Registrable Securities
requesting such registration have been able to register and sell at least 90% of
the Registrable Securities initially requested to be registered by such holders;
provided that in any event Holdings will pay all Registration Expenses in
connection with any registration initiated as a GS Demand whether or not it has
become effective.
(e) Hoechst Demand Registrations. After Holdings's Initial Public
Offering, the holders of a majority of the Hoechst Registrable Securities will
be entitled to request unlimited Demand Registrations (an "Hoechst Demand");
provided that Holdings will not be obligated to effect an Hoechst Demand (i)
unless the holders of Hoechst Registrable Securities
-2-
<PAGE>
request to include at least the lesser of 1,500,000 Hoechst Registrable
Securities or such number of Hoechst Registrable Securities then owned by
Hoechst and its Affiliates (such number to be adjusted for equity securities
(other than Non-Participating Securities) issued by way of stock dividend, stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization) and (ii) if within the twelve month
period preceding such Hoechst Demand, Holdings has effected an Hoechst Demand. A
registration will not count as one of the Hoechst Demands until it has become
effective and unless the holders of Hoechst Registrable Securities requesting
such registration have been able to register and sell at least 90% of the
Hoechst Registrable Securities initially requested to be registered by such
holders. Holdings will pay all Registration Expenses in connection with any
registration initiated as an Hoechst Demand whether or not it has become
effective.
(f) Priority on Demand Registrations. Holdings will not include in
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise Holdings in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the marketability of the
offering, Holdings will include in such registration prior to the inclusion of
any securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold without adversely affecting the marketability of the offering, pro
rata among the respective holders thereof on the basis of the number of shares
of Registrable Securities owned by each such holder.
(g) Restrictions on Demand Registrations. Holdings will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration. Holdings may postpone for up
to six months (from the date of the request) the filing or the effectiveness of
a registration statement for a Demand Registration if and so long as Holdings
determines that such Demand Registration would reasonably be expected to have an
adverse effect on any proposal or plan by Holdings or any of its Subsidiaries to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction;
provided, however, that in such event, the holders of a majority of the
Registrable Securities requesting such Demand Registration will be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration will not count as one of the permitted Demand Registrations
hereunder and Holdings will pay all Registration Expenses in connection with
such registration.
(h) Selection of Underwriters. Subject to the following provisions of
this subparagraph (h), the holders of a majority of the Bain Registrable
Securities included in any Demand Registration (or if none, Holdings) will have
the right to select the investment banker(s) and manager(s) to administer the
offering, subject to Holdings's approval which will not be unreasonably
withheld. The lead investment bank and manager shall be a nationally-recognized,
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New York-based investment banking firm with substantial expertise in offerings
of the kind contemplated in connection with the Demand Registration (such kind
of investment banking firm being referred to herein as a "Qualified Investment
Bank"). Notwithstanding the foregoing, and subject to the terms of the
Stockholders Agreement: (i) in the case of the first GS Demand Registration if
the GS Registrable Securities included in such demand constitute at least a
majority of the Registrable Securities being registered and in the case of the
second GS Demand Registration without regard to the amount of GS Registrable
Securities included in the demand, the holders of a majority of the GS
Registrable Securities included in the demand will have the right to select one
or more Qualified Investment Banks to serve as the investment banker(s) and
manager(s) to administer the offering, subject to Holdings's approval which will
not be unreasonably withheld; (ii) in the case of a Demand Registration where
the Hoechst Registrable Securities included in such demand constitute at least a
majority of the Registrable Securities being registered, Hoechst will have the
right to approve the Qualified Investment Bank(s) selected to administer the
offering which approval shall not be unreasonably withheld; and (iii) in the
case of a Demand Registration where the Hoechst Registrable Securities included
in such demand constitute at least 25% of the Registrable Securities being
registered, Hoechst will have the right to select a Qualified Investment Bank to
serve as a co-investment bank and co-manager to co-administer the offering,
subject to Holdings's approval which will not be unreasonably withheld.
In any registration in which GS Registrable Securities are included in
such registration, subject to the Stockholders Agreement, Goldman, Sachs & Co.
("Goldman") will be appointed a manager in administering such offering.
(i) Other Registration Rights. Except as provided in this Agreement,
Holdings will not grant to any Persons the right to request Holdings to register
any equity securities of Holdings, or any securities convertible or exchangeable
into or exercisable for such securities; provided that Holdings may grant rights
to other Persons to (i) participate in the Piggyback Registrations so long as
such rights are subordinate to the rights of the holders of Registrable
Securities with respect to such Piggyback Registrations, (ii) request
registrations so long as the holders of Registrable Securities are entitled to
participate in any such registrations with such Persons pro rata on the basis of
the number of shares owned by each such holder and (iii) to otherwise request
Holdings to register any such securities if the grant of such right affects
equally and in the same manner the respective rights of holders of Registrable
Securities hereunder.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever Holdings proposes to register any of
its securities under the Securities Act (other than in an Initial Public
Offering or pursuant to a Demand Registration or a registration on Form S-4 or
S-8 or any successor or similar forms) and the registration form to be used
may be used for the registration of Registrable Securities (a "Piggyback
Registration"), whether or not for sale for its own account, Holdings will give
prompt written notice to all holders of Registrable Securities of its intention
to effect such a
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registration and, subject to paragraph 2(d) below, will include in such
registration all Registrable Securities with respect to which Holdings has
received written requests for inclusion therein within 30 days after the receipt
of Holdings's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by Holdings in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of Holdings, and the managing
underwriters advise Holdings in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering, Holdings will include in such registration (i)
first, the securities Holdings proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (iii) third, other securities requested to be
included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of Holdings's
securities and the managing underwriters advise Holdings in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, Holdings will include in
such registration (i) first, the securities requested to be included therein by
the holders requesting such registration and the Registrable Securities
requested to be included in such registration, pro rata among such holders and
the holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (ii) second, other securities requested to be
included in such registration.
(e) Other Registrations. If Holdings has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, Holdings will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders of such securities,
until a period of at least six months has elapsed from the effective date of
such previous registration.
3. Holdback Agreements.
-------------------
(a) To the extent not inconsistent with applicable law, each holder
of Registrable Securities agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of Holdings, or any
securities, options or rights convertible into or exchangeable or exercisable
for such securities, during the seven days prior to
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<PAGE>
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration), unless the underwriters
managing the registered public offering otherwise agree.
(b) Holdings agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) to cause each holder of its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock,
purchased from Holdings at any time after the date of this Agreement (other than
in a registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, Holdings will use its best efforts to effect the registration
and the sale of such Registrable Securities in accordance with the intended
method of disposition thereof and pursuant thereto Holdings will as
expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for inclusion in such registration may be given to Holdings) file
with the Securities and Exchange Commission a registration statement with
respect to such Registrable Securities and thereafter use its best efforts to
cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, Holdings will furnish to the counsel(s) selected by the holders of the
Registrable Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to review of
such counsel);
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of either (i) not less than six months (subject
to extension pursuant to paragraph 7(b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration
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<PAGE>
statement until such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that Holdings will not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in respect of
doing business in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) promptly notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the happening
of any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, Holdings will prepare and furnish to such seller a reasonable number of
copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by Holdings are then
listed and, if not so listed, to be listed on the NASD automated quotation
system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities included in the registration (and in
the case of a GS Demand, the holders of a majority of the GS Registrable
Securities included in the registration; in the case of a Bain Demand, the
holders of a majority of the Bain Registrable Securities included in the
registration; and in the case of a Demand Registration in which Hoechst
Registrable Securities constitute at least a
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<PAGE>
majority of the Registrable Securities being registered, the holders of a
majority of the Hoechst Registrable Securities included in the registration) or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of Holdings, and cause Holdings's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the registration statement, an
earnings statement covering the period of at least twelve months beginning with
the first day of Holdings's first full calendar quarter after the effective date
of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Securities included in such registration statement for sale in any
jurisdiction, Holdings will use its reasonable best efforts promptly to obtain
the withdrawal of such order;
(1) obtain one or more comfort letters, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by Holdings's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request (and in the case of (i) a GS Demand, as the holders of a
majority of the GS Registrable Securities included in the registration
reasonably request, (ii) a Bain Demand, as the holders of a majority of the Bain
Registrable Securities included in the registration reasonably request and (iii)
a Demand Registration in which Hoechst Registrable Securities constitute at
least a majority of the Registrable Securities being registered, as the holders
of a majority of the Hoechst Registrable Securities included in the registration
reasonably request);
(m) provide a legal opinion of Holdings's outside counsel, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwvriting agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in customary
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<PAGE>
form and covering such matters of the type customarily covered by legal opinions
of such nature (in a form reasonably acceptable to the holders of a majority of
the Registrable Securities included in the registration); provided that in any
registration made pursuant to (i) a GS Demand, such legal opinion shall be in a
form reasonably acceptable to the holders of a majority of the GS Registrable
Securities included in such registration, (ii) a Bain Demand, such legal opinion
shall be in a form reasonably acceptable to the holders of a majority of the
Bain Registrable Securities included in such registration and (iii) a Demand
Registration in which Hoechst Registrable Securities constitute at least a
majority of the Registrable Securities being registered, such legal opinion
shall be in a form reasonably acceptable to the holders of a majority of the
Hoechst Registrable Securities included in such registration;
(n) cooperate with the sellers of Registrable Securities covered by the
registration statement and the managing underwriter or agent, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing securities to be sold under the registration
statement, and enable such securities to be in such denominations and registered
in such names as the managing underwriter or agent, if any, or such holders may
request;
(o) notify counsel for the sellers of Registrable Securities included
in such registration statement and the managing underwriter or agent,
immediately, and confirm the notice in writing (i) when the registration
statement, or any post-effective amendment to the registration statement, shall
have become effective, or any supplement to the prospectus or any amendment
prospectus shall have been filed, (ii) of the receipt of any comments from the
Securities and Exchange Commission, (iii) of any request of the Securities and
Exchange Commission to amend the registration statement or amend or supplement
the prospectus or for additional information, and (iv) of the issuance by the
Securities and Exchange Commission of any stop order suspending the
effectiveness of the registration statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings for any of
such purposes;
(p) make every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment;
(q) if requested by the managing underwriter or agent or any holder of
Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such holder reasonably
requests to be included therein, including, without limitation, with respect to
the number of Registrable Securities being sold by such holder to such
underwriter or agent, the purchase price being paid therefor by such underwriter
or agent and with respect to any other terms of the underwritten offering of the
Registrable Securities to be sold in such offering; and make all required
filings of such prospectus
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<PAGE>
supplement or post-effective amendment as soon as practicable after being
notified of the matters incorporated in such prospectus supplement or post-
effective amendment; and
(r) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.
Holdings may require each seller of Registrable Securities as to which any
registration is being effected to furnish Holdings such information relating to
the sale or registration of such Securities regarding such seller and the
distribution of such securities as Holdings may from time to time reasonably
request in writing.
5. Registration Expenses.
----------------------
(a) All expenses incident to Holdings's performance of or compliance
with this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for Holdings and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by Holdings
(all such expenses being herein called "Registration Expenses"), will be borne
as provided in this Agreement, except that Holdings will, in any event, pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit or quarterly review, the expense of any liability insurance
and the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by Holdings are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, Holdings will reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration. In addition, in any registration made pursuant
to (i) a GS Demand, Holdings will reimburse the holders of GS Registrable
Securities covered by such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the GS
Registrable Securities included in such registration, (ii) a Demand Registration
in which Hoechst Registrable Securities constitute at least a majority of the
Registrable Securities being registered, Holdings shall reimburse the holders of
Hoechst Registrable Securities covered by such registration for the reasonable
fees and disbursements of one counsel chosen by the holders of a majority of the
Hoechst Registrable Securities included in such registration and (iii) a Bain
Demand, Holdings shall reimburse the holders of Bain Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Bain Registrable Securities
included in such registration.
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<PAGE>
(c) To the extent Registration Expenses are not required to be paid by
Holdings, each holder of securities included in any registration hereunder will
pay those Registration Expenses allocable to the registration of such holder's
securities so included, and any Registration Expenses not so allocable will be
borne by all sellers of securities included in such registration in proportion
to the aggregate selling price of the securities to be so registered.
6. Indemnification.
----------------
(a) Holdings agrees to indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities, its officers,
directors, employees, stockholders and general and limited partners and each
Person who controls such holder (within the meaning of the Securities Act)
against any and all losses, claims, damages, liabilities, joint or several, to
which such holder or any such director or officer or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (i) any untrue or
alleged untrue statement of material fact contained (A) in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, together with any documents incorporated therein by
reference or, (ii) any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and Holdings will reimburse such holder and each such director, officers,
employees, stockholders and general and limited partners and controlling person
for any legal or any other expenses, including any amounts paid in any
settlement effected with the consent of Holdings, which consent will not be
unreasonably withheld or delayed, incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that Holdings shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged omission,
made in such registration statement, any such prospectus or preliminary
prospectus or any amendment or supplement thereto, or in any application, in
reliance upon, and in conformity with, written information prepared and
furnished to Holdings by such holder expressly for use therein. In connection
with an underwritten offering, Holdings will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to
Holdings in writing such information and affidavits as Holdings reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify and hold harmless
Holdings, its directors, officers, employees, stockholders and general and
limited partners and each other Person who controls Holdings (within the meaning
of the Securities Act) against any losses, claims, damages, liabilities, joint
or several, to which such holder or any such director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings,
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<PAGE>
whether commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or in any application, together with any
documents incorporated therein by reference or (ii) any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is made in such registration statement, any such
prospectus or preliminary prospectus or any amendment or supplement thereto, or
in any application, in reliance upon and in conformity with written information
prepared and furnished to Holdings by such holder expressly for use therein, and
such holder will reimburse Holdings and each such director, officer and
controlling Person for any legal or any other expenses including any amounts
paid in any settlement effected with the consent of such holder, which consent
will not be unreasonably withheld or delayed, incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the obligation to indemnify will be
individual (and not joint and several) to each holder and will be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided, however, that the failure of any
indemnified party to give such notice shall not relieve the indemnifying party
of its obligations hereunder, except to the extent that the indemnifying party
is actually prejudiced by such failure to give such notice), and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnifying party shall not, except with the approval of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to each indemnified party of a release from all liability
in respect to such claim or litigation without any payment or consideration
provided by such indemnified party.
(e) If the indemnification provided for in this Paragraph 6 is
unavailable to or is insufficient to hold harmless an indemnified party under
the provisions above in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
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claims, damages or liabilities (i) in such proportion as is appropriate to
reflect not only the relative benefits received by Holdings on the one hand and
the sellers of Registrable Securities and any other sellers participating in the
registration statement on the other from the sale of Registrable Securities
pursuant to the registered offering of securities as to which indemnity is
sought but also the relative fault of the indemnified party and the indemnifying
party as well as any other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of Holdings on the
one hand and of the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other in connection with the
statement or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by Holdings on the one hand and the sellers of
Registrable Securities and any other sellers participating in the registration
statement on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) to Holdings bear to
the total net proceeds from the offering (before deducting expenses) to the
sellers of Registrable Securities and any other sellers participating in the
registration statement. The relative fault of Holdings on the one hand and of
the sellers of Registrable Securities and any other sellers participating in the
registration statement on the other shall be determined by reference to, among
other things, whether the untrue or alleged omission to state a material fact
relates to information supplied by Holdings or by the sellers of Registrable
Securities or other sellers participating in the registration statement and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Holdings and the sellers of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Paragraph 6 were
determined by pro rata allocation (even if the sellers of Registrable Securities
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Paragraph 6, no seller of Registrable Securities shall be required to contribute
any amount in excess of the net proceeds received by such Seller from the sale
of Registrable Securities covered by the registration statement filed pursuant
hereto. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(f) The indemnification and contribution by any such party provided
for under this Agreement shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant to
law or contract and will remain in full force and effect regardless of any
investigation made or omitted by or on behalf of the indemnified party or
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any officer, director or controlling Person of such indemnified party and will
survive the transfer of securities.
7. Participation in Underwritten Registrations.
--------------------------------------------
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of Registrable
Securities will be required to sell more than the number of Registrable
Securities that such holder has requested Holdings to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from Holdings of the happening of any
event of the kind described in paragraph 4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such paragraph 4(e). In
the event Holdings shall give any such notice, the applicable time period
mentioned in paragraph 4(b) during which a Registration Statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this paragraph to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph 4(e).
8. Current Public Information.
---------------------------
At all times after Holdings has filed a registration statement with
the Securities and Exchange Commission pursuant to the requirements of either
the Securities Act or the Securities Exchange Act, Holdings will timely file all
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder, and will take such further action as any holder
or holders of Registrable Securities may reasonably request, all to the extent
required to enable such holders to sell Registrable Securities pursuant to Rule
144 adopted by the Securities and Exchange Commission under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission.
9. Definitions.
------------
"Bain Registrable Securities" means (i) any share of Common or Class L
Common issued to the Bain Stockholders (or their Affiliates) pursuant to the
Purchase Agreement or otherwise acquired, (ii) any equity securities issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) by way of stock dividend or stock split or in connection
-14-
<PAGE>
with a combination of shares, recapitalization, merger, consolidation or other
reorganization and (iii) any other shares of Common or Class L Common held by
Persons holding securities described in clause (i) or (ii) above; provided,
however, that in the event that pursuant to such recapitalization or exchange
Non-Participating Securities are issued, such Non-Participating Securities will
not be Registrable Securities. As to any particular shares constituting Bain
Registrable Securities, such shares will cease to be Bain Registrable Securities
when they have been (x) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, or (y)
sold to the public pursuant to Rule 144 under the Securities Act. For purposes
of this Agreement, a Person will be deemed to be a holder of Bain Registrable
Securities whenever such Person has the right to acquire directly or indirectly
such Bain Registrable Securities (upon conversion or exercise in connection with
a transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"Class L Common" means the Class L Common Stock, par value $.01 per
share, of Holdings.
"Class L Common, Series B," means the Class L Common Stock, Series B,
par value $.01 per share, of Holdings.
"Common" means the Common Stock, par value $.01 per share, of Holdings.
"Common Stock" means both Class L Common, Class L Common, Series B, and
Common.
"GS Registrable Securities" means (i) any shares of Common or Class L
Common issued to the GS Stockholders (or their Affiliates) pursuant to the
Purchase Agreement or otherwise acquired, (ii) any equity securities issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization and (iii) any other shares of Common or Class L Common held by
Persons holding securities described in clauses (i) or (ii) above; provided,
however, that in the event that pursuant to such recapitalization or exchange
Non-Participating Securities are issued, such Non-Participating Securities will
not be Registrable Securities. As to any particular shares constituting GS
Registrable Securities, such shares will cease to be GS Registrable Securities
when they have been (x) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, or (y)
sold to the public pursuant to Rule 144 under the Securities Act.
"Hoechst Registrable Securities" means (i) any shares of Common or
Class L Common, Series B, issued to Hoechst (or its Affiliate) pursuant to the
Combination Agreement, issued upon exercise of the Warrant (as defined in the
Combination Agreement) or otherwise acquired, (ii) any equity securities issued
or issuable directly or indirectly with respect to the securities referred to in
clause (i) by way of stock dividend or stock split or in connection with a
-15-
<PAGE>
combination of shares, recapitalization, merger, consolidation or other
reorganization and (iii) any other shares of Common or Class L Common held by
Persons holding securities described in clauses (i) or (ii) above; provided,
however, that in the event that pursuant to such recapitalization or exchange
Non-Participating Securities are issued, such Non-Participating Securities will
not be Registrable Securities. As to any particular shares constituting Hoechst
Registrable Securities, such shares will cease to be Hoechst Registrable
Securities when they have been (x) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
or (y) sold to the public pursuant to Rule 144 under the Securities Act.
"Initial Public Offering" means a public offering and sale of
Holdings's common stock pursuant to an effective registration statement under
the Securities Act of 1933, as amended, if immediately thereafter Holdings has
publicly held common stock listed on a national securities exchange or the NASD
automated quotation system with a market value of at least $15 million.
"Management Registrable Securities" means, so long as such holder has
agreed to become bound by the terms and provisions of this Agreement, (i) any
shares of Common Stock or securities convertible or exchangeable into Common
Stock issued to the employees of Holdings or its Subsidiaries, (ii) any equity
securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization and (iii) any other shares of Common Stock
held by Persons holding securities described in clauses (i) or (ii) above;
provided, however, that in the event that pursuant to such recapitalization or
exchange Non-Participating Securities are issued, such Non-Participating
Securities will not be Registrable Securities. As to any particular shares
constituting Management Registrable Securities, such shares will cease to be
Management Registrable Securities when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, or (y) sold to the public pursuant to Rule 144 under
the Securities Act.
"Non-Participating Securities" means equity securities which do not
participate in the residual equity of Holdings.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Registrable Securities" means collectively Bain Registrable
Securities, GS Registrable Securities, Hoechst Registrable Securities and
Management Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal law then in force.
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<PAGE>
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal law then in force.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. Holdings will not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. Holdings will not
take any action, or permit any change to occur, with respect to its securities
which would materially and adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto shall have the right to injunctive relief,
in addition to all of its other rights and remedies at law or in equity, to
enforce the provisions of this Agreement.
(d) Amendment and Waiver. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of Holdings and the holders of a majority of the Bain
Registrable Securities (provided such securities constitute at least 3% of the
outstanding Common Stock on a fully diluted basis), the holders of a majority of
the GS Registrable Securities (provided such securities constitute at least 3%
of the outstanding Common Stock on a fully diluted basis) and the holders of a
majority of the Hoechst Registrable Securities (provided such securities
constitute at least 3% of the outstanding Common Stock on a fully diluted
basis); provided, however, that in the event that such amendment or waiver would
treat a holder or group of holders of Registrable Securities in a manner
different from any other holders of Registrable Securities, then such amendment
or waiver will require the consent of such holder or the holders of a majority
of the Registrable Securities of such group adversely treated. The failure of
any party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(e) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the holders of Registrable Securities (or
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<PAGE>
any portion thereof) as such shall be for the benefit of and enforceable by any
subsequent holder of any Registrable Securities (or of such portion thereof),
subject to the provisions respecting the minimum numbers or percentages of
shares of Registrable Securities (or of such portion thereof) required in order
to be entitled to certain rights, or take certain actions, contained herein.
(f) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when personally delivered,
sent by telecopy (with receipt confirmed) on a Business Day during regular
business hours of the recipient (or, if not, on the next succeeding Business
Day) or two Business Days after sent by reputable overnight express courier
(charges prepaid); provided that notice to the holders of the GS Registrable
Securities shall be effective only if notice has been given to the GS Designee
(as defined in the Stockholders Agreement) and notice to the GS Designee will
not be deemed to have been given unless actually delivered in person or by
telecopy, courier or mail.
If to Holdings:
Dade Behring Holdings, Inc
1717 Deerfield Road
P.O. Box 778
Deerfield, Illinois 60015-0778
U.S.A.
Attention: Chief Executive Officer
General Counsel
If to the Bain Stockholders:
Bain Capital, Inc.
Two Copley Place
-18-
<PAGE>
Boston, Massachusetts 02116
U.S.A.
Attention: John Connaughton
With a copy to (which shall not constitute notice hereunder):
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
U.S.A.
Attention: Jeffrey C. Hammes
If to the GS Stockholders:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
U.S.A.
Attention: Joseph H. Gleberman
Neal Moszkowski
With a copy to (which shall not constitute notice hereunder):
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10014
U.S.A.
Attention: Lee Parks
If to Hoechst:
Hoechst AG
Bruningstrasse 50
D-65929
Germany
Attention: Chairman of the Management Board
With a copy to (which shall not constitute notice hereunder):
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
U.S.A.
-19-
<PAGE>
Attention: Creighton O'M. Condon
11. Delivery by Facsimile. This Agreement and any signed agreement or
instrument entered into in connection thereto or contemplated thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person.
At the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation of a contract and each such party forever waives any such defense.
12. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF HOLDINGS AND ITS STOCKHOLDERS. ALL
OTHER ISSUES CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE COUNTY OF NEW
YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW OF
ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY
SUBMITS TO THE CO-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY, OVER ANY LAWSUIT UNDER THIS AGREEMENT AND WAIVES ANY OBJECTION
BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED
THEREIN. EACH PARTY HERETO HEREBY WAIVES THE NECESSITY FOR PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED), WITH A COPY
ALSO BEING SENT BY FACSIMILE (WITH RECEIPT CONFIRMED), IN EACH CASE DIRECTED TO
SUCH PARTY AT ITS ADDRESS SET FORTH IN, AND WITH COPIES SENT AS REQUIRED BY,
PARAGRAPH 10(i) ABOVE, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED ON
THE DATE OF ACTUAL RECEIPT. EACH PARTY HERETO HEREBY CONSENTS TO SERVICE OF
PROCESS AS AFORESAID. NOTHING IN THIS PARAGRAPH 11 WILL PROHIBIT PERSONAL
SERVICE IN LIEU OF THE SERVICE BY MAIL CONTEMPLATED HEREIN.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
DADE BEHRING HOLDINGS, INC.
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<PAGE>
By: /s/
----------------------------------------------
Its: Vice President
----------------------------------------------
HOECHST AG
By: /s/
----------------------------------------------
Its:
----------------------------------------------
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: /s/
----------------------------------------------
A Managing Director
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: /s/
----------------------------------------------
A Managing Director
BCIP ASSOCIATES
By: /s/
----------------------------------------------
A General Partner
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<PAGE>
BCIP TRUST ASSOCIATES, L.P.
By: /s/
----------------------------------------------
A General Partner
GS CAPITAL PARTNERS, L.P.
By: GS Advisors, L.P.
Its: General Partner
By: GS Advisors, Inc.
Its: General Partner
By: /s/
----------------------------------------------
BRIDGE STREET FUND 1994, L.P.
By: Stone Street Funding Corp. Its: Managing
General Partner
By: /s/
----------------------------------------------
STONE STREET FUND 1994, L.P.
By: Stone Street Funding Corp.
Its: General Partner
By: /s/
----------------------------------------------
RANDOLPH STREET PARTNERS
By: /s/
----------------------------------------------
A General Partner
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<PAGE>
SCHEDULE A
----------
Bain CapitaI Fund IV, L.P.
Bain Capital Fund IV-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
Randolph Street Partners
-23-
<PAGE>
SCHEDULE B
----------
GS Capital Partners, L.P.
Bridge Street Fund 1994, L.P.
Stone Street Fund 1994, L.P.
-24-
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
December 12, 1997, among DADE BEHRING HOLDINGS, INC. ("Holdings"), DADE
INTERNATIONAL INC. (the "Borrower"), the financial institutions party to the
Credit Agreement referred to below (the "Banks") and BANKERS TRUST COMPANY, as
Agent (the "Agent") for the Banks. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H :
-------------------
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties
to a Credit Agreement, dated as of May 7, 1996 and amended and restated as of
April 29, 1997 (as amended, modified, restated or supplemented to the date
hereof, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
------------------------------
1. Section 8.01 of the Credit Agreement is hereby amended by
inserting at the end thereof the following new clause (d):
"(d) Notwithstanding anything to the contrary contained in this
Agreement, the Special Purpose VFP Subsidiary will not engage in any
business other than acquiring instruments, accounts receivable related
thereto and other accounts receivable related to consumable products and
services of the Borrower and its Subsidiaries, and the related transactions
pursuant to the Vendor Financing Program."
2. Section 8.02(dd) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(dd) the Borrower and any of its Subsidiaries may (x) effect Seeded
Instrument Sales in connection with its Vendor Financing Program and effect
other transactions contemplated by the definition of Vendor Financing
Program and (y) effect Seeded Instrument Transactions in connection with
its Alternate Vendor Financing Program, so long as the aggregate
outstanding amount of Capitalized Lease Obligations of the Borrower and its
Subsidiaries under Seeded Instrument Transactions shall not exceed
$27,000,000 at any time;".
-1-
<PAGE>
3. Section 8.02(gg) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(gg) the Behring Transaction may be effected on or after the First
Amendment Effective Date so long as (i) same is effected in accordance
with the terms of the Behring Transaction Documents, (ii) the aggregate
consideration for such transaction (excluding fees and expenses and
excluding post-closing purchase price adjustments) consists solely of
Holdings Common Stock and warrants to purchase Holdings Common Stock, (iii)
no Change of Control Event results from such transaction and (iv) no
Default or Event of Default then exists or would result therefrom."
4. Section 8.03(r) of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(r) Liens on any interest of the Borrower or any of its Subsidiaries
in the equipment subject to the Vendor Financing Program and Liens on
accounts receivable and other current assets owned by the Special Purpose
VFP Subsidiary, in each case securing the recourse obligations owing to a
financial institution party to the Vendor Financing Program, so long as (x)
such obligations are permitted under Section 8.04)(s) and (y) in the case
of any Lien on any such accounts receivable and/or other current assets,
the aggregate face amount of the accounts receivable and other current
assets subject to such Lien does not exceed an amount equal to 120% of the
outstanding recourse obligations permitted under Section 8.04(s)."
5. Section 8.04 of the Credit Agreement is hereby amended by (a)
deleting the word "and" appearing at the end of clause (v) thereof, (b) deleting
the period appearing at the end of clause (w) thereof and inserting "; and" in
lieu thereof and (c) inserting at the end thereof the following new clause (x):
"(x) Indebtedness of the Special Purpose VFP Subsidiary evidenced by
the VFP Purchase Money Note."
6. Section 8.06 of the Credit Agreement is hereby amended by (a)
deleting the word "and" appearing at the end of clause (x) thereof, (b) deleting
the phrase "in addition to investments permitted by clauses (a) through (x)
above" appearing in clause (y) thereof and inserting in lieu thereof the phrase
"in addition to investments permitted by clauses (a) through (x) above and
clause (z) below", (c) deleting the period appearing at the end of clause (y)
thereof and inserting "; and" in lieu thereof and (d) inserting at the end
thereof the following new clause (z):
"(z) the Borrower and/or one or more of its Subsidiaries may hold one
or more VFP Purchase Money Notes."
7. Section 8.08 of the Credit Agreement is hereby amended by (a)
deleting the word "and" appearing at the end of clause (iv) of the first
sentence thereof and (b)
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<PAGE>
inserting at the end of such sentence the following:
"and (vi) the transactions contemplated by the documents governing the
Vendor Financing Program."
8. Section 8.15 of the Credit Agreement is hereby amended by (a)
deleting the word "and" appearing at the end of clause (vii) thereof and
inserting a comma in lieu thereof and (b) inserting at the end thereof the
following:
"and (ix) the documents governing the Vendor Financing Program."
9. Section 10 of the Credit Agreement is hereby amended by deleting
the definition of "Vendor Financing Program" appearing therein in its entirety
and by inserting in lieu thereof the following new definition:
"Vendor Financing Program" shall mean one or more vendor financial
services programs between the Borrower and/or one or more of its
Subsidiaries (including without limitation the Special Purpose VFP
Subsidiary) and a financial institution pursuant to or in connection with
which (x) (i) the Borrower and/or such Subsidiary effects Seeded Instrument
Sales or otherwise sells instruments and the rights related thereto to such
financial institution and (ii) such financial institution leases or sells
the instruments so acquired to third party customers of the Borrower and/or
such Subsidiary, (y) (i) the Borrower and/or one of its operating
Subsidiaries sells or otherwise transfers instruments, accounts receivable
related thereto and other accounts receivable related to consumable
products or services of the Borrower or such Subsidiary to the Special
Purpose VFP Subsidiary, (ii) the Special Purpose VFP Subsidiary effects
Seeded Instrument Sales or otherwise sells instruments and the rights
related thereto to a financial institution and (iii) such financial
institution leases or sells the instruments so acquired to third party
customers of the Borrower or its Subsidiaries, and/or (z) (i) the Borrower
and/or such Subsidiary effects Seeded Instrument Sales or otherwise sells
instruments and the rights related thereto to such financial institution,
(ii) the Borrower and/or such Subsidiary sells or otherwise transfers
accounts receivable related to instruments sold and other accounts
receivable related to consumable products or services of the Borrower or
such Subsidiary to the Special Purpose VFP Subsidiary, (iii) the Special
Purpose VFP Subsidiary sells some or all of such accounts receivable to
such financial institution and (iv) such financial institution leases or
sells the instruments so acquired to third party customers of the Borrower
or its Subsidiaries.
10. Section 10 of the Credit Agreement is hereby amended by inserting
therein in appropriate alphabetical order the following new definitions:
"Special Purpose VFP Subsidiary" shall mean DBI Funding, Inc., a
special purpose bankruptcy remote Subsidiary of the Borrower.
"VFP Purchase Money Note" shall mean one or more purchase money notes
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<PAGE>
issued by the Special Purpose VFP Subsidiary to the Borrower and/or one of
its Subsidiaries pursuant to or in connection with the Vendor Financing
Program.
II. Consents and Agreements.
-----------------------
1. Notwithstanding anything to the contrary contained in Sections
7.11 and 8.16 of the Credit Agreement, in the Pledge Agreement or in the First
Amendment, the Banks hereby agree that Holdings and its Subsidiaries shall not
be required to pledge to the Pledgee under the Pledge Agreement the stock of any
Foreign Subsidiary acquired pursuant to the Behring Acquisition and required to
be pledged pursuant to the terms of the Pledge Agreement until April 30, 1998.
2. The Banks hereby agree that (i) so long as the Special Purpose VFP
Subsidiary is in compliance with Section 8.01(d) of the Credit Agreement, the
Banks will not commence any involuntary case against the Special Purpose VFP
Subsidiary under the Bankruptcy Code and (ii) notwithstanding the terms of any
of the Security Documents, neither the Banks nor the Collateral Agent will
attempt to exercise remedies with respect to, or otherwise assert any interest
in, accounts receivable and other current assets held by the Special Purpose VFP
Subsidiary in an aggregate amount equal to 120% of the outstanding recourse
obligations permitted under Section 8.04(s) minus any cash collateral deposited
with any third party securing such recourse obligations (including cash used to
collateralize any letter of credit supporting such recourse obligations).
III. Miscellaneous Provisions.
------------------------
1. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Second Amendment
Effective Date, both before and after giving effect to this Amendment; and
(b) all of the representations and warranties contained in the Credit
Agreement or the other Credit Documents are true and correct in all
material respects on and as of the Second Amendment Effective Date, both
before and after giving effect to this Amendment, with the same effect as
though such representations and warranties had been made on and as of the
Second Amendment Effective Date (it being understood that any
representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date).
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when exe-
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<PAGE>
cuted and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A complete set of counterparts shall be
lodged with the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when each of Holdings, the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at its Notice Office.
6. From and after the Second Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as amended
hereby.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
DADE BEHRING HOLDINGS, INC.
By /s/
--------------------------------
Name:
Title:
DADE INTERNATIONAL INC.
By /s/
--------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
Individually, as Agent
and as Collateral Agent
By /s/
--------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By /s/
--------------------------------
Name:
Title:
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<PAGE>
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By /s/
--------------------------------
Name:
Title:
BANKBOSTON, N. A.
By /s/
--------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By /s/
--------------------------------
Name:
Title:
SANWA BUSINESS CREDIT
By /s/
--------------------------------
Name:
Title:
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<PAGE>
ABN AMRO BANK N.V., Chicago Branch
By /s/
--------------------------------
Name:
Title:
By /s/
--------------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By /s/
--------------------------------
Name:
Title:
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO, a Unit of The Chase
Manhattan Bank
By /s/
--------------------------------
Name:
Title:
CITIBANK, N.A.
By /s/
--------------------------------
Name:
Title:
-8-
<PAGE>
CRESCENT/MACH I PARTNERS, L.P.
By TCW Asset Management Company,
its Investment Manager
By /s/
--------------------------------
Name:
Title:
STRATA FUNDING LTD.
By /s/
--------------------------------
Name:
Title:
CERES FINANCE LTD.
By /s/
--------------------------------
Name:
Title:
AERIES FINANCE LTD.
By /s/
--------------------------------
Name:
Title:
CAPTIVA FINANCE LTD.
By /s/
--------------------------------
Name:
Title:
-9-
<PAGE>
CAPTIVA II FINANCE LTD.
By /s/
--------------------------------
Name:
Title:
CITY NATIONAL BANK
By /s/
--------------------------------
Name:
Title:
ROYALTON COMPANY,
By Pacific Investment Management Company,
as its Investment Advisor
By /s/
--------------------------------
Name:
Title:
-10-
<PAGE>
FIRST NATIONAL BANK OF CHICAGO
By /s/
--------------------------------
Name:
Title:
FLOATING RATE PORTFOLIO
By: Chancellor LGT - Senior Secured
Management, Inc., as Attorney-in-Fact
By /s/
--------------------------------
Name:
Title:
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor LGT - Senior Secured
Management, Inc., as Investment Advisor
By /s/
--------------------------------
Name:
Title:
DAI-ICHI KANGYO BANK LTD.
By /s/
--------------------------------
Name:
Title:
PRIME INCOME TRUST
By /s/
--------------------------------
Name:
Title:
-11-
<PAGE>
THE FUJI BANK, LIMITED
By /s/
--------------------------------
Name:
Title:
MERRILL LYNCH
SENIOR FLOATING RATE FUND, INC.
By /s/
--------------------------------
Name:
Title:
ML CBO IV (CAYMAN) LTD.
c/o Senior Floating Rate Fund, Inc.
By /s/
--------------------------------
Name:
Title:
NORTHWESTERN MUTUAL LIFE
By /s/
--------------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By /s/
--------------------------------
Name:
Title:
-12-
<PAGE>
SAKURA BANK LTD.
By /s/
--------------------------------
Name:
Title:
SOCIETE GENERALE
By /s/
--------------------------------
Name:
Title:
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By /s/
--------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By /s/
--------------------------------
Name:
Title:
IMPERIAL BANK
By /s/
--------------------------------
Name:
Title:
-13-
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management L.P.,
as Investment Advisor
By /s/
--------------------------------
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/
--------------------------------
Name:
Title:
MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
By: Merrill Lynch Asset Management L.P.,
as Investment advisor
By /s/
--------------------------------
Name:
Title:
-14-
<PAGE>
Exhibit 10.15
TRANSITION SERVICES AGREEMENT
by and between
HOECHEST AG
(hereinafter referred to as "Hoechst")
and
The Companies listed in Annex A)
(hereinafter referred to as the "Service Entities")
- - on the one side -
and
DIAGNOSTICS HOLDING, INC.
(hereafter referred to as "Dade")
and
The Companies listed in Annex B)
(hereinafter referred to as the "Acquired Entities")
- - on the other side)
dated as of September 30, 1997
-1-
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Directory of Annexes 2
Preamble 3
Article 1 - Service Provided 3
Article 2 - Remuneration for Services 3
Article 3 - Invoicing and Payment 9
Article 4 - Liability 10
Article 5 - Excusable Delay 12
Article 6 - Term and Termination 13
Article 7 - Confidentiality 15
Article 8 - Arbitration 16
Article 9 - Miscellaneous 18
</TABLE>
DIRECTORY OF ANNEXES
Annex 1.1 - Services
Annex 1 4 - Service Coordinators
-2-
<PAGE>
Preamble
A. Hoechst and Dade have entered into an Agreement and Plan of Combination
dated as of June 24, 1997 (the "Combination Agreement"). Under the
Combination Agreement Hoechst and Dade have agreed to combine all of Dade's
business and Hoechst's human in vitro diagnostic business (the "Business").
(Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in the Combination Agreement); and
B. As set forth in Section 2.1(g) of the Combination Agreement, Hoechst and
Dade agreed that Dade and the Acquired Entities shall enter into one or
more transition services agreements relating to certain transitional
administrative and support services for the Business for a certain period
after the completion of the transactions contemplated by the Combination
Agreement in accordance with the terms of this Agreement;
NOW, THEREFORE, subject to the terms, conditions, covenants and provisions of
this Agreement, Hoechst and Dade mutually covenant and agree as follows:
Article 1
Services Provided
1.1 Upon the terms and subject to the conditions set forth in this Agreement,
Hoechst and the Service Entities will provide to the Acquired Entities for
the Business each of those administrative and support services listed
individually or included within a category of service listed in Annex 1.1,
which is attached to and made part of this Agreement, in the countries set
forth in that Annex (hereinafter referred to individually as a
"Transitional Service", and collectively as the "Transitional Services"),
during the period until December 31, 1999 unless terminated prior thereto
(hereinafter referred to as the "Time Periods" for all of the Transitional
Services, and the "Time Period" for each Transitional Service). The
Acquired Entities shall purchase and off-take the Transitional Services
during the term of each of such service in amounts of not less than fifty
(50%) of the quantities as of the date hereof, provided that the Acquired
Entities shall continue to lease all space leased as of the date hereof.
1.2 The parties have attempted to list on Annex 1.1 (i) each service rendered
by Hoechst or a Hoechst Entity in 1996 and 1997 to the Business (except for
services to be provided by InfraServ GmbH & Co. Marburg KG and HiServ GmbH)
and (ii) which Hoechst and the Service Entities should provide for an
interim period in order to enable the Acquired Entities to operate
consistent with past practice on a stand-alone basis (collectively the
"Required Services") but acknowledge that Annex 1.1 may be incomplete.
Thus, if a service desired by Dade or an Acquired Entity is not listed in
Annex 1.1 but is a Required Service, such Required Service
-3-
<PAGE>
shall be added to Annex 1.1, upon the terms and conditions of this
Agreement. Such Required Service shall be deemed to be a Transitional
Service for the purpose of this Agreement.
1.3 ln providing the Transitional Services, Hoechst and the Service Entities
may employ the services of third parties (the "Outside Service Providers")
to the extent such Outside Service Providers are either routinely utilized
to provide similar services to Hoechst enterprises or are reasonably
necessary for the efficient performance of any Transitional Service or such
Outside Service Provider is, in Hoechst's reasonable determination,
otherwise qualified to render such Transitional Service at quality
standards not lower than in 1996; provided that Hoechst and the Service
Entities shall not employ for the purpose of this Article 1.3 any Outside
Service Provider which is a competitor of Dade or any of the Acquired
Entities. Whether or not an Outside Service Provider is employed, Hoechst
and the Service Entities shall be responsible for the delivery of the
Transitional Services in compliance with the terms of this Agreement.
1.4 Hoechst and Dade shall each nominate a representative to act as the primary
contact person for the supervision of the implementation of this Agreement
(collectively, the "Primary Coordinators") The initial Primary
Coordinators shall be John Doherty for Dade and Derek Gribbin for Hoechst.
The initial coordinators for specific Transitional Services in each country
shall be the individuals named in the description of such Transitional
Service in Annex 1.4 (the "Service Coordinators") with the name, address
and phone number of each such Service Coordinator set forth on Annex 1.4.
Hoechst and Dade shall advise each other in writing of any change in the
Primary Coordinators and any Service Coordinator. Hoechst and Dade agree
that a copy of all communications relating to the provision of the
Transitional Services shall be directed to the Primary Coordinators.
1.5 Hoechst and each of the Service Entities represent and warrant to Dade that
they have, and covenant with Dade that they shall maintain or have
available through Outside Service Providers all necessary assets and
personnel in order to fulfill their obligations hereunder.
1.6 To the extent reasonably required for the personnel to perform the
Transitional Services, each of the parties shall provide personnel
designated by the other with access to its equipment, office space, plants,
telecommunications and computer equipment and systems, and any other areas
and equipment, provided that such access does not include the use thereof
in the provision of any Transitional Service and does not unreasonably
interfere with such other party's conduct of its business. Any confidential
information received by either party due to such access shall be subject to
the provisions of Article 8 below.
-4-
<PAGE>
1.7 Hoechst hereby represents and warrants to Dade that the amount of
consideration paid or to be paid by the Acquired Entities for each
Transitional Service is not greater than the actual average purchase price
per unit paid for such Transitional Service by the Business during the 1996
calendar year, subject to an increase of Service Costs as agreed in Article
2.2 below (the "1996 Historical Prices").
1.8 Hoechst shall ensure that the Acquired Entities shall be neither assessed
nor liable to pay any (i) termination or similar fee, expense or other
liability of any kind whatsoever relating to, arising from or in connection
with any reduction in the level of use, or deletion, of any Transitional
Service by an Acquired Entity, or (ii) fee, expense or other liability of
any kind whatsoever relating to, arising from or in connection with any
remnant, residual or other similar costs relating to any Transitional
Service. Nothing in this Article 1.8 shall give Dade or the Acquired
Entities the right to assert that the 1996 Historical Prices should be
lower because they include a component which could be regarded as a fee
described above.
1.9 Hoechst promptly shall pay and shall indemnify and hold harmless the
Acquired Entities from any damage (except loss of profit) from or in
connection with any breach by Hoechst of any of the covenants,
representations or warranties in Sections 1.5, 1.7 and 1.8 of this
Agreement. All payments by Hoechst hereunder due to the Acquired Entity
concerned shall be made in the relevant local currency.
1.10 In the event of any of Dade and the Acquired Entities makes a good faith
argument that Hoechst is in breach of the representations and warranties
set forth in Articles 1.7 and 1.8 above, and Hoechst disagrees, Hoechst and
Dade shall make every reasonable effort to amicably resolve such difference
(which reasonable effort shall include a reasonable disclosure of documents
by Hoechst to Dade to permit verification of the actual 1996 prices). In
the event Hoechst and Dade cannot resolve any difference connected
therewith, Hoechst shall cause a qualified independent auditor subject to
Dade's approval, which will not be unreasonably withheld, promptly to
certify that no breach of Articles 1.7 and 1.8 has occurred. Such auditor's
certification shall set forth in reasonable detail the rationale for the
auditor's opinion. The costs for such audit shall be borne by the parties
in accordance with Section 91 et seq. Civil Procedure Act (ZPO).
1.11 The Acquired Entity shall have no obligation to continue to use any of the
Transitional Services and may delete any Transitional Service that Hoechst
is providing to the Acquired Entities by giving Hoechst written notice of
its desire to delete any or all Transitional Services. For this purpose a
written termination notice having effect three (3) months to the end of a
month must be provided by Dade for the deletion of a Transitional Service,
provided that each Acquired Entity shall in good faith attempt to give an
earlier notice to the Service Entity so that as much notice is given as
possible.
-5-
<PAGE>
1.12 Hoechst shall use best efforts (utilizing all commercially feasible means
including after consultation with Dade at Hoechst's free discretion the use
of Outside Service Providers) to provide at the Acquired Entities' cost
(unless such service was provided historically in which case Article 2
shall apply), on or prior to December 31, 1997, as part of the service set
forth in Annex 1.1 as "Accounting-Finance," each and every financial
reporting service set forth in Annex 1.1, (a) (the "Financial Reporting
Services"). In addition, as part of the foregoing and also at the Acquired
Entities' cost, Hoechst shall employ its best efforts to implement the
steps as set forth in Annex 1.12(b). The costs to be borne by the Acquired
Entities hereunder shall be based upon the incremental cost of providing
the Financial Reporting Services above and beyond those provided on a
historical basis. Prior to incurring such incremental cost in connection
with providing such Financial Reporting Services Hoechst shall consult with
Dade. For the avoidance of doubt: Article 1.7 does not apply to the
Financial Reporting Services other than those services provided
historically.
Article 2
Remuneration for Services
2.1 The remuneration for the services delivered hereunder shall be as set forth
in Annex 1.1 (the "Base Price"). V.A.T. or similar taxes are to be paid
separately by the Acquired Entities.
2.2 Upon written request of either (i) Hoechst or the Service Entity concerned
or (ii) Dade or the Acquired Entity concerned, as the case may be, the Base
Price shall be adjusted for any change of Service Costs, as defined
hereinafter. For purposes of this Agreement, "Service Costs" shall mean all
(i) out-of-pocket expenses (including reasonable fees of Outside Service
Providers and fifty percent (50%) of insurance fees to protect Hoechst and
the Service Entities against liability hereunder (cf. Article 4), provided,
that in no event shall Dade and the Acquired Entities be liable for any
insurance fees hereunder in excess of DM 50,000 in the aggregate) paid to
third parties by Hoechst or the relevant Service Entity in order to provide
the Transitional Services, including actual expenses paid by Hoechst or the
relevant Service Entity in order to comply with legal regulations
applicable to the provision of Transitional Services which become effective
after 1996, and (ii), costs relating to higher depreciation as a result of
investments made by Hoechst or the relevant Service Entity in order to
comply with legal regulations applicable to the provision of Transitional
Services which became effective after 1996.
2.3 A change in the Base Price of a service which results from a Price
Adjustment Event shall become effective for such service immediately
following the occurrence of a Price Adjustment Event, provided that any
change shall be deemed effective only if not disputed by any party
concerned following the receipt of a written notice from the party
requesting a price adjustment, which notice shall contain a reasonable
explanation for the change of the Base Price in
-6-
<PAGE>
accordance with Article 2.2 above. A decrease in the Base Price resulting
from a Price Adjustment Event, however, shall have retroactive effect to
such date on which Hoechst or the Hoechst Entity concerned knows or should
have known of such change. On an annual basis, a responsible financial
officer of the relevant Service Entity in their capacity as such without
personal liability and, if requested by Dade, an independent auditing firm
reasonably acceptable to Dade, shall certify that any changes in the Base
Price in the preceding year were correct and in accordance with the terms
of this Agreement. Unless the changes of the Base Price were incorrect, all
costs connected with the employment of the independent auditors shall be
borne by Dade.
2.4 In the event any party disputes the delivered evidence of any changes in
Service Costs, information about such costs shall be disclosed to all
parties concerned and Hoechst and Dade shall make on behalf of all parties
concerned every reasonable effort to amicably determine the substantiated
cost changes. If Hoechst and Dade cannot agree on an adjustment of the Base
Price, then any adjustment of the Base Price shall be determined by an
internationally recognized firm of auditors to be appointed by mutual
agreement of Hoechst and Dade or, failing such agreement, upon request of
either party by Deloitte & Touche after hearing both parties. Confidential
information received by such firm of auditors shall, upon request of
Hoechst or the Service Entity concerned, not be disclosed to Dade or the
Acquired Entity concerned. Any changes agreed to or determined by the
auditors shall be given retroactive effect.
The firm of auditors shall act as appraiser (known as Schiedsgutachter) in
the meaning of Sections 315 et seq. Civil Code (BGB) and not as arbitrator
(known as Schiedsrichter), and its determination shall be final and binding
on the parties.
The costs of the appraisal proceeding, including the cost of the respective
attorneys, witnesses and experts in connection with such arbitration shall
be borne by the parties in accordance with Sections 91 et seq. German Civil
Procedure Act (ZPO) as directed in the auditor's appraisal.
Article 3
Invoicing and Payment
3.l Transitional Services shall be invoiced to the Acquired Entities by Hoechst
or the relevant Service Entities in the month following the month in which
the Transitional Services were rendered. Payment of invoices shall be made
in the currency of the jurisdiction in which the Transitional Service which
is the subject of the Invoice is received. Each invoice shall include a
summary list of the previously agreed upon Transitional Services for which
there are fixed fees, together with documentation supporting each of the
invoiced amounts that are not covered by the fixed fee agreements. The
total of this list and supporting detail
-7-
<PAGE>
will equal the invoice total, and will be provided under separate cover
apart from the Invoice.
3.2 Provided that the invoice is received at least ten (10) days prior to the
due date, Invoices become due for payment on the 25th day after the end of
the invoiced period. Payments by the Acquired Entities shall be effected
free of charge to a bank account designated by Hoechst or the Service
Entities. Delayed payments shall bear interest at 10 percentage points p.a.
Article 4
Liability
4.l Hoechst and the Service Entities shall perform the Transitional Services
hereunder exercising the greater of (i) the same degree of care they
usually apply in their own matters, (ii) the same degree of care applied by
a prudent business person or (iii) the same degree of care they exercised
historically in performing the same or similar services for the Business
during the 1996 calendar year, provided, however, that Hoechst and the
Service Entities, as the case may be, may be held contractually or legally
liable only for claims with regard to the fulfillment of this Agreement
(a) if the relevant management (Vorstand; Geschaftsfuhrung) has
negligently or willfully violated the obligation of due care as stated
above, or
(b) if a person, including employees of Hoechst or a Service Entity
performing contractual tasks hereunder (Erfullungsgehilfe) other than
the management of such company, has grossly negligently or willfully
caused a damage to an Acquired Entity.
Notwithstanding anything to the contrary contained herein, in the event
Hoechst or a Service Entity commits an error with respect to, or
incorrectly performs or fails to perform, any service, Hoechst or the
Service Entity, at the Acquired Entity's request, shall use reasonable best
efforts to promptly correct such error, or to reperform or perform such
service.
4.2 To the extent that Hoechst or a Service Entity, as the case may be, is
responsible for damages as set forth in Article 4.1 lit. (a) and lit. (b)
above, Hoechst or the responsible Service Entity shall fully indemnify and
hold harmless the Acquired Entity concerned against any damages (excluding
damages for loss of profit). Unless such damages were caused by willful
misconduct of Hoechst or the Service Entities, Hoechst's or the Service
Entities', as the case may be, indemnification obligation hereunder shall
only apply to the extent that in each incident (or series of related
incidents) such damages exceed DM 25,000 (in words: Deutsche Mark twenty
five thousand).
-8-
<PAGE>
The liability limitations referred to in this Article 4.2 shall not apply
in cases of willful misconduct.
4.3 To the extent that the parties submit to each other information or give
advice without remuneration outside of their duties under this Agreement,
neither party shall assume any liability for the correctness of such
information or advice.
4.4 Subject to the terms and conditions stated hereinafter Hoechst guarantees
that each of the Service Entities will
(a) always have sufficient capital to make the expenditures necessary to
maintain the quantity and the quality of the Transitional Services
which the Service Entities are obligated to provide under this
Agreement; and
(b) make all payments due to the Acquired Entities under this Agreement,
including payments due to breach of contract
(hereinafter the "Performance Guarantee").
Any Service Entity can call Hoechst liable under the Performance Guarantee,
if (i) the relevant Service Entity has been liquidated and the delivery of
the services under this Agreement will not be continued by a successor, or
(ii) if the relevant Service Entity's assets become subject of a bankruptcy
procedure and the trustee in bankruptcy or an successor is not prepared to
fully continue to provide the services under the terms of this Agreement,
or (iii) the enforcement of a final arbitration award against the relevant
Service Entity in favor of the Acquired Entity on the basis of this
Agreement is fruitless. Hoechst hereby agrees to join and be bound by any
arbitration proceeding brought by the Acquired Entity against any Service
Entity relating to this Agreement and to resolve, to the extent possible,
any dispute with respect to Hoechst's liability under the Performance
Guarantee in such proceeding.
Upon request by any Acquired Entity and with a view to prevent or limit any
material non-performance or mal-performance of any Service Entity under
this Agreement, Hoechst shall cause (if legally possible, otherwise Hoechst
shall use its best efforts to cause) the Service Entity concerned to fully
comply with the terms of this Agreement (unless the Service Entity
concerned is excused from so complying under the terms of this Agreement).
Such request of any Acquired Entity shall be set forth in a written notice
stating in reasonable detail why and that the Service Entity concerned does
not comply or may be reasonably expected not to comply in a material way
with the terms of this Agreement.
-9-
<PAGE>
Article 5
Excusable Delay
5.1 Except as otherwise expressly provided in this Agreement, neither party
hereto shall be liable for a failure to perform hereunder for reasons of
force majeure, including acts of God, acts of a public enemy, acts of the
governments of any state or political subdivision or any department or
regulatory agency thereof or entity created thereby, quotas, embargoes,
acts of any person engaged in subversive activity or sabotage, fires,
floods, explosions, or other catastrophes, epidemics, or quarantine
restrictions, strikes or other labor stoppages, slowdowns or disputes, or
any other cause beyond the control of the parties ("Reasons of Force
Majoure"). Each party shall use its best efforts to cure any such cause
preventing its performance and to resume performance.
5.2 In the event Hoechst or a Hoechst Entity reasonably believes that delivery
of Transitional Services may be delayed, impaired or prevented by Reasons
of Force Majeure, it shall (a) immediately notify the Acquired Entity
concerned of the possibility of such cause, (b) immediately notify the
Acquired Entity of such actual cause, and (c) use its best efforts to keep
this Agreement operative.
5.3 In the event an Acquired Entity reasonably believes that receiving of
Transitional Services may be delayed due to a Reason of Force Majeure, such
Acquired Entity shall (a) immediately notify the Hoechst Entity concerned
of the possibility of such cause, (b) immediately notify the Hoechst Entity
of such actual cause, and (c) use its best efforts to keep this Agreement
operative.
5.4 If and to the extent any Acquired Entity shall be unable to off-take a
Transitional Service as a result of a Reason of Force Majoure, such
Acquired Entity shall pay any actual damage incurred by Hoechst or the
Service Entity thereof, provided that Hoechst or the Service Entity
concerned shall use its best efforts to mitigate any such damage.
Article 6
Term and Termination
6.1 This Agreement shall become effective on the Closing Date and shall remain
in force until the expiration of the longest Time Period unless all of the
Transitional Services are deleted by the parties in accordance with Article
6.2 below. This Agreement shall in any event terminate on December 31,
1999.
6.2 If either party (hereafter called the "Defaulting Party") shall fail to
perform or default in the performance of any of its obligations under this
Agreement, the other party receiving or rendering Transitional Services
hereunder (hereinafter called the "Non-Defaulting Party") may give written
notice to the Defaulting Party specifying the nature of such failure or
default and stating that the Non-
-10-
<PAGE>
Defaulting Party intends to terminate this Agreement if such failure or
default is not cured within fifteen (15) days of such written notice. If
any failure or default so specified is not cured within such fifteen (15)
day period, the Non-Defaulting Party may elect to immediately terminate
this Agreement; provided, however, that if the failure or default relates
to a dispute made in good faith by the Defaulting Party, the Non-Defaulting
Party may not terminate this Agreement pending the resolution of such
dispute. Such termination shall be effective upon giving a written notice
of termination from the Non-Defaulting Party to the Defaulting Party and
shall be without prejudice to any other remedy which may be available to
the Non-Defaulting Party against the Defaulting Party. Furthermore, the
Non-Defaulting Party shall be entitled to immediately terminate either this
Agreement or any of the Transitional Services provided hereunder if the
Defaulting Party is not able to cure within thirty (30) days a Reason of
Force Majeure as set forth in Article 5 hereunder.
6.3 Dade specifically agrees and acknowledges that all obligations of Hoechst
and the Service Entities to provide each Transitional Service shall
immediately cease upon the expiration of the Time Period for such
Transitional Service, and Hoechst's obligations to provide all of the
Transitional Services shall immediately cease upon the termination of this
Agreement.
6.4 Without prejudice to the survival of the other agreements of the parties,
the following obligations shall survive the termillatioll of this
Agreement: (i) for the period set forth therein, the obligations of each
party under Articles 4 (Liability), 7 (Confidentiality) (ii) Hoechst's or
the Service Entities' right to receive the compensation for the
Transitional Services provided prior to the effective date of termination.
6.5 Within ten (10) days of the earlier of (i) notice by Dade to Hoechst of
termination of any of the Transitional Services set forth in Annex 1.1, or
(ii) Dade's earlier request at any time more than sixty (60) days after the
15 date of this Agreement, Hoechst and the Service Entities shall, at
Hoechst's sole expense transfer and deliver to Dade all master and
transaction files necessary and desirable, in Dade's sole discretion, for
Dade's conversion to new data processing systems. Such files shall be
delivered in the form they exist in Hoechst's or the Service Entities' data
processing systems.
Article 7
Confidentiality
7.1 Each party shall regard as confidential and proprietary all of the
information communicated to it by the other party from and after the date
hereof in connection with this Agreement (including but not limited to the
Specifications and any and all documents or other information relating
thereto, whether or not marked "confidential") (which information shall,
subject to the exception set forth in
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<PAGE>
Article 8.4 hereof, at all times remain the property of the disclosing
party), referred to herein as "Confidential Information". Confidential
Information includes such information disclosed by a party orally or
visually, directly or indirectly. Confidential Information of a party is
also deemed to include identification of problems to be solved, areas for
process, product and equipment improvements, and Confidential Information
of third parties, which are observed, identified or disclosed under or as a
result of this Agreement.
7.2 During the term of this Agreement and for a period of ten (10) years
following termination, neither party shall, without the other's prior
written consent, at any time (a) use such Confidential Information for any
purpose other than in connection with the performance of its obligations
under this Agreement, or (b) disclose any portion of such Confidential
Information to third parties. Each party shall promptly at the termination
of this Agreement return to the disclosing party all such Confidential
Information which is in written or tangible form (including all copies,
summaries and notes of the contents thereof), but its counsel may retain a
single copy thereof for record purposes.
7.3 Each party shall disseminate Confidential Information of the other party to
its employees, agents and subcontractors only on a need-to-know" basis, and
shall use the same degree of care in protecting such Confidential
Information of the other party as it does for its own information of like
kind. Each party shall cause each of its employees, agents and
subcontractors who has access to such Confidential Information to comply
with the terms and provisions of this Article 7 in the same manner as it is
bound hereby, with it remaining responsible for the actions and disclosures
of any such employees, agents and subcontractors.
7.4 Notwithstanding the foregoing, a party's obligations pursuant to the above
paragraph shall not apply to (i) information that, at the time of
disclosure, is, or after disclosure becomes part of, the public domain
other than as a consequence of a breach of this Agreement, (ii) information
that was known or otherwise available to the receiving party prior to the
disclosure by the disclosing party, (iii) information disclosed by a third
party to the receiving party after the disclosure by the disclosing party,
if such third party's disclosure does not violate any obligation of the
third party to the disclosing party, (iv) information that is independently
developed by the receiving party, or (v) which is required to be disclosed
by law or governmental order.
7.5 With respect to any confidential information. each party agrees that upon
the discovery of any inadvertent disclosure or unauthorized use of said
information, or upon obtaining notice of such a disclosure or use from the
other party, it shall take all necessary actions to prevent any further
inadvertent disclosure or unauthorized use, and such other party shall be
entitled to pursue any other remedy which may be available to it.
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<PAGE>
Article 8
Arbitration
8.1 In the event of any dispute or disagreement between the parties as to the
interpretation of any provision of this Agreement (or the performance of
any obligations hereunder), except pursuant to Article 2.4, the matter,
upon written request of either party, shall be referred to representatives
of the parties for decision, each party being represented by one senior
officer who has no direct operational responsibility for the matters
contemplated by this Agreement and who is authorized to settle the dispute
without further consultation with any other officer (the
"Representatives"). The Representatives shall promptly meet in a good faith
effort to resolve the dispute. If the Representatives do not agree upon a
decision within thirty (30) days after reference of the matter to them,
each of the parties shall be free to exercise the remedies available to it
under Article 8.2.
8.2 Except as provided in Article 2.4, any controversy, dispute or claim
arising out of or relating in any way to this Agreement or the other
agreements contemplated hereby that cannot be resolved by negotiation shall
be settled exclusively by arbitration in Frankfurt am Main, Germany. The
arbitration shall be conducted in the English language. Such arbitration
shall be administered by the German Institution for Arbitration (the
"Arbitral Body") in accordance with the then prevailing Arbitration Rules
of the German Institution for Arbitration e.V. (DIS) (except as otherwise
provided herein), by three independent and impartial arbitrators, one of
whom shall be appointed by Hoechst and one of whom shall be appointed by
Dade. The fees and expenses of the Arbitral Body and the arbitrators shall
be shared equally by the parties and advanced by them from time to time as
required; provided that at the conclusion of the arbitration, the
arbitrators shall award costs and expenses (including the costs of the
arbitration previously advanced and the reasonable fees and expenses of
attorneys, accountants and other experts) and interest (at the rate of
eight per cent (8%) per annum) in accordance with Article 8.3 below. No
pre-arbitration discovery shall be permitted, except that the arbitrators
shall have the power in their sole discretion, on application by either
party, to order pre-arbitration examination of the witnesses and documents
that the other party intends to introduce in its case-in-chief at the
arbitration hearing. The arbitrators shall render their award within ninety
(90) days of the conclusion of the arbitration hearing. The arbitrators
shall not be empowered to award either party any punitive damages in
connection with any dispute between them arising out of or relating in any
way to this Agreement or the transactions arising hereunder, and each party
hereby irrevocably waives any right to recover such damages.
Notwithstanding anything to the contrary provided in this Article 8 and
without prejudice to the above procedures, either party may apply to any
court of competent jurisdiction for temporary injunctive or other
provisional judicial relief if such action is necessary to avoid
irreparable damage or to preserve the status quo until such time as the
arbitration panel is convened and available to hear such party's request
for temporary relief. The
-13-
<PAGE>
award rendered by the arbitrators shall be final and not subject to
judicial review and judgment thereon may be entered in any court of
competent jurisdiction.
8.3 The costs of the arbitration, including the cost of the respective
attorneys, witnesses and experts in connection with such arbitration shall
be borne by the parties in accordance with Sections 91 et seq. German Civil
Procedure Act (ZPO) as directed by the arbitrators.
Article 9
Miscellaneous
9.1 This Agreement shall replace all existing agreements, understandings or
other arrangements between the Acquired Entities on the one side and
Hoechst and the Service Entities on the other side relating to the subject
matter of this Agreement, but it shall not affect any existing agreements
with third parties. In addition, any agreements by and among the Acquired
Entities are neither affected hereby.
9.2 All notices, reports, and consents required or permitted to be given under
this Agreement shall be in writing and deemed given when hand delivered or
delivered by documented overnight delivery service, or sent by telecopy,
telefax, or other electronic transmission service, provided a confirmation
copy is also sent no later than the next business day by first class mail,
return receipt requested, to the party to whom the same is directed at its
address whereby Hoechst shall receive a copy of all notices to the Service
Entities to the address as set forth below and Dade shall receive a copy of
all notices to the Acquired Entities to the address as also set forth
below, or with respect to both, to such other address as such party shall
designate by notice under this Article 9.2:
Notices to Hoechst:
-------------------
Hoechst Aktiengesellschaft
Bruningstrasse 50
65926 Frankfurt a. M.
GERMANY
Attention: Contract Controlling
Facsimile No.: (+49-69) 305-16 404
-14-
<PAGE>
Notices to Dade:
----------------
Dade International Inc.
1717 Deerfield Road
P.O. Box 778
Deerfield, Illinois 60015
U.S.A.
Attention: General Counsel
Facsimile No.: (+1-847) 267-5376
with a copy (which shall not constitute notice hereunder) to:
-------------------------------------------------------------
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
U.S.A.
Attention: Steven G. Pagliuca
John Connaughton
Facsimile No.: (++1-617) 572-3274
and:
---
Kirkland & Ellis
199 Bishopsgate
London EC2M 3TY
ENGLAND
Attention: Karl S. Okamoto
David Patrick Eich
Facsimile No.: (+44-171) 814-6623
9.3 This Agreement may not be assigned by either party without the consent of
the other and any assignment without such consent shall be void, provided
that
(a) the Service Entities may assign this Agreement (including their
obligations hereunder) to (i) any of their subsidiaries, affiliates or
by means of their merger with or into any other company whether or not
they will be the surviving company or (ii) any entity with which they
establish a joint venture or similar business relationship; and
(b) the Acquired Entities may assign this Agreement under the same
circumstances as Hoechst or the Service Entities (cf. lit. (a) above),
provided that any such assignment does not materially alter the scope
or the nature of the Transition Services. It is understood that the
Acquired Entities are entitled to pass through to third parties which
assume or operate assets of the Acquired Entities the right to receive
Transitional
-15-
<PAGE>
Services. Furthermore, the Acquired Entities may assign their rights
pursuant to this Agreement (including their rights to indemnification)
to any of their or their affiliates' lenders as collateral security.
9.4 The construction, performance, and completion of this Agreement shall be
governed by the substantive law (and not the law of conflicts) of Germany.
Place of venue shall be Frankfurt a.M.
9.5 Whenever possible, each provision of this Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law. The
determination by any court of competent jurisdiction that one or more of
the sections or provisions of this Agreement are unenforceable shall not
invalidate this Agreement, and the decision of such court shall be given
effect so as to (i) limit, to the extent possible, the sections or
provisions of this Agreement which are deemed unenforceable and (ii)
replace any such sections or provisions with a section or provision which
accomplishes, to the extent possible, the original business purpose of such
provision in an enforceable manner. To the extent such determination has a
material impact upon the economic expectations of the parties hereto, the
parties agree to make appropriate modifications to this Agreement to take
such impact into account.
9.6 Except as required by law or compelled by legal process, neither party
shall, without the prior written consent of the other, disclose any of the
material terms or conditions contained herein.
9.7 Any amendment of or supplement to this Agreement, including this provision
and the Annexes, must be in writing to be valid and must be at least signed
by Hoechst and Dade.
9.8 Attached hereto as Annex 1.1 is a description of the Transitional Services
and related terms and conditions. Dade and Hoechst acknowledge and agree
that Annex 1.1 may not reflect the understanding of the parties hereto and
may, in particular, not be consistent with the representations and
warranties made by Hoechst pursuant to Articles 1.1. 1.6, 1.8, 1.9 and 4.1
herein. Dade and Hoechst agree that to the extent that Annex 1.1 is
inconsistent with the terms of this Agreement, the terms of this Agreement
shall govern. Dade and Hoechst shall amend Annex 1.1 such that the terms
and conditions set forth therein shall be consistent with the terms and
conditions set forth in this Agreement. Dade and Hoechst acknowledge and
agree that nothing in Annex 1.1 shall modify, amend or otherwise effect the
representations and warranties of Hoechst and the Service Entities set
forth in this Agreement or the rights or remedies of Dade or any Acquired
Entity hereunder.
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
HOECHST AKTIENGESELLSCHAFT
also acting on behalf of the companies
listed in Annex A
By: /s/ By:
----------------------------- ---------------------------
Name: -------------------------- Name:--------------------------
Title:-------------------------- Title:-------------------------
DIAGNOSTICS HOLDING, INC.
also acting on behalf of the companies
listed in Annex B
By: /s/
-----------------------------
Name-----------------------------
Title:---------------------------
-17-
<PAGE>
THIRD AMENDMENT TO THE
AMENDED AND RESTATED
EXCLUSIVE DISTRIBUTION AGREEMENT
This Agreement ("Agreement"), made and entered into as of May 27, 1998 (to
be effective in accordance with Section 5 hereof), by and between Dade Behring
Inc., a Delaware corporation ("Dade" or "Supplier"), and Allegiance Healthcare
Corporation, a Delaware corporation ("Allegiance" or "Distributor").
Witnesseth that:
A. Whereas, Dade and Allegiance, as assignee of Baxter Healthcare
Corporation ("Baxter"), are parties to that certain Amended and Restated
Exclusive Distribution Agreement dated as of September 15, 1995 (the
"Distribution Agreement"), as amended by that certain Amendment to Amended and
Restated Exclusive Distribution Agreement executed on and effective as of
September 26, 1996 (the "First Amendment"), and as further amended by that
certain Second Amendment to Amended and Restated Exclusive Distribution
Agreement executed on and effective as of October 1, 1997 (the "Second
Amendment" and, together with the Distribution Agreement and the First
Amendment, the "Amended Distribution Agreement"); and,
B. Whereas, Dade represents and warrants that, effective January 1, 1998,
it changed its corporate name from Dade International Inc. to Dade Behring Inc.;
C. Whereas, Dade and Allegiance desire to further amend the Amended
Distribution Agreement in order to add certain Dade Behring products;
Now, therefore, in consideration of the premises, the mutual covenants
contained herein, the representations of the parties, the benefits expected to
be derived hereunder and other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged, the parties, intending to be
legally bound, agree, subject to the conditions, terms and provisions hereof and
notwithstanding any contrary provisions in the Amended Distribution Agreement
except as expressly provided herein, to further amend the Amended Distribution
Agreement as follows:
Section 1. Products and Gross Profit Margin.
a. The following definition is hereby added to Section 1 of the
Distribution Agreement:
"Dade Behring Hemostasis Products" means the hemostasis products
formerly
<PAGE>
manufactured or sold by Behring Diagnostics GmbH which are now sold by
Supplier, including without limitation all of those products bearing
the Supplier's part number or catalog number indicated on Exhibit A-1
hereof.
b. The following sentence is hereby added as the second sentence in
the definition of "Products" in Section 1 of the Distribution Agreement:
From June 1, 1998 forward the Dade Behring Hemostasis Products shall
be considered a part of the Hemostasis class of Products for all
purposes under this Agreement, except as otherwise stated herein.
Section 2. Distributor's Duties.
a. The following sentence shall be added as the second from last
sentence of Section 5(c) of the Distribution Agreement:
Notwithstanding the immediately preceding sentence, with respect to
the Dade Behring Hemostasis Products, a single lot QAP inventory
program shall be any single lot of control or single lot of reagent
Products purchased for a specific customer or group of customers and
maintained in inventory by Distributor in order to meet customer
requirements for maintaining consistent manufacturing lot usage.
[Section 5(c) then continues: "Distributor shall pay..."]
b. The following sentence shall be added as the second sentence of
Section 5(e)(8) of the Distribution Agreement:
Notwithstanding the foregoing, Distributor shall administer the single
lot program with respect to the Dade Behring Hemostasis Products in
the same manner and to the same extent as that program was conducted
by Distributor for Hemostasis Products immediately prior to the
execution of the Third Amendment to this Agreement. [Section 5(e)(8)
then continues: "If at any time..."]
2
<PAGE>
Section 3. Supplier's Duties. The first sentence of Section 6(i) of the
Distribution Agreement is hereby amended to read in its entirety as follows:
Reimburse Distributor at Distributor's cost for all outdated Products
shipped after the date of this Agreement included within the Dade QAP
and College of American Pathologists ("CAP") programs and the single
lot reagents associated with those programs; in addition to the
foregoing, Supplier shall reimburse Distributor at Distributor's cost
for all single lot controls associated with the foregoing programs
with respect to outdated Dade Behring Hemostasis Products.
Section 4. Sales Plan and DIOH Plan. The last two sentences of the first
paragraph of Section 8(d) of the Distribution Agreement are hereby amended to
read in their entirety as follows:
Distributor and Supplier shall prepare an annual DIOH Plan presenting
data on a quarterly basis considering the Sales Plan, and an analysis
of past trends and planned process changes agreed upon by both
parties; provided that the Dade Behring Hemostasis Products shall not
be included in any such DIOH Plan. Exhibit B reflects guidelines for
DIOH Plans; provided, however, that for purposes of Exhibit B the Dade
Behring Hemostasis Products shall not be considered part of the
Hemostasis class of Products.
Section 5. Effective Date. This provisions of this Agreement shall become
effective on June 1, 1998 (the "Effective Date"); provided, however, that the
parties hereto acknowledge that Distributor has ordered and Supplier has
delivered and may deliver certain Dade Behring Hemostasis Products to
Distributor prior to June 1, 1998 with respect to which the pricing and payment
terms of the Amended Distribution Agreement, as amended by this Agreement, will
apply.
Section 6. Defined Terms. Terms not defined but used herein which are
defined in the Amended Distribution Agreement have the meaning ascribed to such
terms therein.
Section 7. Entire Agreement. This Agreement together with the Amended
Distribution Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all previous
3
<PAGE>
negotiations, commitments and writings with respect to such subject matter.
Section 8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Illinois
applicable to contracts made and to be performed in that state and the federal
laws of the United States of America applicable therein. Any lawsuit arising
from or related to this Agreement shall be brought before the United States
District Court for the Northern District of Illinois or an Illinois state court
sitting in Lake County, Illinois, or Cook County, Illinois. The parties hereby
consent to the jurisdiction of such courts. Nothing in this Section is intended
to alter the arbitration provisions of Section 16 of the Distribution Agreement.
Section 9. Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
Section 10. Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original for all purposes, but all of which together shall constitute
one and the same instrument.
Section 11. Confirmation. Except as expressly provided herein, the
provisions of the Amended Distribution Agreement remain in effect.
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized representatives to execute and deliver this Agreement as of the date
first above written.
DADE BEHRING INC.
By: /s/
--------------------------------
Name:
Title:
ALLEGIANCE HEALTHCARE CORPORATION
By: /s/
-------------------------------
Name:
Title:
5
<PAGE>
August 1, 1996
James Reid-Anderson
1160 North Sheridan Road
Lake Forest, IL 60045
Dear Jim:
I am pleased to offer you the position of Executive Vice President and Chief
Financial Officer for Dade International Inc.
In this position, you will report directly to me and will be responsible for the
corporate-wide management of the financial function as well as serve as a member
of Dade's leadership team. My careful consideration of your requests and
suggestions is reflected in the terms of employment offered here:
1) Your annual salary will be $330,000 per year. Your start date will be as
soon as possible and mutually agreed upon. It will not be later than
September 15, 1996.
2) You will participate in the 1996 Management Incentive Compensation Plan.
Your target bonus will be 45% of your annual salary ($148,500). For 1996 a
minimum of $148,500 will be paid. The maximum payout in future years under
this plan is 230% of your target bonus or $341,550. Overachievement is
based on both company and individual performance. Your overachievement for
1996 will be prorated based on months of service. Specific details and a
plan document will be available following the Board of Directors' approval
of the 1996 Management Incentive Compensation Plan which is in process.
3) You and your dependents will be eligible to participate in the various Dade
employee benefit plans. You will also be eligible to participate in the
Dade retirement plans consistent with Dade policy.
4) As a senior executive of the Company, you will also be eligible to
participate in Dade's supplemental pension and 401 (K) programs.
5) You will be eligible for Dade's executive physical and vacation programs as
defined in corporate policy.
6) Your office will be in the headquarters building located at 1717 Deerfield
Road, Deerfield, Illinois.
<PAGE>
7) You will be eligible to participate in Dade's Long-Term Incentive Plan
("LTI"). This is the equity plan established by the Board of Directors for
the senior executives of Dade International. As we have discussed, and as
I hope has been echoed by the team and our shareholders, we truly believe
the Dade platform offers the opportunity for substantial rewards. As a
senior executive, your participation in the LTI will include the
opportunity to invest directly in Dade stock instruments as follows:
I. Purchased Equity
<TABLE>
<CAPTION>
Grant Price/Share Cost
-------------------------------------------------
<S> <C> <C> <C>
Common L 400 $44.00 $17,600
Common 3,600 $ 4.00 $14,400
Up Front Investment $32,000
</TABLE>
II. Stock Options
<TABLE>
<CAPTION>
Grant Price/Share
-------------------------------------------------
<S> <C> <C>
Time Options 47,000 $ 4.00
Performance Options
Tranche I 11,000 $ 7.00
Tranche II 11,000 $16.00
</TABLE>
Notes:
A. 40,000 time options vest on 12/31/96, or upon the sale of the company
before a public offering.
B. 7,000 time options vest 20% per year starting on May 7, 1997.
C. If there is no public market for the shares, and employment is
terminated for any reason other than cause, all vested stock will be
subject to policy as stated in the Dade Long-Term Incentive Plan.
8) Should you be involuntarily terminated for any reason other than material
dishonesty or material gross misconduct, the company will provide to you
salary continuation for a period of either 18 months or until you secure
another position, whichever comes first.
Consistent with Dade's employment policies, this offer is contingent upon you
completing the formal application of employment, appropriate background check
and passing a drug screening test.
<PAGE>
Jim, I am delighted by the prospect of having you as a part of my management
team. We have a once in a lifetime opportunity to build a truly great company
while achieving significant personal rewards. Your talents and energy will make
a significant difference for Dade International. I look forward to you joining
the team.
Best regards,
/s/Scott T. Garrett
- --------------------------
Scott T. Garrett
P.S.: Your early response and commitment would be greatly appreciated. I would
like to inform the Board of your decision on Friday. I will make sure that
confidentiality is maintained.
I accept this offer:
/s/James Reid-Anderson August 2, 1996
- -------------------------------- -------------------------------------
James Reid-Anderson Date
<PAGE>
MANAGING DIRECTOR - EMPLOYMENT AGREEMENT
Dade Behring Holding GmbH, Frankfurt am Main,
Germany, ("the Company"), represented by its sole shareholder
Dade Behring, Inc.
Deerfield, Illinois
USA
and
Mr. Friedhelm Blobel
754 Ashby
Palo Alto, California
USA
Preamble
1. The Company is part of the Dade Behring Group (Dade Behring Holdings, Inc.,
and its subsidiaries).
2. Friedhelm Blobel has been employed with companies of the former Behring
Group since January 1996, most recently with Behring Diagnostics, Inc.,
(now named Syva Company), San Jose, California, USA.
3. Effectively October 5, 1998, (the "Effective Date") Friedhelm Blobel (the
"Managing Director") shall be appointed Managing Director of the Company.
Friedhelm Blobel shall also be responsible for the global Microbiology
business which has major operations in the USA and Germany.
4. All prior employment and service agreements of the Managing Director with
the Company, with other companies of the former Behring Group and of the
present Dade Behring Group shall terminate as of the Effective Date,
including the employment contract Behring Diagnostics, Inc.
5. As of the Effective Date, the Company and the Managing Director enter into
the following Managing Director Employment Agreement, of which this
Preamble is an integral part:
I.
Position and Scope of Duties
1. The Managing Director shall be appointed managing director of the Company.
2. The Managing Director shall conduct the business of the Company in
accordance with statutory law, the provisions of the Articles of the
Company and in
<PAGE>
accordance with the general or specific directives and instructions of the
shareholders meeting.
3. In connection with this Agreement and without additional remuneration, the
Managing Director shall, upon request of the Company, also assume functions
in other enterprises which are affiliated with the Company ((S) Stock
Companies Act). This applies accordingly with respect to honorary
functions in associations and professional organizations, in which the
Company is a member. The Managing Director shall act as Group, President.
II.
Other Activities
1. The Managing Director will devote all his working time, knowledge and
skills to the business of the Company. Any other activity which is for
remuneration or which normally would be for remuneration, considering its
type and scope, and the direct or indirect participation in a business
having the same or similar business purposes, or any activity in the
supervisory board of such business, or the participation as general partner
in any commercial partnership, regardless of its purpose, requires in each
specific instance the prior written approval of the shareholders' meeting.
This provision shall also apply to activities and to the assumption of
positions in associations and professional organizations.
2. Scientific and literary activity is permitted, provided that it does not
adversely affect the working capacity and time of the Managing Director and
does not divulge confidential information.
3. Publications and lectures affecting the interests of the Company or any of
its affiliated companies ((S) Stock Companies Act) require the prior
approval of the shareholders meeting.
III.
Compensation and Expenses, Relocation
l. The Managing Director shall be remunerated as follows:
(a) He shall receive an annual fixed salary at a rate of $270,000 gross (in
words: two hundred seventy thousand US dollars) (the "Base Salary").
In the year in which this Agreement commences, as well as the year it
terminates, the Fixed Salary shall be paid pro rata temporis. The Base
Salary shall be paid in 26 equal installments. The Base Salary shall
be regularly reviewed, in line with Company's practices.
(b) The Managing Director shall be eligible to participate in the Dade
Behring Management Incentive Compensation Plan ("MICP"), as amended
each fiscal year. For fiscal year 1998, the full year 1998 incentive
target is 50%
<PAGE>
of the Base Salary which represents US $135,000. Payments under MICP
shall be made only if and to the extent that the requirements specified
in the respective MICP have been met.
2. The Managing Director shall be eligible to participate in the Dade Behring
Holdings, Inc., Management Stock Option Plan, as established by the Board
of Directors of Dade Behring Holdings, Inc., for the senior executives of
the Dade Behring Group companies.
In particular, the Managing Director shall be offered a grant of stock
options of 64,000 with a strike price of US $34.50 per share, subject and
pursuant to the Dade Behring Holdings, Inc. Management Stock Option Plan.
These options will vest over a five year period in 20% increments. The
first 20% - 12,800 shares will vest on October 1, 1998.
3. The payment of the Base Salary is full compensation for all activities of
the Managing Director including such out of the usual office hours.
4. The Company shall reimburse the Managing Director for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's prevailing policies with
respect to travel, entertainment, and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of
such expenses.
5. As a US based employee, the Managing Director shall be eligible to
participate in the US Dade Behring employee benefit programs.
6. The Managing Director's participation in the German Pensionskasse shall be
grandfathered for the duration of this contract.
7. The Company shall pay for the relocation costs according to the Company's
relocation policy for the Managing Director to relocate back from the U.S.
to Germany upon termination of this contract.
IV.
Inventions, Copyright Protected Works
With respect to inventions, proposals for technical improvements an copyright
protected works of the Managing Director, the regulations applicable to
employees shall apply accordingly.
V.
Vacation
The Managing Director is entitled to an annual vacation of 4 weeks. The
scheduling of the vacation shall be agreed upon by the Managing Director and the
Chief Executive
<PAGE>
Officer of Dade Behring Inc. taking into consideration the personal wishes of
the Managing Director and the interests of the Company. Vacation not taken
within three months after the end of a calendar year shall be forfeited without
any right of compensation unless otherwise agreed in writing.
VI.
Payment in Case of Illness
In the case of incapacity to work due to illness or accidental disability, the
Company shall continue to pay the Managing Director the remuneration hereunder
for a period of up to 12-months.
VII.
Secrecy
1. The Managing Director shall not, during the term of his employment and
thereafter, disclose to any third party any of the business or operational
secrets of the Company or any affiliated company which have been entrusted
or otherwise become known to him, and he shall not utilize such Buenos or
operational secrets himself. The term "business and operational secrets"
includes all business, operational, organizational and technical knowledge,
transactions and information which is known only to a limited number of
persons and which according to the intentions of the Company is not
supplied to become known to the public.
2. Business records of any kind, including private notes concerning the
company's affairs and activities shall be used only for business purposes.
3. Business and operational records which are in the possession of the
Managing Director within the scope of his employment shall be carefully
kept and shall be returned to the Company at any time upon request, at the
latest upon termination of the employment. The same applies to any other
items owned or controlled by the Company. The assertion of any right of
retention is excluded.
VIII.
Term of Employment
1. The Employment agreement shall commence on the Effective Date and shall be
for a two-year period. This contract is subject to renewal one year prior
to the contract expiration. The Managing Director may terminate this
Agreement with a twelve months notice period.
2. The Company may at any time temporarily or permanently release the Managing
Director from his duties and/or remove him from his office as managing
director. The remuneration claims of the Managing Director remain
unaffected.
<PAGE>
3. The right to termination with immediate effect for a compelling reason
remains unaffected.
IX.
Miscellaneous
1. This Agreement embodies the entire understanding between the parties
relating to the employment. There are no ancillary agreements. Any
amendments or additions to this Agreement shall be in writing to be
effective.
2. Should any provision of this Agreement be or become void, the validity of
the other provision shall not be affected thereby.
3. This Agreement shall be governed by German law. However, Clause III.2 -
Stock Option Grant-shall be governed by the laws applicable to the Dade
Behring Holdings, Inc. management Stock Option Plan.
On behalf of the Company:
Place: Marburg, Germany
----------------------------------------
Date: August 19th 1998
------------------------------------------
Signature: /s/Thomas E. Hill
--------------------------------------
Thomas E. Hill
Senior Vice President
Human Resources of Dade Behring, Inc.
Managing Director:
Place: Marburg, Germany
----------------------------------------
Date: August 19th 1998
------------------------------------------
Signature: /s/Friedhelm Blobel
-------------------------------------
Friedhelm Blobel
<PAGE>
Exhibit 10.38
January 8, 1997
Marc Casper
56 St. Botolph St.
#404
Boston, MA 02116
Dear Marc:
I am pleased to confirm an employment offer on behalf of Dade International
Inc., as Executive Vice President-International effective January 14, 1997.
In this position, you will report directly to the Chief Executive Officer and
will be responsible for all aspects of the Company's international business.
You will be a member of Dade's Executive Committee and a Corporate Officer of
Dade International Inc. The terms of employment are as follows:
1. Your annual base salary will be $ 180,000 per year.
2. You will participate in the 1997 Management Incentive Compensation Plan
(MICP). Your target bonus will be 45% of your annual base salary
($81,000). Overachievement is based on both company and individual
performance. Enclosed for your reference is a copy of the 1996 MICP
brochure. The 1997 MICP brochure will be provided to you as soon as it
becomes available.
3. You and your dependents will be eligible to participate in the various Dade
employee benefit plans. A benefits overview brochure is enclosed for your
review. You will receive Dade Employee Benefit Program enrollment
information from the Employee Benefits Center within one month of your
start date. Should you choose to elect health insurance coverage, it will
be effective the first of the month following thirty (30) days of
employment. Our Human Resources staff is available to assist you with any
questions you may have in the interim.
4. Your office will be in the headquarters building located at 1717 Deerfield
Road, Deerfield, Illinois.
5. The company will reimburse you for rental cost of a temporary executive
apartment and a Company leased car in Chicago consistent with company
policy. You will be provided coach airfare tickets for two trips per month
from Chicago to Boston (or vice versa). This will be applicable for you to
fly back to Boston, or for your wife to fly to Chicago. There may be tax
implication for you if we reimburse the airfare for your wife because the
reimbursement amount will be
<PAGE>
considered as imputed income to you. The duration of this arrangement will
be one year and we will re-evaluate the situation after such time.
6. You will be eligible to participate in Dade's Long-Term Incentive Plan
("LTI"). This is the equity plan establish by the Board of Directors for
the senior executives of Dade International. Upon your acceptance of this
employment offer, Dade will recommend to the Board of Directors that you be
granted the following:
<TABLE>
<CAPTION>
Purchased Equity Grant Cost
<S> <C> <C>
Common L @ $44.00 1,250 $55,000
Common @ $4.00 11,250 $45,000
Upfront Investment $100,000
Stock Options Grant
Time Options @ $4.00 20,000
Performance Options - Tranche I @ $7.00 15,000
Performance Options - Tranche II @ $16.00 15,000
</TABLE>
We truly believe the Dade platform offers the opportunity for substantial
rewards, dependent upon the ultimate cash return to original investors as
expressed as a multiple of the original equity investment. Summary details
of the DMEP are available in the enclosed brochure. Should you have
further questions regarding DMEP, please call me directly.
7. Should you be involuntarily terminated for any reason other than material
dishonesty or material gross misconduct, the company will provide you
salary continuation for a period of either 6 months or until you secure
another position, whichever comes first.
The employment offer, if accepted, would create an employment-at-will
relationship between you and Dade International. It is not intended nor should
it be construed as a contract of continued employment. The employment offer is
also subject to your compliance with the following requirements. Please read
these carefully and contact me at 847-267-5330 if you need further
clarification.
I. Employment Agreement - We are offering you a position of trust that
requires the maintenance of confidence. Therefore, it will be necessary
for you to execute an employment agreement prior to commencing employment.
Please review the attached employment agreement and return a signed copy on
or before your start date.
II. Employment Eligibility Verification (Form I-9) - All employees are required
to prove their eligibility to work in the United States as required
<PAGE>
by the U.S. Immigration Law. Please complete section I of the enclosed form
I-9, and return it with either one document from list A or one document
each from list B or C.
III. Pre-employment Drug Screening - Your employment offer is contingent upon
passing a confidential urine drug screening. Enclosed is information on
where you should go to have this done and what information will be
requested of you. Take the chain of custody form provided and a picture ID
with you to the clinic. Please complete your drug screen at least one week
prior to your start date. If you have any questions regarding this, please
contact Sue Canar, Human Resource Manager at 847-267-7010.
IV. Employment Application - A completed Dade International application is
required of every employee. Please complete the enclosed application, and
return it on or before your start date.
Marc, I am delighted by the prospect of having you as a part of the management
team. We have a once in a lifetime opportunity to build a truly great company
while achieving significant personal rewards. Your talents and energy will make
a significant difference for Dade International. I look forward to you joining
the team.
Best regards,
/s/ Thomas E. Hill
Thomas E. Hill
Senior VP Human Resources
Dade International Inc.
enclosures
I acknowledge and accept this offer:
/s/ Marc Casper 1/13/97 076 50 9829
- ----------------------- -------------- ----------------
Marc Casper (signature) Date Social Security No.
<PAGE>
Exhibit 10.39
Date: July 20, 1998
Subject: Separation Arrangement
To: Marc Casper
From: Steve Barnes /s/
Personal & Confidential
-----------------------
Dear Marc:
In consideration for your continued commitment to Dade Behring, the following
separation arrangement will be provided to you in the event you are
involuntarily terminated, except for material dishonesty:
. The company will provide you with salary and benefits continuation for a
period of six months from your termination date. If you have not secured
employment with another employer after the first six months, you will
receive up to an additional six months salary and benefits continuation
until you secure employment with another employer, whichever occurs first.
. You will be entitled to any other separation arrangements provided by
company policy such as full executive outplacement services to assist you
in securing new employment.
Upon an event of termination, Dade Behring or a successor employer will initiate
the above separation arrangement.
<PAGE>
Exhibit 10.40
EXECUTIVE AGREEMENT
-------------------
EXECUTIVE AGREEMENT (this "Agreement") effective as of October 1, 1997, by
and between Dade Behring Holdings, Inc., a Delaware corporation (the "Company")
and Steve Barnes ("Executive"). Capitalized terms used in this Agreement without
definition herein shall have the meaning given to such terms in the Plan (as
defined below).
Pursuant to the Company's 1997 Executive Stock Purchase and Option Plan
(the "Plan"), the Company and Executive desire to enter into an agreement
pursuant to which the Company will grant to Executive options to acquire 180,000
shares of Common, which options will be subject to time vesting (the "Time
Options"). The Time Options are sometimes hereinafter referred to individually
as an "Option" and collectively as the "Options." All shares of Common Stock now
or hereafter acquired by Executive pursuant to the Plan are referred to herein
as the "Executive Stock".
The parties hereto agree as follows:
1. Stock Options.
(a) Time Option Grants. The Company hereby grants to Executive, pursuant
to the Plan, the Time Options to purchase 180,000 shares of Common (the "Time
Options") with an exercise price per share of $16.00 (the "Option Price"). The
shares issued upon exercise of the Time Options are referred to herein as the
"Time Option Shares". The number of Time Option Shares and the Option Price will
be equitably adjusted for any stock split, stock dividend, reclassification or
recapitalization of the Company which occurs subsequent to the date of this
Agreement.
(b) Exercisability. Notwithstanding any provision to the contrary in the
Plan, on each date set forth below, the Time Options will vest, and thus become
exercisable with respect to the cumulative percentage of Time Option Shares set
forth opposite such date if Executive is, and has been, continuously employed by
the Company or any of its Subsidiaries from the date of this Agreement through
such date:
Cumulative Percentage
Date of Time Options Vested
---- ----------------------
June 30, 1998 50%
December 31, 1998 75%
December 31, 1999 100%
<PAGE>
; provided that upon any Change in Control (as defined below) or the
consummation of an Approved Sale of the Company (as defined in paragraph 6
below), so long as Executive was employed by the Company or any of its
Subsidiaries on the day immediately prior to such Change in Control or
consummation of the Approved Sale, as the case may be, 100% of the Time Options
granted to Executive shall become vested and immediately exercisable (including
any Time Options previously vested pursuant to this paragraph 1(b)). For
purposes hereof, a "Change in Control" shall be deemed to occur upon the first
date that the Investors and their affiliates collectively cease to own at least
50% of the aggregate number of shares of common stock of the Company that they
own on the date hereof (as adjusted for stock splits, stock dividends and
recapitalization and for exchanges in connection with a merger, consolidation,
reorganization or sale).
(c) Securities Laws Restrictions. Executive represents that when
Executive exercises the Options he will be purchasing Executive Stock for
Executive's own account and not on behalf of others. Executive understands and
acknowledges that federal and state securities laws govern and restrict
Executive's right to offer, sell or otherwise dispose of any Executive Stock
unless Executive's offer, sale or other disposition thereof is registered under
the Securities Act of 1933, as amended (the "1933 Act") and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration thereunder. Executive agrees that he
will not offer, sell or otherwise dispose of any Executive Stock in any manner
which would: (i) require the Company to file any registration statement (or
similar filing under state law) with the Securities and Exchange Commission or
to amend or supplement any such filing or (ii) violate or cause the Company to
violate the 1933 Act, the rules and regulations promulgated thereunder or any
other state or federal law. Executive further understands that the certificates
for any Executive Stock Executive purchases will bear the legend set forth in
paragraph 4 hereof or such other legends as the Company deems necessary or
desirable in connection with the 1933 Act or other rules, regulations or laws.
(d) Expiration. The Options will expire on the earlier of the tenth
anniversary of the date hereof or the date of termination of Executive's
employment with the Company or any of its Subsidiaries for any reason (the
"Termination Date"); provided that any portion of the Options which has not
vested and become exercisable prior to the Termination Date shall expire on the
Termination Date and may not be exercised under any circumstance; provided
further that any portion of the Options which has vested and become exercisable
prior to the Termination Date pursuant to the terms of the Plan and this
Agreement will expire on the earlier of (i) (A) 30 days after the Termination
Date if Executive's employment with the Company or any of its Subsidiaries is
terminated for Cause or without Good Reason (as each such term is defined in
that certain Employment Agreement dated as of the date hereof between Dade
International Inc. and Executive) and (B) three years after the Termination Date
if Executive's employment with the Company or any of its Subsidiaries is
terminated for any reason other than as specified in clause (A) above and (ii)
the tenth anniversary of the date hereof. In the event of Executive's death or
Disability (as defined in Executive's employment agreement with the Company of
even date herewith) the portion of the unvested Options which would have
-2-
<PAGE>
vested pursuant to paragraph 1(b) on the next succeeding vesting date after the
date of such death or Disability had Executive still been employed by the
Company on such date shall be deemed to have vested.
(e) Non-Transferability of Option. The Options are personal to Executive
and are not transferable by Executive. Only Executive or his estate or heirs is
entitled to exercise the Options.
(f) Payment of Cash Dividends. If the Company pays any cash dividends
with respect to the Common prior to the Termination Date, then with respect to
Time Options which have not been exercised and have not expired, the Company
shall provide Executive with a substantially equivalent economic package (which
substantially equivalent economic package shall be determined in the sole
discretion of the Board, and may consist of a reduction in the Option Price, a
payment in cash, the grant of additional employee benefits or otherwise) as if
Executive had been a holder of the Common issuable upon exercise of the Time
Options at the time such cash dividends are paid. Notwithstanding the foregoing,
if any such Time Options have not vested at the time the Company pays any such
cash dividends, the Company's obligation to provide the aforementioned
substantially equivalent economic package shall arise if, and only if, such Time
Options become vested.
2. Repurchase Option.
(a) In the event that Executive is no longer employed by the Company or
any of its Subsidiaries for any reason, the Executive Stock, whether held by
Executive, or one or more transferees, will be subject to repurchase by the
Company and the Investors (solely at their option) pursuant to the terms and
conditions set forth in the Plan (the "Repurchase Option").
(b) Notwithstanding any limitation in the Plan to the contrary, in the
event that the Company and/or the Investors exercise the Repurchase Option, in
addition to those procedures set forth in the Plan, the procedures set forth in
this Section 2(b) shall apply to any repurchase of Executive Stock pursuant to
the Repurchase Option. If, within 15 days after the delivery of a Determination
Notice to the holder(s) of the Executive Stock, Executive delivers to the Board
a written notice stating that he objects to the Fair Market Value stated in the
Determination Notice (an "Objection Notice"), Fair Market Value shall mean a
fair market value selected by either a New York Stock Exchange member firm, the
business valuation group of any "Big 6" accounting firm or either of the
valuation firms of Houlihan Lokey or Murray Devine selected by the Board
(provided that any such firm or business valuation group is an Independent Third
Party) (the "Independent Valuation Expert") which is equal to the midpoint of
the range of fair market values for the Company, divided by the number of shares
of stock of the Company then outstanding on a fully diluted basis, as determined
by the Independent Valuation Expert; provided that Executive will not be
permitted to deliver an Objection Notice in connection with a Determination
Notice which states a fair market value which
-3-
<PAGE>
is greater than or equal to any previous fair market value determination by an
Independent Valuation Expert delivered to the Company no more than one (1) year
prior to the delivery of the Repurchase Notice. If Executive delivers an
Objection Notice objecting to the Fair Market Value set forth in a Repurchase
Notice which also constitutes a Determination Notice, the Company may elect to
revoke the Repurchase Notice by delivering written notice thereof (a "Revocation
Notice") to such holder(s) within ten (10) days of receipt of the valuation by
the Independent Valuation Expert. If the Company does not deliver a Revocation
Notice, the repurchase of such Executive Stock shall be effected on the basis of
the Fair Market Value (to the extent applicable) determined pursuant to the Plan
and this Section 2(b).
3. Restrictions on Transfer.
(a) Transfer of Executive Stock. Executive will not sell, pledge or
otherwise transfer any interest in any shares of Executive Stock, except
pursuant to (i) the provisions of paragraphs 2, 3(b), 6 or 7 hereof or (ii)
pursuant to the provisions of the Plan.
(b) Certain Permitted Transfers. The restrictions contained in this
paragraph 3 will not apply with respect to transfers of Executive Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among
Executive's Family Group (as defined below), provided that the restrictions
contained in this paragraph 3 will continue to be applicable to the Executive
Stock after any such transfer and the transferees of such Executive Stock shall
agree in writing to be bound by the provisions of this Agreement. "Family Group"
means Executive's spouse and descendants (whether natural or adopted) and any
trust solely for the benefit of Executive and/or Executive's spouse and/or
descendants. Any transferee of Executive Stock pursuant to a transfer in
accordance with the provisions of this subparagraph 3(b) is herein referred to
as a "Permitted Transferee." Upon the transfer of Executive Stock pursuant to
this paragraph 3(b), the Executive will deliver a written notice thereof (the
"Transfer Notice") to the Company. The Transfer Notice will disclose in
reasonable detail the identity of the Permitted Transferee(s).
-4-
<PAGE>
4. Additional Restrictions on Transfer.
(a) The certificates representing the Executive Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EXECUTIVE AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND A
CERTAIN EMPLOYEE OF THE COMPANY DATED AS OF OCTOBER 1, 1997, A COPY OF
WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Stock may sell, transfer or dispose of any
Executive Stock (except pursuant to an effective registration statement under
the 1933 Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company (which counsel shall
be reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such transfer.
5. Definition of Executive Stock. For all purposes of this Agreement,
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company and purchasers pursuant to an
offering registered under the 1933 Act or purchasers pursuant to a Rule 144
transaction (other than a Rule 144(k) transaction occurring prior to the time of
a closing of an Initial Public Offering (as defined in Section 7 below)), and
each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to shares of Executive Stock by way of a stock split, stock
dividend or other recapitalization.
-5-
<PAGE>
6. Sale of the Company.
(a) In the event of an Approved Sale (as such term is defined in that
certain Amended and Restated Stockholders Agreement dated as of October 1, 1997,
by and among the Company and its stockholders listed therein, as the same may be
amended or otherwise modified from time to time (the "Stockholders Agreement")),
each holder of Executive Stock will vote for, consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as (i) a merger
or consolidation, each holder of Executive Stock will waive any dissenters'
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) a sale of stock, each holder of Executive Stock will agree
to sell all of his shares of Executive Stock and rights to acquire shares of
Executive Stock on the terms and conditions approved by the Board and the
holders of a majority of the Common Stock then outstanding. Each holder of
Executive Stock will take all necessary or desirable actions in connection with
the consummation of the Approved Sale as requested by the Company.
(b) The obligations of the holders of Common Stock with respect to the
Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given a reasonable opportunity upon reasonable prior notice to
exercise such rights prior to the consummation of the Approved Sale and
participate in such sale as holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter into
any negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities Exchange Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Executive Stock will, at the request of
the Company, appoint a purchaser representative (as such term is defined in Rule
501) reasonably acceptable to the Company. If any holder of Executive Stock
appoints a purchaser representative designated by the Company, the Company will
pay the fees of such purchaser representative, but if any holder of Executive
Stock declines to appoint the purchaser representative designated by the
Company, such holder will appoint another purchaser representative, and such
holder will be responsible for the fees of the purchaser representative so
appointed.
-6-
<PAGE>
(d) Executive and the other holders of Executive Stock (if any) will bear
their pro-rata share (based upon the number of shares sold) of the costs of any
sale of Executive Stock pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this paragraph 6 will terminate upon the closing of
an Initial Public Offering (as defined below).
7. Public Offering. In the event that an Initial Public Offering (as
defined in the Stockholders Agreement) is approved pursuant to Section 6 of the
Stockholders Agreement, the holders of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Initial Public
Offering. In the event that such Initial Public Offering is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the Common Stock structure will adversely affect the marketability
of the offering, each holder of Executive Stock will consent to and vote for a
recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters, the Board and holders of a majority
of the shares of Common Stock then outstanding find acceptable and will take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the resulting
securities reflect and are consistent with the rights and preferences set forth
in the Company's Certificate of Incorporation as in effect immediately prior to
such Initial Public Offering.
8. Termination of Provisions Relating to Executive Stock. The provisions
of paragraphs 2 and 3, and the rights of Executive under paragraphs 7 and 8 of
the Plan, will terminate upon the first to occur of (i) an Approved Sale and
(ii) (A) an Initial Public Offering and (B) the Investors and their affiliates
collectively ceasing to own at least 50% of the aggregate number of shares of
common stock of the Company that they own on the date hereof (as adjusted for
stock splits, stock dividends and recapitalization and for exchanges in
connection with a merger, consolidation, reorganization or sale).
MISCELLANEOUS PROVISIONS
------------------------
9. Notices. Any notice provided for in this Agreement must be in writing
and must be personally delivered, received by certified mail, return receipt
requested, or sent by guaranteed overnight delivery service, to the Investors at
the addresses indicated in the Company's records and to the other recipients at
the address indicated below:
-7-
<PAGE>
To the Company:
Dade Behring Holdings, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Stephen G. Pagliuca
John Connaughton
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
To Executive:
Steve Barnes
One Jackson Circle
Franklin, MA 02038
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attn: Steven P. Rosenthal, Esq.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
10. Representations and Warranties. In connection with the grant of the
Options hereunder, Executive represents and warrants to the Company that:
(a) This Agreement constitutes the legal, valid and binding obligation of
Executive, enforceable in accordance with its terms, and the execution, delivery
and performance of this Agreement by Executive does not and will not conflict
with, violate or cause a breach of any agreement, contract or instrument to
which Executive is a party or any judgment, order or decree to which Executive
is subject.
(b) As an inducement to the Company to grant the Options to Executive, as
a condition thereto, Executive acknowledges and agrees that neither the grant of
the Options to Executive nor any provision contained herein shall entitle
Executive to remain
-8-
<PAGE>
in the employment of the Company or its Subsidiaries or affect the right of the
Company or its Subsidiaries to terminate Executive's employment at any time for
any reason.
(c) The Company and Executive acknowledge and agree that this Agreement
has been executed and delivered and the Options have been granted hereunder, in
connection with and as part of the compensation and incentive arrangements among
the Company, Dade International Inc. and Executive and, that except as otherwise
expressly provided in this Agreement, the issuance of the Options and the
issuance of any Executive Stock upon the exercise of any of the Options is
subject to all of the terms and conditions contained in the Plan.
11. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
12. Complete Agreement. This Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
13. Counterparts. This Agreement may be executed in separate counterparts
(any one of which may be by facsimile), each of which will be deemed to be an
original and all of which taken together will constitute one and the same
agreement.
14. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company, the Investors
and their respective successors and assigns, provided that Executive may not
assign any of his rights or obligations, except as expressly provided by the
terms of this Agreement.
15. Governing Law. The corporate law of Delaware will govern all issues
concerning the relative rights of the Company and its stockholders. All other
issues concerning the enforceability, validity and binding effect of this
Agreement will be governed by and construed in accordance with the laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the law of any jurisdiction other than the
State of Illinois.
16. Remedies. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this Agreement
and
-9-
<PAGE>
that any party hereto will have the right to injunctive relief, in addition to
all of its other rights and remedies at law or in equity, to enforce the
provisions of this Agreement.
17. Effect of Transfers in Violation of Agreement. The Company will not
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares, to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
have been transferred in violation of this Agreement.
18. Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company, Executive
and the Investors who hold 70% of the Common Stock held by the Investors.
19. Third Party Beneficiaries. The parties hereto acknowledge and agree
that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
20. Dade Behring Holdings, Inc. 1997 Executive Stock Purchase and Option
Plan. Except as otherwise expressly set forth in this Agreement, the grant of
Options and issuance of Executive Stock hereunder is pursuant to, and subject to
all the terms and conditions of, the Plan, attached hereto as Exhibit A.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
DADE BEHRING HOLDINGS, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
/s/
----------------------------------------
STEVE BARNES
-10-
<PAGE>
Exhibit 10.41
EXECUTIVE AGREEMENT
-------------------
EXECUTIVE AGREEMENT (this "Agreement") effective as of October 1, 1997, by
and between Dade Behring Holdings, Inc., a Delaware corporation (the "Company")
and Jim Reid-Anderson ("Executive"). Capitalized terms used in this Agreement
without definition herein shall have the meaning given to such terms in the Plan
(as defined below).
Pursuant to the Company's 1997 Executive Stock Purchase and Option Plan
(the "Plan"), the Company and Executive desire to enter into an agreement
pursuant to which the Company will grant to Executive options to acquire 20,000
shares of Common, which options will be subject to time vesting (the "Time
Options"). The Time Options are sometimes hereinafter referred to individually
as an "Option" and collectively as the "Options." All shares of Common Stock now
or hereafter acquired by Executive pursuant to the Plan are referred to herein
as the "Executive Stock".
The parties hereto agree as follows:
1. Stock Options.
(a) Time Option Grants. The Company hereby grants to Executive, pursuant
to the Plan, the Time Options to purchase 20,000 shares of Common (the "Time
Options") with an exercise price per share of $16.00 (the "Option Price"). The
shares issued upon exercise of the Time Options are referred to herein as the
"Time Option Shares". The number of Time Option Shares and the Option Price will
be equitably adjusted for any stock split, stock dividend, reclassification or
recapitalization of the Company which occurs subsequent to the date of this
Agreement.
(b) Exercisability. Notwithstanding any provision to the contrary in the
Plan, on each date set forth below, the Time Options will vest, and thus become
exercisable with respect to the cumulative percentage of Time Option Shares set
forth opposite such date if Executive is, and has been, continuously employed by
the Company or any of its Subsidiaries from the date of this Agreement through
such date:
<TABLE>
<CAPTION>
Cumulative Percentage
Date of Time Options Vested
---- ----------------------
<S> <C>
June 30, 1998 50%
December 31, 1998 75%
December 31, 1999 100%
</TABLE>
<PAGE>
; provided that upon any Change in Control (as defined below) or the
consummation of an Approved Sale of the Company (as defined in paragraph 6
below), so long as Executive was employed by the Company or any of its
Subsidiaries on the day immediately prior to such Change in Control or
consummation of the Approved Sale, as the case may be, 100% of the Time Options
granted to Executive shall become vested and immediately exercisable (including
any Time Options previously vested pursuant to this paragraph 1(b)). For
purposes hereof, a "Change in Control" shall be deemed to occur upon the first
date that the Investors and their affiliates collectively cease to own at least
50% of the aggregate number of shares of common stock of the Company that they
own on the date hereof (as adjusted for stock splits, stock dividends and
recapitalization and for exchanges in connection with a merger, consolidation,
reorganization or sale).
(c) Securities Laws Restrictions. Executive represents that when Executive
exercises the Options he will be purchasing Executive Stock for Executive's own
account and not on behalf of others. Executive understands and acknowledges that
federal and state securities laws govern and restrict Executive's right to
offer, sell or otherwise dispose of any Executive Stock unless Executive's
offer, sale or other disposition thereof is registered under the Securities Act
of 1933, as amended (the "1933 Act") and state securities laws or, in the
opinion of the Company's counsel, such offer, sale or other disposition is
exempt from registration thereunder. Executive agrees that he will not offer,
sell or otherwise dispose of any Executive Stock in any manner which would: (i)
require the Company to file any registration statement (or similar filing under
state law) with the Securities and Exchange Commission or to amend or supplement
any such filing or (ii) violate or cause the Company to violate the 1933 Act,
the rules and regulations promulgated thereunder or any other state or federal
law. Executive further understands that the certificates for any Executive Stock
Executive purchases will bear the legend set forth in paragraph 4 hereof or such
other legends as the Company deems necessary or desirable in connection with the
1933 Act or other rules, regulations or laws.
(d) Expiration. The Options will expire on the earlier of the tenth
anniversary of the date hereof or the date of termination of Executive's
employment with the Company or any of its Subsidiaries for any reason (the
"Termination Date"); provided that any portion of the Options which has not
vested and become exercisable prior to the Termination Date shall expire on the
Termination Date and may not be exercised under any circumstance; provided
further that any portion of the Options which has vested and become exercisable
prior to the Termination Date pursuant to the terms of the Plan and this
Agreement will expire on the earlier of (i) (A) 30 days after the Termination
Date if Executive's employment with the Company or any of its Subsidiaries is
terminated for Cause (as defined in subparagraph (g) below) or due to
Executive's resignation and (B) three years after the Termination Date if
Executive's employment with the Company or any of its Subsidiaries is terminated
for any reason other than as specified in clause (A) above and (ii) the tenth
anniversary of the date hereof. In the event of Executive's death or Disability
(as defined in subparagraph (h) below) the portion of the unvested Options which
would have vested pursuant to paragraph 1(b) on the next succeeding vesting date
-2-
<PAGE>
after the date of such death or Disability had Executive still been employed by
the Company on such date shall be deemed to have vested.
(e) Non-Transferability of Option. The Options are personal to Executive
and are not transferable by Executive. Only Executive or his estate or heirs is
entitled to exercise the Options.
(f) Payment of Cash Dividends. If the Company pays any cash dividends with
respect to the Common prior to the Termination Date, then with respect to Time
Options described in paragraph 1(a) of this Agreement which have not been
exercised and have not expired, the Company shall provide Executive with a
substantially equivalent economic package (which substantially equivalent
economic package shall be determined in the sole discretion of the Board, and
may consist of a reduction in the Option Price, a payment in cash, the grant of
additional employee benefits or otherwise) as if Executive had been a holder of
the Common issuable upon exercise of the Time Options described in paragraph
1(a) of this Agreement at the time such cash dividends are paid. Notwithstanding
the foregoing, if any such Time Options have not vested at the time the Company
pays any such cash dividends, the Company's obligation to provide the
aforementioned substantially equivalent economic package shall arise if, and
only if, such Time Options become vested.
(g) For purposes of this Agreement, "Cause" shall mean (i) the intentional
disregard of a written direction from the Board to Executive to which Executive
has not objected within ten (10) days of receiving such written direction, which
intentional disregard is materially injurious to the Company or any of its
affiliates, (ii) the knowing and intentional theft by Executive of property of
the Company or any of its affiliates, which property has a substantial value,
(iii) the commission by Executive of an act of moral turpitude which is
materially injurious to the Company or any of its affiliates or (iv) any
material breach of this Agreement or any material breach of the Executive's
employment agreement (as the same may be amended, modified or restated from time
to time) with Dade Behring Inc.
(h) For purposes of this Agreement, "Disability" (i) shall mean any
physical or mental incapacitation which results in Executive's inability to
perform his duties and responsibilities for the Company for a total of 180 days
during any twelve-month period, as determined by the Board in its good faith
judgment and (ii) shall be deemed to have occurred on the 180th day of such
inability to perform.
2. Repurchase Option.
(a) In the event that Executive is no longer employed by the Company or
any of its Subsidiaries for any reason, the Executive Stock, whether held by
Executive, or one or more transferees, will be subject to repurchase by the
Company and the Investors (solely at their option) pursuant to the terms and
conditions set forth in the Plan (the "Repurchase Option").
-3-
<PAGE>
(b) Notwithstanding any limitation in the Plan to the contrary, in the
event that the Company and/or the Investors exercise the Repurchase Option, in
addition to those procedures set forth in the Plan, the procedures set forth in
this Section 2(b) shall apply to any repurchase of Executive Stock pursuant to
the Repurchase Option. If, within 15 days after the delivery of a Determination
Notice to the holder(s) of the Executive Stock, Executive delivers to the Board
a written notice stating that he objects to the Fair Market Value stated in the
Determination Notice (an "Objection Notice"), Fair Market Value shall mean a
fair market value selected by either a New York Stock Exchange member firm, the
business valuation group of any "Big 6" accounting firm or either of the
valuation firms of Houlihan Lokey or Murray Devine selected by the Board
(provided that any such firm or business valuation group is an Independent Third
Party) (the "Independent Valuation Expert") which is equal to the midpoint of
the range of fair market values for the Company, divided by the number of shares
of stock of the Company then outstanding on a fully diluted basis, as determined
by the Independent Valuation Expert; provided that Executive will not be
permitted to deliver an Objection Notice in connection with a Determination
Notice which states a fair market value which is greater than or equal to any
previous fair market value determination by an Independent Valuation Expert
delivered to the Company no more than one (1) year prior to the delivery of the
Repurchase Notice. If Executive delivers an Objection Notice objecting to the
Fair Market Value set forth in a Repurchase Notice which also constitutes a
Determination Notice, the Company may elect to revoke the Repurchase Notice by
delivering written notice thereof (a "Revocation Notice") to such holder(s)
within ten (10) days of receipt of the valuation by the Independent Valuation
Expert. If the Company does not deliver a Revocation Notice, the repurchase of
such Executive Stock shall be effected on the basis of the Fair Market Value (to
the extent applicable) determined pursuant to the Plan and this Section 2(b).
3. Restrictions on Transfer.
(a) Transfer of Executive Stock. Executive will not sell, pledge or
otherwise transfer any interest in any shares of Executive Stock, except
pursuant to (i) the provisions of paragraphs 2, 3(b), 6 or 7 hereof or (ii)
pursuant to the provisions of the Plan.
(b) Certain Permitted Transfers. The restrictions contained in this
paragraph 3 will not apply with respect to transfers of Executive Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among
Executive's Family Group (as defined below), provided that the restrictions
contained in this paragraph 3 will continue to be applicable to the Executive
Stock after any such transfer and the transferees of such Executive Stock shall
agree in writing to be bound by the provisions of this Agreement. "Family Group"
means Executive's spouse and descendants (whether natural or adopted) and any
trust solely for the benefit of Executive and/or Executive's spouse and/or
descendants. Any transferee of Executive Stock pursuant to a transfer in
accordance with the provisions of this subparagraph 3(b) is herein referred to
as a "Permitted Transferee." Upon the
-4-
<PAGE>
transfer of Executive Stock pursuant to this paragraph 3(b), the Executive will
deliver a written notice thereof (the "Transfer Notice") to the Company. The
Transfer Notice will disclose in reasonable detail the identity of the Permitted
Transferee(s).
4. Additional Restrictions on Transfer.
(a) The certificates representing the Executive Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EXECUTIVE AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND A
CERTAIN EMPLOYEE OF THE COMPANY DATED AS OF OCTOBER 1, 1997, A COPY OF
WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Stock may sell, transfer or dispose of any
Executive Stock (except pursuant to an effective registration statement under
the 1933 Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company (which counsel shall
be reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such transfer.
5. Definition of Executive Stock. For all purposes of this Agreement,
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company and purchasers pursuant to an
offering registered under the 1933 Act or purchasers pursuant to a Rule 144
transaction (other than a Rule 144(k) transaction occurring prior to the time of
a closing of an Initial Public Offering (as defined in Section 7 below)), and
each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to shares of Executive Stock by way of a stock split, stock
dividend or other recapitalization.
-5-
<PAGE>
6. Sale of the Company.
(a) In the event of an Approved Sale (as such term is defined in that
certain Amended and Restated Stockholders Agreement dated as of October 1, 1997,
by and among the Company and its stockholders listed therein, as the same may be
amended or otherwise modified from time to time (the "Stockholders Agreement")),
each holder of Executive Stock will vote for, consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as (i) a merger
or consolidation, each holder of Executive Stock will waive any dissenters'
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) a sale of stock, each holder of Executive Stock will agree
to sell all of his shares of Executive Stock and rights to acquire shares of
Executive Stock on the terms and conditions approved by the Board and the
holders of a majority of the Common Stock then outstanding. Each holder of
Executive Stock will take all necessary or desirable actions in connection with
the consummation of the Approved Sale as requested by the Company.
(b) The obligations of the holders of Common Stock with respect to the
Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given a reasonable opportunity upon reasonable prior notice to
exercise such rights prior to the consummation of the Approved Sale and
participate in such sale as holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter into
any negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities Exchange Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Executive Stock will, at the request of
the Company, appoint a purchaser representative (as such term is defined in Rule
501) reasonably acceptable to the Company. If any holder of Executive Stock
appoints a purchaser representative designated by the Company, the Company will
pay the fees of such purchaser representative, but if any holder of Executive
Stock declines to appoint the purchaser representative designated by the
Company, such holder will appoint another purchaser representative, and such
holder will be responsible for the fees of the purchaser representative so
appointed.
-6-
<PAGE>
(d) Executive and the other holders of Executive Stock (if any) will bear
their pro-rata share (based upon the number of shares sold) of the costs of any
sale of Executive Stock pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this paragraph 6 will terminate upon the closing of
an Initial Public Offering (as defined below).
7. Public Offering. In the event that an Initial Public Offering (as
defined in the Stockholders Agreement) is approved pursuant to Section 6 of the
Stockholders Agreement, the holders of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Initial Public
Offering. In the event that such Initial Public Offering is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the Common Stock structure will adversely affect the marketability
of the offering, each holder of Executive Stock will consent to and vote for a
recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters, the Board and holders of a majority
of the shares of Common Stock then outstanding find acceptable and will take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the resulting
securities reflect and are consistent with the rights and preferences set forth
in the Company's Certificate of Incorporation as in effect immediately prior to
such Initial Public Offering.
8. Termination of Provisions Relating to Executive Stock. The provisions
of paragraphs 2 and 3, and the rights of Executive under paragraphs 7 and 8 of
the Plan, will terminate upon the first to occur of (i) an Approved Sale and
(ii) (A) an Initial Public Offering and (B) the Investors and their affiliates
collectively ceasing to own at least 50% of the aggregate number of shares of
common stock of the Company that they own on the date hereof (as adjusted for
stock splits, stock dividends and recapitalization and for exchanges in
connection with a merger, consolidation, reorganization or sale).
MISCELLANEOUS PROVISIONS
------------------------
9. Notices. Any notice provided for in this Agreement must be in writing
and must be personally delivered, received by certified mail, return receipt
requested, or sent by guaranteed overnight delivery service, to the Investors at
the addresses indicated in the Company's records and to the other recipients at
the address indicated below:
-7-
<PAGE>
To the Company:
Dade Behring Holdings, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Stephen G. Pagliuca
John Connaughton
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes, P.C.
To Executive:
Jim Reid-Anderson
1160 North Sheridan Road
Lake Forest, Illinois 60045
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
10. Representations and Warranties. In connection with the grant of the
Options hereunder, Executive represents and warrants to the Company that:
(a) This Agreement constitutes the legal, valid and binding obligation of
Executive, enforceable in accordance with its terms, and the execution, delivery
and performance of this Agreement by Executive does not and will not conflict
with, violate or cause a breach of any agreement, contract or instrument to
which Executive is a party or any judgment, order or decree to which Executive
is subject.
(b) As an inducement to the Company to grant the Options to Executive, as
a condition thereto, Executive acknowledges and agrees that neither the grant of
the Options to Executive nor any provision contained herein shall entitle
Executive to remain in the employment of the Company or its Subsidiaries or
affect the right of the Company or its Subsidiaries to terminate Executive's
employment at any time for any reason.
(c) The Company and Executive acknowledge and agree that this Agreement
has been executed and delivered and the Options have been granted hereunder, in
connection with and as part of the compensation and incentive arrangements among
the Company, Dade International Inc. and Executive and, that except as otherwise
expressly
-8-
<PAGE>
provided in this Agreement, the issuance of the Options and the issuance of any
Executive Stock upon the exercise of any of the Options is subject to all of the
terms and conditions contained in the Plan.
11. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
12. Complete Agreement. This Agreement embodies the complete agreement and
understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way,
including, without limitation, any bonus arrangements upon a consummation of a
sale of the Company or any of its subsidiaries.
13. Counterparts. This Agreement may be executed in separate counterparts
(any one of which may be by facsimile), each of which will be deemed to be an
original and all of which taken together will constitute one and the same
agreement.
14. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company, the Investors
and their respective successors and assigns, provided that Executive may not
assign any of his rights or obligations, except as expressly provided by the
terms of this Agreement.
15. Governing Law. The corporate law of Delaware will govern all issues
concerning the relative rights of the Company and its stockholders. All other
issues concerning the enforceability, validity and binding effect of this
Agreement will be governed by and construed in accordance with the laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the law of any jurisdiction other than the
State of Illinois.
16. Remedies. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party hereto will have the right to injunctive relief, in addition
to all of its other rights and remedies at law or in equity, to enforce the
provisions of this Agreement.
17. Effect of Transfers in Violation of Agreement. The Company will not be
required (a) to transfer on its books any shares of Executive Stock which have
been sold or transferred in violation of any of the provisions set forth in this
Agreement or (b) to
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<PAGE>
treat as owner of such shares, to accord the right to vote as such owner or to
pay dividends to any transferee to whom such shares have been transferred in
violation of this Agreement.
18. Amendments and Waivers. Any provision of this Agreement may be amended
or waived only with the prior written consent of the Company, Executive and the
Investors who hold 70% of the Common Stock held by the Investors.
19. Third Party Beneficiaries. The parties hereto acknowledge and agree
that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
20. Dade Behring Holdings, Inc. 1997 Executive Stock Purchase and Option
Plan. Except as otherwise expressly set forth in this Agreement, the grant of
Options and issuance of Executive Stock hereunder is pursuant to, and subject to
all the terms and conditions of, the Plan, attached hereto as Exhibit A.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first above written.
DADE BEHRING HOLDINGS, INC.
By: /s/
---------------------------------
Title:
------------------------------
/s/
------------------------------------
JIM REID-ANDERSON
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<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF DADE BEHRING INC.
<TABLE>
<CAPTION>
State or Jurisdiction
of Incorporation or
Subsidiary Organization
- ---------- ---------------------
<S> <C>
Dade Microscan Inc. Delaware
Dade Behring Export Corporation Delaware
Dade Finance, Inc. Delaware
Dade Foreign Sales Corporation Barbados
Syva Diagnostics Holding Company Delaware
Syva Company Delaware
Syva Childcare Inc. Delaware
Dade Behring B.V. Netherlands
Dade Behring S.A. Belgium
D. Diagnosticos Lda. Portugal
Dade Behring S.A. France
Dade Behring Vertriebs GmbH Germany
Dade Behring AG Switzerland
Dade Diagnostics AG Switzerland
Dade Behring Canada Inc. Canada
Dade Behring, S.A. de C.V. Mexico
Dade Behring Ltd. Japan
Dade Behring Ltda. Brazil
Dade Behring de Venezuela C.A. Venezuela
Dade Behring Argentina, S.A. Argentina
Dade Behring Diagnostics Pty., Ltd. Australia
Dade Behring Holding GmbH Germany
Dade Behring Marburg GmbH Germany
Dade Behring Grundstrucks GmbH Germany
Dade Behring Vertriebs GmbH & Co. Germany
Dade Behring Austria Ges.m.b.H Austria
Behring Diagnostics Benelux S.A. Belgium
Dade Behring A/S Denmark
Dade Behring OY Finland
Dade Behring Hellas ABEE Greece
Dade Behring Diagnostica S.p.A. Italy
Instituto Behring S.p.A. Italy
Dade Behring S.p.A. Italy
Syva Diagnostica B.V. Netherlands
Syva European Distribution B.V. Netherlands
Dade Behring Diagnostika Norway AS Norway
Dade Behring Polska Sp.z.o.o. Poland
Behring Diagnostios Portugal-Meios de Diagnostico
Medico, Lda. Portugal
Dade Behring Diagnostics S.A. Spain
Dade Behring AB Sweden
Dade Behring Diagnostik Ticaret Ltd. Sirketi Turkey
Dade Behring Ltd. U.K.
Behring Diagnostika AG Switzerland
Dade Behring Diagnostics Pty. Ltd. Australia
Dade Behring Diagnostics Ltd., NZ New Zealand
Dade Behring Diagnostics Asia Pte. Ltd. Singapore
Dade Behring Diagnostics S.A.E. Egypt
</TABLE>
X-5
<PAGE>
EXHIBIT 23.1
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Dade Behring Inc.
Our audits of the consolidated financial statements of Dade Behring Inc.
referred to in our report dated March 19, 1999 (which report and consolidated
financial statements are listed in the "Index to Financial Statements and
Schedule" of this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a)(i) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 19, 1999
X-6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the 1998 Annual Report of Dade Behring Inc. 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-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 25,800
<SECURITIES> 0
<RECEIVABLES> 401,200
<ALLOWANCES> 18,000
<INVENTORY> 265,900
<CURRENT-ASSETS> 729,300
<PP&E> 532,700
<DEPRECIATION> 228,000
<TOTAL-ASSETS> 1,533,400
<CURRENT-LIABILITIES> 468,500
<BONDS> 350,000
0
0
<COMMON> 0
<OTHER-SE> 249,300
<TOTAL-LIABILITY-AND-EQUITY> 1,533,400
<SALES> 1,285,200
<TOTAL-REVENUES> 1,285,200
<CGS> 529,400
<TOTAL-COSTS> 1,132,400
<OTHER-EXPENSES> (5,600)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,500
<INCOME-PRETAX> 77,900
<INCOME-TAX> 34,400
<INCOME-CONTINUING> 43,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,500
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
