-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N+JVWQTIKao1EOEJY65uflHGn35x9ZM5j5L5dStXOFxosJPJxYcRmafhChVWSUrh f9DMB5c7Aj3KTkAa0Rf+9A== 0000950150-98-000602.txt : 19980420 0000950150-98-000602.hdr.sgml : 19980420 ACCESSION NUMBER: 0000950150-98-000602 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19980417 SROS: AMEX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BECKMAN COULTER INC CENTRAL INDEX KEY: 0000840467 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 951040600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-50409 FILM NUMBER: 98596729 BUSINESS ADDRESS: STREET 1: 2500 HARBOR BLVD CITY: FULLERTON STATE: CA ZIP: 92634 BUSINESS PHONE: 7148714848 MAIL ADDRESS: STREET 1: 2500 HARBOR BLVD CITY: FULLERTON STATE: CA ZIP: 92834 FORMER COMPANY: FORMER CONFORMED NAME: BECKMAN INSTRUMENTS INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HYBRITECH INC CENTRAL INDEX KEY: 0000355266 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 330680402 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-50409-01 FILM NUMBER: 98596730 BUSINESS ADDRESS: STREET 1: P O BOX 269006 CITY: SAN DIEGO STATE: CA ZIP: 92196-9006 BUSINESS PHONE: 6195789800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COULTER CORP CENTRAL INDEX KEY: 0001051492 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 591635784 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-50409-02 FILM NUMBER: 98596731 BUSINESS ADDRESS: STREET 1: COULTER TECHNOLOGY CENTER STREET 2: 11800 SOUTHWEST 147TH AVE CITY: MIAMI STATE: FL ZIP: 33196-2500 MAIL ADDRESS: STREET 1: C/O COULTER TECHNOLOGY CENTER STREET 2: 11800 SOUTHWEST 147TH AVE CITY: MIAMI STATE: FL ZIP: 33196-2500 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BECKMAN INSTRUMENTS NAGUABO INC CENTRAL INDEX KEY: 0001059592 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 330593479 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-50409-03 FILM NUMBER: 98596732 BUSINESS ADDRESS: STREET 1: EL DUQUE INDUSTRIAL PARK CARR ESTATAL N STREET 2: 971 CALLE NO4 NAGUABO PUERTO RICO BUSINESS PHONE: 8098742635 MAIL ADDRESS: STREET 1: EL DUQUE INDUSTRIAL PK CARR ESTATAL NO 9 STREET 2: 71 CALLE NO4 NAGUABO PURETO RICO 00718-0 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITHKLINE DIAGNOSTICS INC CENTRAL INDEX KEY: 0001059601 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 951898957 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-50409-04 FILM NUMBER: 98596733 BUSINESS ADDRESS: STREET 1: 1050 PAGE MILL RD CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 650-857-1227 MAIL ADDRESS: STREET 1: 1050 PAGE MILL RD CITY: PALO ALTO ZIP: 94303 S-4 1 FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ BECKMAN COULTER, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3826 95-1040600 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.) CALIFORNIA BECKMAN INSTRUMENTS (NAGUABO) INC. 33-0593479 CALIFORNIA HYBRITECH INCORPORATED 33-0680402 DELAWARE SMITHKLINE DIAGNOSTICS, INC. 95-1898957 DELAWARE COULTER CORPORATION 59-1635784 (STATE OR OTHER JURISDICTION OF (EXACT NAME OF REGISTRANT (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) AS SPECIFIED IN ITS CHARTER) IDENTIFICATION NO.)
------------------------ 4300 NORTH HARBOR BOULEVARD FULLERTON, CALIFORNIA 92835 (714) 871-4848 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES) ------------------------ WILLIAM H. MAY VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY 4300 NORTH HARBOR BOULEVARD FULLERTON, CALIFORNIA 92835 (714) 871-4848 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: BRIAN G. CARTWRIGHT LATHAM & WATKINS 633 WEST FIFTH STREET, SUITE 4000 LOS ANGELES, CALIFORNIA 90071 (213) 485-1234 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
======================================================================================================================== PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PROPOSED AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------ 7.10% Senior Notes due 2003...... $160,000,000 100% $160,000,000 $47,200 - ------------------------------------------------------------------------------------------------------------------------ 7.45% Senior Notes due 2008...... $240,000,000 100% $240,000,000 $70,800 ========================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 BECKMAN COULTER, INC. CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus........................... Outside Front Cover Page; Cross Reference Sheet; Inside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.................. Inside Front Cover Page; Outside Back Cover Page 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information.......................... Prospectus Summary; Risk Factors; Selected Historical Financial Information of Beckman; Selected Historical Financial Information of Coulter 4. Terms of the Transaction............. The Exchange Offer; Certain Federal Tax Considerations, Description of Notes 5. Pro Forma Financial Information...... Prospectus Summary; Pro Forma Financial Statements 6. Material Contacts with the Company Being Acquired....................... Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters............ Not Applicable 8. Interests of Named Experts and Counsel.............................. Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.......................... Not Applicable 10. Information with Respect to S-3 Registrants.......................... Prospectus Summary; The Acquisition; Capitalization; Pro Forma Financial Statements; Selected Historical Financial Information of Beckman; Selected Historical Financial Information of Coulter; Management's Discussion and Analysis of Financial Conditions and Results of Operations; Business; Management; Description of Credit Facility; Description of Notes; Plan of Distribution; Available Information; Incorporation of Certain Documents By Reference; Legal Matters; Independent Public Accountants; Financial Statements 11. Incorporation of Certain Information by Reference......................... Incorporation of Certain Documents by Reference 12. Information with Respect to S-2 or S-3 Registrants...................... Not Applicable 13. Incorporation of Certain Information by Reference......................... Not Applicable 14. Information with Respect to Registrants Other Than S-3 or S-2 Registrants.......................... Not Applicable 15. Information with Respect to S-3 Companies............................ Not Applicable 16. Information with Respect to S-2 or S-3 Companies........................ Not Applicable 17. Information with Respect to Companies Other Than S-2 or S-3 Companies...... Not Applicable 18. Information if Proxies, Consents or Authorizations are to be Solicited... Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer.... Management; The Exchange Offer
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED APRIL 17, 1998 PROSPECTUS OFFER TO EXCHANGE 7.10% SENIOR NOTES DUE 2003 FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003 AND 7.45% SENIOR NOTES DUE 2008 FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008 OF BECKMAN COULTER, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1998 UNLESS EXTENDED. ------------------------ Beckman Coulter, Inc., a Delaware corporation (formerly known as Beckman Instruments, Inc.) (the "Company"), hereby offers (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange (i) its outstanding 7.10% Senior Notes due 2003 (the "Initial 2003 Notes"), of which an aggregate of $160,000,000 in principal amount is outstanding as of the date hereof, for an equal principal amount of newly issued 7.10% Senior Notes due 2003 (the "Exchange 2003 Notes") and (ii) its outstanding 7.45% Senior Notes due 2008 (the "Initial 2008 Notes" and, together with the Initial 2003 Notes, the "Initial Notes"), of which an aggregate of $240,000,000 in principal amount is outstanding as of the date hereof, for an equal principal amount of newly issued 7.45% Senior Notes due 2008 (the "Exchange 2008 Notes" and, together with the Exchange 2003 Notes, the "Exchange Notes"). The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes except that (i) the Exchange Notes will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement of which this Prospectus is a part (the "Registration Statement") and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Initial Notes under the Registration Rights Agreement (as defined herein), which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Initial Notes (which they replace) and will be entitled to the benefits of an indenture dated as of March 4, 1998 governing the Initial Notes and the Exchange Notes (the "Indenture"). The Initial Notes and the Exchange Notes are sometimes referred to herein collectively as the "Notes." See "The Exchange Offer" and "Description of Notes." The Exchange Notes will bear interest at the same rate and on the same terms as the Initial Notes. Consequently, interest on the Exchange Notes will be payable semi-annually on March 4 and September 4 of each year, commencing September 4, 1998. The Exchange Notes will be redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Exchange Notes or (ii) as determined by an Independent Investment Banker (as defined herein), the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at the Adjusted Treasury Rate (as defined herein), plus, in each case, accrued interest thereon to the date of redemption. See "Description of Notes -- Optional Redemption." In addition, upon the occurrence of a Change of Control Triggering Event (as defined herein), each holder of the Exchange Notes will have the right to require that the Company repurchase all or any part of such holder's Exchange Notes at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of such repurchase. See "Description of Notes -- Change of Control." The Exchange Notes will be unsecured senior obligations of the Company, and the Indebtedness (as defined herein) evidenced by the Exchange Notes will rank pari passu in right of payment with all other existing and future senior obligations of the Company, including all borrowings under the Credit Facility (as defined herein), and senior in right of payment to all future obligations of the Company subordinated in right of payment to the Exchange Notes. As of December 31, 1997, the outstanding Indebtedness of the Company and the Note Guarantors (as defined herein) was $1,127.4 million (excluding capital lease obligations), none of which was secured Indebtedness, and the outstanding Indebtedness of the Company's subsidiaries (other than the Note Guarantors) was approximately $98.2 million (excluding capital lease obligations). The Exchange Notes will be fully and unconditionally guaranteed on an unsecured, senior basis by Coulter Corporation and certain other subsidiaries of the Company. Each such guarantee will be an unsecured, senior obligation of the respective Note Guarantor and will rank pari passu in right of payment with all other existing and future senior obligations of such Note Guarantor, including any guarantee of borrowings under the Credit Facility, and senior in right of payment to all future obligations of such Note Guarantor subordinated in right of payment to the guarantee of the Exchange Notes. Each such guarantee will be subject to release and discharge as provided in the Indenture. ------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES. ------------------------ THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The date of this Prospectus is , 1998 4 The Company will accept for exchange any and all validly tendered Initial Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Initial Notes may be withdrawn at any time prior to the Expiration Date. Initial Notes may be tendered only in integral multiples of $1,000. The Exchange Offer is subject to certain customary conditions, but is not conditioned on any minimum principal amount of Initial Notes being tendered for exchange. See "The Exchange Offer -- Conditions." Based on an interpretation by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and had no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Initial Notes wishing to accept the Exchange Offer must represent to the Company, as required by the Registration Rights Agreement, that such conditions have been met. Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Company believes that none of the registered holders of the Initial Notes is an affiliate (as such term is defined in Rule 405 under the Securities Act) of the Company. Prior to the Exchange Offer, there has been no public market for the Notes. The Exchange Notes will not be listed on any securities exchange, but the Initial Notes are eligible for trading in the National Association of Securities Dealers, Inc.'s Private Offerings, Resales and Trading through Automatic Linkages (PORTAL) market. There can be no assurance that an active market for the Notes will develop. To the extent that a market for the Notes does develop, the market value of the Notes will depend on market conditions (such as yields on alternative investments), general economic conditions, the Company's financial condition and certain other factors. Such conditions might cause the Notes, to the extent that they are traded, to trade at a significant discount from face value. See "Risk Factors -- Absence of Public Market; Restrictions on Transfer." Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. See "The Exchange Offer -- Resale of the Exchange Notes" and "Plan of Distribution." The Company will not receive any proceeds from, and has agreed to bear the expenses of, the Exchange Offer. No underwriter is being used in connection with this Exchange Offer. See "The Exchange Offer -- Resale of the Exchange Notes." THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF INITIAL NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY i 5 EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. The Exchange Notes will be available initially only in book-entry form. The Company expects that the Exchange Notes issued pursuant to the Exchange Offer will be issued in the form of one or more fully registered global notes that will be deposited with, or on behalf of, the Depository Trust Company ("DTC" or the "Depositary") and registered in its name or in the name of Cede & Co., as its nominee. Beneficial interests in the global note representing the Exchange Notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depositary and its participants. After the initial issuance of such global note, Exchange Notes in certificated form will be issued in exchange for the global note only in accordance with the terms and conditions set forth in the Indenture. See "The Exchange Offer -- Book-Entry Transfer." ii 6 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the related notes thereto, appearing elsewhere in this Prospectus. The market share and competitive position data contained in this Prospectus are based upon industry sources and Company estimates. Although such data are inherently imprecise, based on its understanding of the markets in which the Company competes, management believes that such data are generally indicative of the Company's relative market share and competitive position. The term "Coulter," as used herein, refers to Coulter Corporation and includes, unless the context otherwise requires, all of its consolidated subsidiaries. The term "Company," "Beckman" or "Beckman Coulter" refers to Beckman Coulter, Inc., (formerly known as Beckman Instruments, Inc.) and includes, unless the context otherwise requires, all of its consolidated subsidiaries, including Coulter. The term "Pro Forma 1997" refers to the fiscal year ended December 31, 1997 for Beckman (which includes results for Coulter from November 1, 1997) and the ten months ended October 31, 1997 for Coulter, on a pro forma basis giving effect to the acquisition of Coulter by Beckman on October 31, 1997 (the "Acquisition"), the offering of the Initial Notes (the "Offering") and the application of the net proceeds therefrom. "Fiscal 1997" refers to Beckman's fiscal year ended December 31, 1997. "Fiscal 1996" and "Fiscal 1995" refer to Beckman's fiscal years ended December 31, 1996 and 1995, respectively, or Coulter's fiscal years ended March 31, 1997 and 1996, respectively, as the context requires. THE COMPANY OVERVIEW Beckman Coulter is a world leader in providing systems that simplify and automate laboratory processes. The Company designs, manufactures and services a broad range of laboratory systems consisting of instruments, reagents and related products that customers use to conduct basic scientific research, drug discovery research and diagnostic analysis of patient samples. Approximately 75% of the Company's Pro Forma 1997 sales were for clinical diagnostics applications, principally in hospital laboratories, while the remaining sales were for life sciences and drug discovery applications in universities, medical schools, and pharmaceutical and biotechnology companies. The Company's systems address over 75% of the hospital laboratory test volume, including virtually all routine laboratory tests. The Company believes that it is a worldwide market leader in its primary markets, with well-recognized systems and a reputation for high-quality, reliable service. After giving effect to the Acquisition, the Company had sales and EBITDA of $1.8 billion and $278.2 million, respectively, for Pro Forma 1997. The Company's systems improve efficiency by integrating customer laboratory operations. The design of these systems draws upon the Company's extensive expertise in the chemical, biological, engineering and software sciences. Beckman Coulter has an installed base of approximately 75,000 systems in over 120 countries, which the Company believes will provide a recurring stream of revenue and cash flows from the sale of reagents, consumables and services after initial system placement ("After Sales"). Approximately 67% of the Company's Pro Forma 1997 sales were derived from After Sales, while the remaining 33% were derived from the direct placement of systems. On October 31, 1997, Beckman acquired all of the outstanding capital stock of Coulter, which became a wholly owned subsidiary of Beckman. See "The Acquisition." The acquisition of Coulter represents a significant milestone in accomplishing the Company's strategy to solidify its position as a leading provider of laboratory systems, adding Coulter's leading market position in hematology and number two position in flow cytometry. Coulter is the world's leading manufacturer of in vitro diagnostic ("IVD") systems for blood cell analysis (hematology), with a market share in hematology approximately twice that of its next largest competitor. Beckman and Coulter serve substantially the same customer base but have essentially no overlap in their product offerings. As a result, the Company expects to be able to enhance the operating efficiency of the combined entities through cross-selling and reduced operating costs. The Acquisition provides the Company with a significant opportunity to cross-sell existing product lines between Beckman's and Coulter's existing customers. 1 7 COMPETITIVE STRENGTHS LEADING POSITION IN THE SIMPLIFICATION AND AUTOMATION OF LABORATORY PROCESSES. The Acquisition significantly expanded Beckman's presence in the clinical diagnostics and life sciences markets and combined Beckman and Coulter, two of the most recognized global franchises and brand names in these markets. In particular, Coulter's number one market position in hematology significantly strengthens Beckman's global leadership in the clinical diagnostics market. This will enhance the Company's ability to offer integrated testing capabilities and automation options that can match a wider range of laboratory test volume, capitalizing on the efforts of laboratories to improve productivity and reduce costs. RECURRING AFTER SALES FROM SUBSTANTIAL INSTALLED BASE. The Company generates a recurring stream of revenues and cash flows from its large installed base of approximately 75,000 systems, which require the ongoing consumption of various reagents, consumables and services. After Sales revenue accounted for approximately 67% of the Company's Pro Forma 1997 sales. In addition, the Company's large installed base provides a strong foundation for new product introductions and upgrades, since many customers tend to remain with an existing supplier who can reliably provide quality products and services. BROAD PRODUCT OFFERING. The Company manufactures and markets a more comprehensive range of laboratory systems than any of its competitors. In hospitals, the Company's broad product line addresses approximately 75% of all testing volume, including virtually all routine laboratory tests. This broad-based capability allows the Company to capitalize on the trend among hospitals and laboratories toward preferred supplier arrangements and combined product purchases. The Company offers more than 180 different clinical diagnostics tests and a full range of hematology capabilities, giving customers the ability to diagnose and monitor a wide variety of diseases and conditions. The Company also provides a wide range of systems for life sciences applications and is the industry leader in centrifugation, capillary electrophoresis and high throughput screening for drug discovery. The Company believes that broadening its product portfolio targeted to its existing laboratory customer base will allow it to leverage its manufacturing and distribution capabilities, extensive worldwide sales and service infrastructure and product development capabilities as well as finance and administration activities. WORLDWIDE SALES AND SERVICE NETWORK. Beckman Coulter maintains an extensive worldwide sales, service and distribution network, generating approximately one-half of the Company's Pro Forma 1997 sales outside the United States. This sales and service network, furnishing service to customers in more than 120 countries, provides Beckman Coulter with recurring revenues and cash flows, access to new product and application ideas, and sales opportunities from new and existing customers. BUSINESS STRATEGY Beckman Coulter's goal is to profitably gain and retain customers by providing quality products and services that simplify and automate biochemical analyses across the technological continuum that extends from academic and commercial research to clinical diagnostics laboratories. In pursuit of this goal, the Company focuses on the following key initiatives: IMPROVE LABORATORY PRODUCTIVITY. By integrating its systems into customer processes, Beckman Coulter improves productivity and reduces costs in laboratories worldwide. Laboratories are increasingly focused on automation as a means of controlling labor costs, which typically account for over 50% of total laboratory costs. Marketed as "The Power of Process," the Company's approach is to link pre-analytical and analytical steps with robotics systems to automate nearly the entire testing process. The Company will continue to focus on its customers' needs to maximize laboratory operating efficiencies. EXPAND MARKET SHARE THROUGH PRODUCT DEVELOPMENT. The Company's expertise in simplifying and automating processes for biological laboratories forms a technological continuum, which Beckman Coulter can broadly apply to develop a range of products that are configured to meet specific customer needs in both the clinical diagnostics and life sciences markets. The Company believes that its close relationships with research laboratories allow the Company to identify and commercialize new research techniques. Once brought to the marketplace, the Company is in a position to translate technology into systems targeted for 2 8 diagnostic needs. Both Beckman and Coulter historically have invested considerable capital on research and development efforts, contributing to their leadership in their respective markets and allowing them to consistently provide new products. In Fiscal 1997, Beckman invested $123.6 million, or 10.3% of sales, on research and development. INCREASE INSTALLED BASE TO GENERATE AFTER SALES. One of the Company's primary objectives is to maximize systems installations to generate future After Sales revenue. Over the last six years, Beckman has ranked first in total systems placements in automated clinical chemistry, its largest product category. The Company believes that increasing its installed base of instruments will generate increased reagent, consumables and service revenue, and expand opportunities for new product sales and systems upgrades. In addition, management believes that providing a fully integrated system that is reliable and easy to use results in high switching costs and loyalty among customers who value consistency and accuracy in test results. PURSUE SELECTED ACQUISITION OPPORTUNITIES. The primary focus of Beckman's acquisition strategy has been to broaden its product offerings. Beckman significantly strengthened its diagnostic immunochemistry offerings, including products for cancer diagnostics, through the acquisitions of Hybritech Incorporated in January 1996 and the Access immunoassay product line of Sanofi Diagnostics Pasteur in April 1997. Beckman also acquired high throughput screening and robotics technology for drug discovery from Sagian, Inc. in December 1996 and DNA sequencing technology through the acquisition of Genomyx Inc. in October 1996. The acquisition of Coulter represents a significant milestone in accomplishing the Company's strategy to solidify its position as a leading provider of laboratory systems through Coulter's leading market position in hematology and number two position in flow cytometry. CONTINUE TO MAXIMIZE OPERATING EFFICIENCY. Beckman has a proven track record of managing costs and improving operating efficiency through integrating acquisitions, consolidating redundant functions and realizing potential synergies in its business. For example, during 1993, Beckman strategically repositioned itself in response to changes in the worldwide healthcare market by consolidating redundant functions and improving overall efficiency. This resulted in annualized savings of over $50 million in 1996. In connection with the Acquisition, management believes annual synergies of at least $60 million can be achieved by 1999 with further gains anticipated in 2000, stemming from a combination of increased revenues related to cross-selling opportunities as well as reduced operating costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Summary of Effects of the Acquisition." No assurances can be given as to whether and to what extent such annual synergies may be actually realized in the future. See "Risk Factors -- Ability to Successfully Integrate Coulter." RECENT DEVELOPMENTS SUCCESSFUL CONSUMMATION OF THE COULTER ACQUISITION On October 31, 1997, Beckman acquired all of the outstanding capital stock of Coulter, which became a wholly owned subsidiary of the Company. The Acquisition joins two of the most recognized global franchises in clinical diagnostics and life sciences and is a major part of Beckman's initiative to become a broad-based world leader in IVD testing. The purchase price for the Acquisition totaled $1,178.0 million, consisting of $875.0 million in cash, assumed liabilities of $170.0 million and purchase liabilities of $133.0 million. See "The Acquisition." DELEVERAGING INITIATIVES ACHIEVED AND ANTICIPATED Since the Acquisition, the Company has commenced a debt reduction plan. The Company's plan includes selling certain financial assets (primarily consisting of lease receivables and equipment subject to customer leases) and real estate assets to reduce debt and provide funds for integration purposes. During December 1997, the Company sold financial assets having a net book value of approximately $71 million and received approximately $75 million in cash proceeds. The Company applied these proceeds, together with funds from operations, to reduce the Company's debt by $100 million to approximately $1,250 million at December 31, 1997. The Company intends to consummate sale-leaseback transactions with respect to some of its real estate 3 9 assets which the Company expects will generate proceeds of approximately $150 million in 1998 and approximately $40 million in 1999. Further, the Company expects to sell an additional $30 million of lease receivables in 1998. See "Management's Discussion of Financial Condition and Results of Operations -- Events Impacting Comparability -- Sale of Assets; -- Financial Condition -- Liquidity and Capital Resources -- Future Financing Sources and Cash Flows." OTHER MANAGEMENT INITIATIVES The Company has announced cost-saving initiatives that are designed to rationalize manufacturing capacity, close duplicate field offices, align distribution networks, combine administrative functions and size the Company to match market conditions. The first of these changes has been announced and includes staff reductions in Florida, California and Europe, along with the termination of manufacturing at a Coulter facility in Luton, England. This first initiative affects approximately 600 positions. These cost-saving initiatives, together with anticipated cross-selling opportunities, are part of the Company's plan to realize at least $60 million in annual synergies by 1999. See "Management's Discussion of Financial Condition and Results of Operations -- Summary of Effects of the Acquisition." THE OFFERING AND THE TENDER OFFER On March 4, 1998, the Company completed the Offering of the Initial Notes. On March 6, 1998, the Company launched a tender offer (the "Tender Offer") for the purchase of any and all of its outstanding 7.05% Debentures due 2026 (the "Old Debentures") at a purchase price of $1,000 per $1,000 principal amount of Old Debentures tendered. Immediately prior to the launch of the Tender Offer, the Company amended the indenture governing the Old Debentures to increase the 2006 put price to a price of 103.900% of the principal amount of the Old Debentures and to provide guarantees, such that the Old Debentures are guaranteed in the same manner and to the same extent as the Notes and the borrowings under the Credit Facility. No Old Debentures were tendered in the Tender Offer which expired on March 13, 1998. 4 10 THE EXCHANGE OFFER The Exchange Offer......... The Company is offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Initial Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. There are $160,000,000 aggregate principal amount of Initial 2003 Notes outstanding and $240,000,000 aggregate principal amount of Initial 2008 Notes outstanding. See "The Exchange Offer -- Purpose of the Exchange Offer." Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that the holder is acquiring Exchange Notes in the ordinary course of its business and is not participating, and had no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer -- Resale of the Exchange Notes." Registration Rights Agreement................ The Initial Notes were sold by the Company on March 4, 1998 (the "Offering") to Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston, Morgan Stanley Dean Witter, BancAmerica Robertson Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. (collectively, the "Initial Purchasers") pursuant to a Purchase Agreement, dated February 25, 1998, by and among the Company and the Initial Purchasers (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company and the Initial Purchasers entered into a Registration Rights Agreement, dated as of March 4, 1998 (the "Registration Rights Agreement"), which grants the holders of the Initial Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such rights, which will terminate upon the consummation of the Exchange Offer. See "The Exchange Offer -- Termination of Certain Rights." Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended by the Company in its sole discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer -- Expiration Date; Extensions; Amendments." 5 11 Accrued Interest on the Exchange Notes and the Initial Notes............ The Exchange Notes will bear interest from and including the date of issuance of the Initial Notes (March 4, 1998). Holders whose Initial Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Initial Notes. See "The Exchange Offer -- Interest on the Exchange Notes." Conditions to the Exchange Offer.................... Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange the Exchange Notes for, any Initial Notes, and may terminate the Exchange Offer as provided herein before the acceptance of such Initial Notes, if, in the reasonable judgment of the Company, the Exchange Offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the Commission. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Initial Notes being tendered for exchange. See "The Exchange Offer -- Conditions." Procedures for Tendering Initial Notes............ Each holder of Initial Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Initial Notes and any other required documentation to The First National Bank of Chicago, as exchange agent (the "Exchange Agent"), at the address set forth herein. By executing the Letter of Transmittal, the holder will represent to and agree with the Company that, among other things, (i) it is not an affiliate of the Company, (ii) any Exchange Notes to be received by it are to be acquired in the ordinary course of its business and (iii) at the time of consummation of the Exchange Offer, it has no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes. In addition, in connection with the resale of Exchange Notes, any broker-dealer (a "Participating Broker-Dealer") who acquired the Notes for its own account as a result of market-making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) with the prospectus contained in the Registration Statement. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use the prospectus contained in the Registration Statement in connection with the resale of such Exchange Notes. See "The Exchange Offer -- Procedures for Tendering." Special Procedures for Beneficial Owners.......... Any beneficial owner whose Initial Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Initial Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial 6 12 owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Initial Notes, either make appropriate arrangements to register ownership of the Initial Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. See "The Exchange Offer -- Procedures for Tendering." Guaranteed Delivery Procedures............... Holders of Initial Notes who wish to tender their Initial Notes and whose Initial Notes are not immediately available or who cannot deliver their Initial Notes, the Letter of Transmittal or any other documentation required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Initial Notes according to the guaranteed delivery procedures set forth under "The Exchange Offer -- Guaranteed Delivery Procedures." Acceptance of the Private Notes and Delivery of the Exchange Notes........... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all Initial Notes that are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Withdrawal Rights.......... Tenders of Initial Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." Certain Federal Tax Considerations........... For a discussion of certain material federal income tax considerations relating to the exchange of the Exchange Notes for the Initial Notes, see "Certain United States Federal Tax Considerations." Exchange Agent............. The First National Bank of Chicago is serving as the Exchange Agent in connection with the Exchange Offer. THE EXCHANGE NOTES The Exchange Offer applies to $160,000,000 aggregate principal amount of the Initial 2003 Notes and $240,000,000 aggregate principal amount of the Initial 2008 Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Initial Notes under the Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Initial Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. For further information and for definitions of certain capitalized terms used below, see "Description of Notes." Notes Offered.............. $160,000,000 aggregate principal amount of 7.10% Senior Notes due 2003 and $240,000,000 aggregate principal amount of 7.45% Senior Notes due 2008. 7 13 Interest Rate and Payment Dates...................... The Exchange 2003 Notes will bear interest at the rate of 7.10% per annum and the Exchange 2008 Notes will bear interest at the rate of 7.45% per annum, and such interest will be payable semi-annually in arrears on March 4 and September 4, commencing September 4, 1998. Maturity Dates............. The Exchange 2003 Notes will mature on March 4, 2003 and the Exchange 2008 Notes will mature on March 4, 2008. Optional Redemption........ The Exchange Notes will be redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Exchange Notes or (ii) as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the date of redemption. See "Description of Notes -- Optional Redemption." Change of Control.......... Upon the occurrence of a Change of Control Triggering Event, each holder of the Exchange 2003 Notes and the Exchange 2008 Notes shall have the right to require that the Company repurchase all or any part of such holder's Exchange Notes at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of such repurchase. See "Description of Notes -- Change of Control." Note Guarantees............ The Indenture provides that the Company is required to cause any of its Restricted Subsidiaries (as defined herein) that guarantee Bank Indebtedness (as defined herein) of the Company (including indebtedness under the Credit Facility) to irrevocably, fully and unconditionally guarantee (the "Note Guarantees"), on an unsecured, senior basis, the performance of all monetary obligations of the Company under the Notes and the Indenture. Any such Note Guarantee will be automatically and unconditionally released and discharged upon the release and discharge of all Guarantees by such Restricted Subsidiaries of Bank Indebtedness of the Company. The Indebtedness under the Credit Facility and the Initial Notes is currently guaranteed by Coulter Corporation and certain other domestic subsidiaries of the Company. Ranking.................... The Exchange Notes will be unsecured senior obligations of the Company, and the Indebtedness evidenced by the Exchange Notes will rank pari passu in right of payment with all other existing and future senior obligations of the Company, including all borrowings under the Credit Facility, and senior in right of payment to all future obligations of the Company subordinated in right of payment to the Exchange Notes. As of December 31, 1997, the outstanding Indebtedness of the Company and the Note Guarantors was $1,127.4 million (excluding capital lease obligations), none of which was secured Indebtedness, and the outstanding Indebtedness of the Company's subsidiaries (other than the Note Guarantors) was approximately $98.2 million (excluding capital lease obligations). Each Note Guarantee will be an unsecured, senior obligation of the respective Note Guarantor and will rank pari passu in right of payment with all other existing and future senior obligations of such 8 14 Note Guarantor, including any guaranteed borrowings under the Credit Facility, and senior in right of payment to all future obligations of such Note Guarantor subordinated in right of payment to its Note Guarantee. Restrictive Covenants...... The Indenture relating to the Exchange Notes contains certain restrictive covenants, including, but not limited to, covenants with respect to the following matters: (i) limitation on liens, (ii) limitation on sale and leaseback transactions, (iii) limitation on incurrence of indebtedness and (iv) limitation on restricted payments. The covenants with respect to limitation on incurrence of indebtedness and limitation on restricted payments will cease to be effective upon the first Investment Grade Rating Date (as defined herein). See "Description of Notes -- Restrictive Covenants." Use of Proceeds............ The Company will not receive any cash proceeds from the issuance of the Exchange Notes pursuant to this Prospectus. RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered carefully in evaluating the Exchange Offer. 9 15 SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA The following table sets forth summary unaudited pro forma condensed combined ("pro forma") data for the Company. The summary pro forma financial data are derived from the unaudited pro forma financial statements included elsewhere in this Prospectus, which give pro forma effect to the Acquisition, the Offering and the application of the net proceeds therefrom. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The pro forma statement of operations gives effect to the Acquisition, the Offering and the application of the net proceeds therefrom as if they had occurred as of January 1, 1997. The pro forma balance sheet gives effect to the Offering and the application of the net proceeds therefrom as if they had occurred as of December 31, 1997. The pro forma financial statements do not purport to represent what the financial position or results of operations of the Company would actually have been had the Acquisition, the Offering and the application of the net proceeds therefrom in fact occurred on the assumed dates or to project the financial position or results of operations of the Company for any future period or date. See "Pro Forma Financial Statements."
FISCAL YEAR ENDED DECEMBER 31, 1997(a) -------------------- (DOLLARS IN MILLIONS) OPERATING DATA: Sales....................................................... $1,790.1 Gross profit................................................ 858.3 Marketing, general and administrative....................... 568.4 Research and development.................................... 188.4 Operating income............................................ 95.6 Interest expense............................................ 91.3 Net earnings................................................ 9.4 OTHER DATA: Depreciation and amortization............................... $ 152.1 EBITDA(b)(c)................................................ 278.2 Ratio of EBITDA to interest expense(d)...................... 3.1x Ratio of earnings to fixed charges(e)....................... 1.3 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents................................... $ 47.4 Working capital............................................. 96.7 Total assets................................................ 2,349.4 Total debt.................................................. 1,270.2 Stockholders' equity........................................ 80.8
- --------------- (a) Historical financial data for the Company for the fiscal year ended December 31, 1997 includes results for Coulter from November 1, 1997. Pro forma financial data for the Company for the year ended December 31, 1997 also includes the results of Coulter for the ten-month period ended October 31, 1997. (b) Coulter incurred a restructuring charge of $5.9 million during the fiscal year ended March 31, 1997 with respect to the termination of certain employees and the discontinuance of certain research and development activities. This charge has been excluded from the calculation of EBITDA for this presentation. (c) EBITDA represents earnings before income taxes plus interest expense, in-process research and development, restructuring charges, depreciation and amortization. While EBITDA should not be construed as a substitute for operating income or as a better indicator of liquidity than cash flows from operating activities (both of which are determined in accordance with generally accepted accounting principles) it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditures and working capital requirements. (d) For purposes of calculating this ratio, interest expense excludes $0.7 million of amortization of debt financing fees and expenses for the year ended December 31, 1997. (e) For purposes of this calculation, "earnings" consist of income (loss) before income taxes and fixed charges. "Fixed charges" consist of interest expense and a portion of rent expense deemed representative of the interest factor. 10 16 SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA OF BECKMAN AND COULTER The following summary historical financial and operating data of Beckman and Coulter are derived from the consolidated financial statements of Beckman and Coulter, including the related notes thereto, as well as the selected financial and operating information included elsewhere in this Prospectus. The information set forth below should be read in conjunction with the financial statements and information and related notes included elsewhere in this Prospectus. See "Selected Historical Financial Information of Beckman," "Selected Historical Financial Information of Coulter," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of each of Beckman and Coulter and related notes included elsewhere in this Prospectus (the "Consolidated Financial Statements").
BECKMAN YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1997(A) 1996 1995 1994 1993 --------- -------- -------- -------- -------- (DOLLARS IN MILLIONS, EXCEPT AS NOTED) OPERATING DATA: Sales...................................... $1,198.0 $1,028.0 $930.1 $888.6 $875.7 Gross profit............................... 588.3 550.2 502.9 472.3 457.4 Marketing, general and administrative...... 360.3 319.3 300.4 281.9 278.5 Research and development................... 123.6 108.4 91.7 91.5 93.3 In-process research and development(b)..... 282.0 -- -- -- -- Restructuring charge(c).................... 59.4 -- 27.7 11.3 114.7 Operating (loss) income.................... (237.0) 122.5 83.1 87.6 (29.1) Net (loss) earnings........................ (264.4) 74.7 48.9 42.2 (37.6) OTHER DATA: Depreciation and amortization.............. $ 109.1 $ 87.8 $ 79.1 $ 70.1 $ 63.5 Capital expenditures(d).................... 110.7 117.4 110.0 98.7 92.8 EBITDA(b)(c)(e)............................ 228.0 217.4 192.6 161.4 89.8 EBITDA margin(f)........................... 19.0% 21.1% 20.7% 18.2% 10.3% Number of employees (unaudited)............ 11,171 6,079 5,702 5,963 6,689 Sales per employee (in thousands, unaudited)(g)............................ $ -- $ 169.1 $163.1 $149.0 $130.9 Ratio of earnings to fixed charges(h)...... --(i) 5.0 4.1 4.5 --(i)
COULTER SIX MONTHS ENDED SEPTEMBER 30, YEAR ENDED MARCH 31, -------------------- -------------------------------- 1997 1996 1997 1996 1995 -------- -------- -------- -------- -------- (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT AS NOTED) OPERATING DATA: Sales....................................... $330.3 $316.7 $ 700.9 $685.3 $654.3 Gross profit................................ 157.6 153.3 327.4 336.1 313.8 Selling, general and administrative expenses.................................. 108.3 108.9 217.9 216.9 204.8 Research and development expenses........... 36.8 43.0 85.8 87.3 73.5 Restructuring charges(c).................... -- -- 5.9 -- -- Operating income............................ 12.5 1.4 17.8 31.9 35.5 Net income.................................. 6.4 0.3 14.6 33.0 17.3 OTHER DATA: Depreciation and amortization............... $ 12.5 $ 11.8 $ 25.1 $ 23.7 $ 18.8 Capital expenditures(d)..................... 14.4 36.9 58.0 31.1 31.1 EBITDA(c)(e)................................ 27.8 18.2 64.8 72.6 57.6 EBITDA margin(f)............................ 8.4% 5.7% 9.2% 10.6% 8.8% Number of employees (unaudited)............. 5,077 5,290 5,293 5,225 4,945 Sales per employee (in thousands, unaudited)(g)............................. $ -- $ -- $ 132.4 $131.2 $132.3
Footnotes to table appear on following page. 11 17 Footnotes to table on prior page. - --------------- (a) Financial and operating data of Beckman for the year ended December 31, 1997 includes financial and operating data of Coulter from November 1, 1997. (b) The Company's allocation of purchase price in the Acquisition resulted in the allocation of $282.0 million of in-process research and development which, under generally accepted accounting principles, was expensed immediately after the Acquisition was completed. This charge has been excluded from the calculation of EBITDA for these presentations. (c) The 1997 Beckman restructuring charge of $59.4 million was taken in conjunction with the Acquisition and includes costs associated with asset redeployment, reduction of duplicate overhead and implementation of operating efficiencies on a worldwide basis. The 1995 and 1994 Beckman restructuring charges include costs for facility moves and transition costs which were anticipated and directly associated with Beckman's 1993 restructuring plan but could not be recognized in establishment of the original restructuring reserve under generally accepted accounting principles. The Beckman restructuring in 1993 resulted from a redirected business strategy in response to unfavorable market conditions caused by a worldwide drive to contain healthcare costs and generally weak economic conditions. Restructuring charges for Coulter for its fiscal year ended March 31, 1997 represent costs incurred with respect to the termination of certain employees and the discontinuance of certain research and development activities. These charges have been excluded from the calculation of EBITDA for these presentations. (d) Capital expenditures include expenditures for customer leased equipment. For Fiscal 1997, customer leased equipment accounted for approximately 85% of Beckman's capital expenditures. (e) EBITDA represents earnings before income taxes plus interest expense, in-process research and development, restructuring charges, depreciation and amortization. While EBITDA should not be construed as a substitute for operating income or as a better indicator of liquidity than cash flows from operating activities (both of which are determined in accordance with generally accepted accounting principles), it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditures and working capital requirements. (f) EBITDA margin represents EBITDA, as defined in footnote (e) above, expressed as a percentage of sales. (g) Sales per employee is calculated by dividing period sales by the number of employees at period end. Sales per employee is not calculated for Beckman for the year ended December 31, 1997 or Coulter for the six-months ended September 30, 1997 and 1996 as the results are not meaningful. (h) For purposes of this calculation, "earnings" consist of income (loss) before income taxes and fixed charges. "Fixed charges" consist of interest expense and a portion of rent expense deemed representative of the interest factor. (i) Earnings were inadequate to cover fixed charges for the years ended December 31, 1997 and 1993. The coverage deficiencies were approximately $251.9 and $53.9, respectively. 12 18 RISK FACTORS This Prospectus includes "forward looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from the Company's forward looking statements are set forth below and elsewhere in this Prospectus. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth below. SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS The Company is highly leveraged. At December 31, 1997, the Company had $1,250.2 million of outstanding indebtedness and $81.8 million of stockholders' equity. Prior to the Acquisition, Beckman was operated with a significantly smaller degree of leverage. Management has extensive experience in operating Beckman's business, but has not operated the Company with the level of indebtedness that was incurred in connection with the Acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition -- Liquidity and Capital Resources." Subject to certain limitations, the Company and its subsidiaries may incur additional indebtedness in the future. It is expected that the Company will be able to incur approximately $670 million in additional indebtedness in compliance with a financial ratio test provided under the Indenture, and the Company and its subsidiaries will be able to incur certain other permitted indebtedness. See "Capitalization," "Pro Forma Financial Statements," "Description of Credit Facility" and "Description of Notes." The Company's ability to make interest payments on or to refinance its indebtedness (including the Notes), and to fund its operations, including planned capital expenditures and research and development expense, depends on its future performance and financial results, which, to a certain extent, are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. Based upon current levels of operations, management believes that its cash flow from operations, together with available borrowings under the Credit Facility, anticipated cost savings and future growth, and other sources of liquidity, will be adequate to meet the Company's anticipated requirements for interest payments and other debt service obligations, working capital, capital expenditures, lease payments and other operating needs, until the maturity of the Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition -- Liquidity and Capital Resources." There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels or that anticipated cost savings or growth can be achieved. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt and operate its business, including making necessary capital expenditures, the Company may be required to refinance all or a portion of its existing debt, including the Notes, to sell assets or to obtain additional financing. There can be no assurance that any such action would be successful. The Company's high level of debt has several important effects on its future operations, including but not limited to: (i) making it more difficult for the Company to satisfy its obligations with respect to the Notes, (ii) increasing the Company's vulnerability to general adverse economic and industry conditions, (iii) limiting the Company's ability to obtain additional financing to fund future working capital, capital expenditures, research and development and other general corporate requirements, (iv) requiring the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, research and development or other operating needs and uses, (v) limiting the Company's flexibility in planning for, or reacting to, changes in its business and in the clinical diagnostics and life sciences markets, (vi) placing the Company at a competitive disadvantage vis-a-vis less leveraged competitors and (vii) exposing the Company to the risk of increased interest rates since certain of the Company's borrowings are at variable rates of interest. 13 19 ABILITY TO SUCCESSFULLY INTEGRATE COULTER Since 1995, Beckman has acquired four businesses or product lines. However, management does not have experience in acquiring and integrating a business the size of Coulter. The integration and consolidation of Coulter will require substantial management, financial and other resources. While the Company believes that it has sufficient resources to manage the Acquisition, the Acquisition involves a number of significant risks, including diversion of management's attention, the inability to integrate successfully Coulter's operations with those of Beckman, difficulties in assimilating the technologies, services and products of Coulter, the inability to retain key management employees of Coulter and unanticipated events or circumstances, some or all of which could have a material adverse effect on the Company's business, financial condition or results of operations. Moreover, there can be no assurance as to the extent to which the anticipated benefits with respect to the Acquisition will be realized, or the timing of any such realization. The inability of the Company to integrate and manage Coulter successfully, or to achieve a substantial portion of the anticipated benefits within the time frame anticipated by management, could have a material adverse effect on the Company's business, financial condition or results of operations. See "The Acquisition" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." RESTRICTIVE FINANCING COVENANTS The Credit Facility contains a number of covenants that significantly restrict the operations of the Company. In addition, the Company is required to comply with specified financial ratios and tests under the Credit Facility, including minimum net worth, maximum capital expenditures, a debt to earnings ratio, a minimum interest coverage ratio and a maximum amount of debt incurrence. There can be no assurance that the Company will be able to comply with such covenants or restrictions in the future. The Company's ability to comply with such covenants and other restrictions may be affected by events beyond its control, including prevailing economic, financial and industry conditions. The breach of any such covenants or restrictions would result in a default under the Credit Facility that would permit the lenders thereunder to declare all amounts outstanding thereunder to be immediately due and payable, together with accrued and unpaid interest, and terminate their commitments to make further extensions of credit thereunder. See "Description of Credit Facility." In addition, the Indenture contains a number of restrictive covenants relating to the Company. These covenants, however, are significantly less restrictive than those contained in the Credit Facility and are subject to a number of important exceptions and limitations. See "Description of Notes." HIGHLY COMPETITIVE INDUSTRIES The clinical diagnostics and life sciences markets are each highly competitive, and the Company encounters significant competition in each market from many manufacturers, both domestic and from outside the United States. Many of its competitors are larger and have greater financial resources than those of the Company and are less leveraged than the Company. The Company has from time to time experienced price pressures due to competition. Moreover, competitive and regulatory conditions in many markets restrict the Company's ability to fully recover, through price increases, higher costs of acquired goods and services resulting from inflation. The Company's competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive price and performance characteristics. Although the Company believes that it has certain technological and other advantages over its competitors, realizing and maintaining these advantages will require continued investment by the Company in research and development, sales and marketing and customer service and support. There can be no assurance that the Company will have sufficient resources to continue to make such investments or that the Company will be successful in maintaining such advantages. See "-- Substantial Leverage; Ability to Service Indebtedness," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Business Climate" and "Business -- Competition." 14 20 DEPENDENCE ON CAPITAL SPENDING POLICIES AND GOVERNMENT FUNDING; EFFECT OF POTENTIAL HEALTHCARE REFORM The Company's customers include pharmaceutical, biotechnology and chemical companies, clinical diagnostics laboratories and hospitals. The capital spending policies of these companies and institutions have a significant effect on the demand for the Company's products. Such policies are based on a wide variety of factors, including the resources available to make such purchases, the spending priorities among various types of equipment and the policies regarding capital expenditures during industry downturns or recessionary periods. Any significant decrease in capital spending by these companies or institutions could have a material adverse effect on the Company's business, financial condition or results of operations. The diagnostics and life sciences markets continue to be unfavorably impacted by economic weakness in Europe and cost containment initiatives in several European governmental and healthcare systems. The life sciences market also continues to be affected by consolidation of pharmaceutical companies and governmental constraints on research and development spending. Cost containment initiatives in the U.S. and European healthcare systems are expected to be continuing factors which may affect the Company's sales. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Business Climate" and "Business -- Customers and Markets." Many of the Company's customers, including universities, medical schools and research institutions, obtain funding for the purchase of the Company's products from grants by governments or government agencies. If government funding necessary to purchase the Company's products were to decrease, the Company's business, financial condition or results of operations could be materially adversely affected. Healthcare reform and the growth of managed care organizations have been and continue to be significant factors in the clinical diagnostics market. These competitive forces place constraints on the levels of overall pricing, and thus could have a material adverse effect on the profit margins of the Company's products sold in clinical diagnostics markets. Such continuing changes in the United States and European healthcare markets could also force the Company to alter its approach in selling, marketing, distribution and servicing its customers. See "Business -- Government Regulation." RISK OF CURRENCY FLUCTUATION; FOREIGN OPERATIONS; RECENT ADVERSE ECONOMIC CONDITIONS IN ASIA Approximately 50% of the Company's Pro Forma 1997 sales were generated outside of the United States. U.S. dollar denominated expenses represent a much greater percentage of the Company's operating expenses than U.S. dollar denominated sales represent of total net sales. As a result, appreciation of the U.S. dollar against the Company's major trading currencies has a negative impact on the Company's results of operations, and depreciation of the U.S. dollar has a positive impact. The Company seeks to mitigate the effects of changing currency exchange rates through hedging programs. However, long-term appreciation of the U.S. dollar could have a material adverse effect on the Company's business, financial condition or results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Foreign Currency Exposure" and "-- Financial Condition -- Liquidity and Capital Resources" and Note 7 to Beckman's Consolidated Financial Statements and Note G to Coulter's Consolidated Financial Statements, included elsewhere in this Prospectus. In addition to the currency risks discussed above, the Company's international operations are subject to the risk of new and different legal and regulatory requirements in local jurisdictions, tariffs and trade barriers, potential difficulties in staffing and managing local operations, credit risk of local customers and distributors, potential difficulties in protecting intellectual property, risk of nationalization of private enterprises, potential imposition of restrictions on investments, potentially adverse tax consequences, including imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries, and local economic, political and social conditions, including the possibility of hyper-inflationary conditions, in certain countries. There can be no assurance that one or a combination of these factors will not have a material adverse impact on the Company's ability to maintain or increase its foreign sales or on its business, financial condition or results of operations. The economic conditions in certain countries in Asia have worsened significantly in recent months. Approximately 8% of the Company's Pro Forma 1997 sales were derived from the Asian markets other than Japan, and approximately 11% of the Company's Pro Forma 1997 sales were derived from Japan where the 15 21 economic downturn has been less significant. Although the Company does not anticipate that the Asian economic conditions will materially impact its business, financial condition or results of operations, there can be no assurance that the current economic conditions in Asia (including Japan) will not worsen or that the situation will not negatively impact the Company's business, financial condition or results of operations. RELIANCE ON PATENTS AND OTHER INTELLECTUAL PROPERTY; RISK OF INTELLECTUAL PROPERTY LITIGATION The Company owns numerous United States and foreign patents, and has patent applications pending in the United States and abroad. The Company also owns numerous United States and foreign registered trademarks and trade names and has applications for the registration of trademarks and trade names pending in the United States and abroad. In addition, the Company possesses a wide array of unpatented proprietary technology and know-how and licenses certain intellectual property rights to and from third parties. The Company believes that its intellectual property rights in the aggregate are of material importance in the operation of the Company's business, but that no single patent or license is material in relation to the Company's business as a whole. See "Business -- Patents and Trademarks." The Company's ability to compete effectively with other companies depends, to some extent, on its ability to maintain the proprietary nature of its intellectual property. There can be no assurance as to the degree of protection offered by the claims of the various patents or the likelihood that patents will be issued on pending patent applications. If the Company were unable to maintain the proprietary nature of its intellectual property with respect to its significant current or proposed products, the Company's business could be materially adversely affected. There can be no assurance that the Company will be able to obtain patent protection for products or processes discovered using the Company's technologies. Furthermore, there can be no assurance that any patents issued to the Company will not be challenged, invalidated, narrowed or circumvented, or that the rights granted thereunder will provide significant proprietary protection or competitive advantages to the Company. There can be no assurance that, if challenged, the Company's patents would be held valid by a court of competent jurisdiction. Legal standards relating to the breadth and scope of patent claims are uncertain. Accordingly, the valid scope of patent claims cannot be predicted. There can be no assurance that the claims of the Company's patents will be interpreted by a court broadly enough to offer significant patent protection to the Company, or that the claims of a third party's patents will not be interpreted by a court broadly enough to cover some of the Company's products. See "Business -- Patents and Trademarks." Litigation, which could result in substantial costs to the Company, may be necessary to enforce or defend the Company's patents or to determine the scope and validity of third-party proprietary rights. Uncertainties resulting from the initiation and continuation of any patent or related litigation could have a material adverse effect on the Company's business, financial condition or results of operations. An adverse outcome in connection with an infringement or validity proceeding could subject the Company to significant liabilities and expenses (e.g., reasonable royalties, lost profits, attorneys' fees, trebling of damages for willfulness), require disputed rights to be licensed from third parties or require the Company to cease using the disputed intellectual property or cease the sale of a commercial product, any of which could have a material adverse effect on the Company's business, financial condition or results of operations. For a discussion of currently pending litigation relating to certain of the Company's intellectual property, see "Business -- Legal Proceedings." ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state, local and foreign environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations that would have a material impact on the Company's operations or financial condition. No assurance can be given, however, that no such expenditures will be incurred. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Environmental Matters and Litigation." Management cannot predict with any certainty whether future events, such as changes in existing laws and regulations or the discovery of conditions not currently known to the Company, may give rise to additional environmental costs. Furthermore, actions by federal, state, local and foreign governments concerning 16 22 environmental matters could result in laws or regulations that could increase the costs of producing the Company's products or providing its services, or otherwise adversely affect the demand for its products or services. See "Business -- Environmental Matters." FRAUDULENT TRANSFER CONSIDERATIONS RELATING TO GUARANTEES The Company's obligations under the Notes are guaranteed on an unsecured, senior basis by the Note Guarantors. If, under relevant federal and state fraudulent transfer and conveyance statutes, in a bankruptcy or reorganization case or a lawsuit by or on behalf of unpaid creditors of any Note Guarantor, a court were to find that, at the time the Notes were guaranteed by such Note Guarantor, such Note Guarantor (a) guaranteed the Notes with the intent of hindering, delaying or defrauding current or future creditors or (b) (i) received less than reasonably equivalent value or fair consideration for guaranteeing the Notes, as applicable, and (ii)(A) was insolvent or was rendered insolvent by reason of the guarantee of the indebtedness, (B) was engaged, or about to engage, in a business or transaction for which its assets constituted unreasonably small capital, (C) intended to incur, or believed that it would incur, debts beyond its ability to pay as such debts matured (as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes) or (D) was a defendant in an action for money damages, or had a judgment for money damages docketed against it (if, in either case, after final judgment the judgment is unsatisfied), such court could avoid or subordinate such Note Guarantor's Note Guarantee to presently existing and future indebtedness of such Note Guarantor and take other action detrimental to the holders of the Notes, including, under certain circumstances, invalidating the Note Guarantees. The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in any such proceeding. There can be no assurance as to what standards a court would use to determine whether a Note Guarantor was solvent at the relevant time, or whether, whatever standard was used, the Note Guarantees would not be avoided on another of the grounds set forth above. ABSENCE OF A PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON RESALE The Initial Notes have not been registered under the Securities Act. Accordingly, the Initial Notes may only be offered or sold pursuant to an exemption from the registration requirements of the Securities Act or pursuant to an effective registration statement. There is no existing market for the Exchange Notes and, although the Exchange Notes are expected to be eligible for trading in PORTAL, there can be no assurance as to the liquidity of any markets that may develop for the Exchange Notes, the ability of holders of the Exchange Notes to sell their Exchange Notes or the prices at which holders would be able to sell their Exchange Notes. Future trading prices of the Exchange Notes will depend on many factors, including, among other things, the Company's ability to effect the Exchange Offer, prevailing interest rates, the Company's operating results and the market for similar securities. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation of the Exchange Notes in any automated dealer quotation system. See "Plan of Distribution." FAILURE TO EXCHANGE INITIAL NOTES Exchange Notes will be issued in exchange for Initial Notes only after timely receipt by the Exchange Agent of such Initial Notes, a properly completed and duly executed Letter of Transmittal and all other required documentation. Therefore, holders of Initial Notes desiring to tender such Initial Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor the Company is under any duty to give notification of defects or irregularities with respect to tenders of Initial Notes for exchange. Initial Notes that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. In addition, any holder of Initial Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or any other trading activities, must acknowledge that it will deliver a 17 23 prospectus in connection with any resale of such Exchange Notes. To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Initial Notes could be adversely affected due to the limited amount, or "float," of the Initial Notes that are expected to remain outstanding following the Exchange Offer. Generally, a lower "float" of a security could result in less demand to purchase such security and could, therefore, result in lower prices for such security. For the same reason, to the extent that a large amount of Initial Notes are not tendered or are tendered and not accepted in the Exchange Offer, the trading market for the Exchange Notes could be adversely affected. See "Plan of Distribution" and "The Exchange Offer." 18 24 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The Initial Notes were issued by the Company on March 4, 1998 (the "Closing Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently sold the Initial Notes to "qualified institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A"), in reliance on Rule 144A. As a condition to the sale of the Initial Notes, the Company and the Initial Purchasers entered into the Registration Rights Agreement on March 4, 1998. Pursuant to the Registration Rights Agreement, the Company agreed that, unless the Exchange Offer is not permitted by applicable law or Commission policy, it would (i) file with the Commission a Registration Statement under the Securities Act with respect to the Exchange Notes within 45 calendar days after the Closing Date, (ii) use its best efforts to cause such Registration Statement to become effective under the Securities Act within 120 calendar days after the Closing Date (iii) use its best efforts to keep the Registration Statement effective until the closing of the Exchange Offer and (iv) use its best efforts to cause the Exchange Offer to be consummated within 150 calendar days after the Closing Date. Upon the effectiveness of the Registration Statement, the Company will offer the Exchange Notes in exchange for surrender of the Initial Notes. The Company will keep the Exchange Offer open for not less than 30 calendar days after the date notice of the Exchange Offer is mailed to the holders of the Notes (or longer if required by applicable law). A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement. The Registration Statement is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement. RESALE OF THE EXCHANGE NOTES With respect to the Exchange Notes, based upon an interpretation by the staff of the Commission set forth in certain no-action letters issued to third parties, the Company believes that a Holder (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) any such Holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchanges Initial Notes for Exchange Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement with any person to participate, in a distribution of the Exchange Notes, will be allowed to resell Exchange Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any Holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in the distribution of the Exchange Notes or is a broker-dealer, such Holder cannot rely on the position of the staff of the Commission enumerated in certain no-action letters issued to third parties and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making or other trading activities. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Initial Notes validly tendered and not withdrawn prior to the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Initial Notes surrendered pursuant to the Exchange Offer. Initial Notes may be tendered only in integral multiples of $1,000. 19 25 The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes except that (i) the exchange will be registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to any of the rights of holders of Initial Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Initial Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture, which also authorizes the issuance of the Initial Notes, such that both series of Notes will be treated as a single class of debt securities under the Indenture. As of the date of this Prospectus, $160,000,000 in aggregate principal amount of the Initial 2003 Notes are outstanding and registered in the name of Cede & Co., as nominee for DTC and $240,000,000 in aggregate principal amount of the Initial 2008 Notes are outstanding and registered in the name of Cede & Co., as nominee for DTC. Only a registered Holder of the Initial Notes (or such Holder's legal representative or attorney-in-fact) as reflected on the records of the Trustee under the Indenture may participate in the Exchange Offer. There will be no fixed record date for determining registered holders of the Initial Notes entitled to participate in the Exchange Offer. Holders of the Initial Notes do not have any appraisal or dissenters' rights under the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Initial Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Initial Notes for the purposes of receiving the Exchange Notes from the Company. Holders who tender Initial Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Initial Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will (i) notify the Exchange Agent of any extension by oral or written notice and (ii) mail to the registered holders an announcement thereof which shall include disclosure of the approximate number of Initial Notes deposited to date, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Company reserves the right, in its reasonable discretion, (i) to delay accepting any Initial Notes, (ii) to extend the Exchange Offer or (iii) if any conditions set forth below under "-- Conditions" shall not have been satisfied, to terminate the Exchange Offer by giving oral or written notice of such delay, extension or termination to the Exchange Agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. 20 26 INTEREST ON THE EXCHANGE NOTES The Exchange 2003 Notes will bear interest at a rate equal to 7.10% per annum and the Exchange 2008 Notes will bear interest at a rate equal to 7.45% per annum. Interest on the Exchange Notes will be payable semi-annually in arrears on each March 4 and September 4, commencing September 4, 1998. Holders of Exchange Notes will receive interest on September 4, 1998 from the date of initial issuance of the Exchange Notes, plus an amount equal to the accrued interest on the Initial Notes from the date of initial delivery to the date of exchange thereof for Exchange Notes. Holders of Initial Notes that are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Initial Notes. PROCEDURES FOR TENDERING Only a registered Holder of Initial Notes may tender such Initial Notes in the Exchange Offer. To tender in the Exchange Offer, a Holder of Initial Notes must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile to the Exchange Agent at the address set forth below under "-- Exchange Agent" for receipt prior to the Expiration Date. In addition, either (i) certificates for such Initial Notes must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Initial Notes, if such procedure is available, into the Exchange Agent's account at the Depositary pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with the guaranteed delivery procedures described below. The tender by a Holder that is not withdrawn prior to the Expiration Date will constitute an agreement between such Holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF INITIAL NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR INITIAL NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner(s) of the Initial Notes whose Initial Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Initial Notes, either make appropriate arrangements to register ownership of the Initial Notes in such owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal described below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Initial Notes tendered pursuant thereto are tendered (i) by a registered Holder who has not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the Letter of Transmittal (an "Eligible Institution"). 21 27 If the Letter of Transmittal is signed by a person other than the registered holder of any Initial Notes listed therein, such Initial Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered Holder as such registered Holder's name appears on such Initial Notes. If the Letter of Transmittal or any Initial Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Exchange Agent and the Depositary have confirmed that any financial institution that is a participant in the Depositary's system may utilize the Depositary's Automated Tender Offer Program to tender Initial Notes. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Initial Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Initial Notes not properly tendered or any Initial Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Initial Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Initial Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Initial Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Initial Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While the Company has no present plan to acquire any Initial Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any Initial Notes that are not tendered pursuant to the Exchange Offer, the Company reserves the right in its sole discretion to purchase or make offers for any Initial Notes that remain outstanding subsequent to the Expiration Date or, as set forth below under "-- Conditions," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Initial Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. Each holder of the Notes who wishes to tender Notes in exchange for Exchange Notes in the Exchange Offer will be required to represent that (i) it is not an affiliate of the Company, (ii) any Exchange Notes to be received by it are to be acquired in the ordinary course of its business and (iii) at the time of consummation of the Exchange Offer, it has no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes. In addition, in connection with the resale of Exchange Notes, any Participating Broker-Dealer who acquired the Notes for its own account as a result of market-making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) with the prospectus contained in the Registration Statement. RETURN OF INITIAL NOTES If any tendered Initial Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Initial Notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or non-exchanged Initial Notes will be returned without expense to the tendering Holder thereof (or, in the case of Initial Notes tendered by book-entry transfer into the Exchange Agent's account at the Depositary pursuant to the book-entry transfer procedures described below, such Initial Notes will be credited to an account maintained with the Depositary) as promptly as practicable. 22 28 BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Initial Notes at the Depositary for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Depositary's systems may make book-entry delivery of Initial Notes by causing the Depositary to transfer such Initial Notes into the Exchange Agent's account at the Depositary in accordance with the Depositary's procedures for transfer. However, although delivery of Initial Notes may be effected through bookentry transfer at the Depositary, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "-- Exchange Agent" on or prior to the Expiration Date or pursuant to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Initial Notes and (i) whose Initial Notes are not immediately available or (ii) who cannot deliver their Initial Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder, the certificate number(s) of such Initial Notes and the principal amount of Initial Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing the Initial Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Initial Notes in proper form for transfer and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Initial Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. To withdraw a tender of Initial Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Initial Notes to be withdrawn (the "Depositor"), (ii) identify the Initial Notes to be withdrawn (including the certificate number or numbers and principal amount of such Initial Notes) and (iii) be signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Initial Notes were tendered (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, whose determination shall be final and binding on all parties. Any Initial Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer, and no Exchange Notes will be issued with respect thereto unless the Initial Notes so withdrawn are validly retendered. Properly withdrawn Initial Notes may be retendered by following one of the procedures described above under "The Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration Date. 23 29 CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange the Exchange Notes for, any Initial Notes, and may terminate the Exchange Offer as provided herein before the acceptance of such Initial Notes, if, in the reasonable judgment of the Company, the Exchange Offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the Commission. If the Company determines in its reasonable discretion that any of these conditions are not satisfied, the Company may (i) refuse to accept any Initial Notes and return all tendered Initial Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Initial Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Initial Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Initial Notes that have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered holders of the Initial Notes, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. TERMINATION OF CERTAIN RIGHTS All rights under the Registration Rights Agreement (including registration rights) of holders of the Initial Notes eligible to participate in the Exchange Offer will terminate upon consummation of the Exchange Offer except with respect to the Company's continuing obligations (i) to indemnify such holders (including any broker-dealers) and certain parties related to such holders against certain liabilities (including liabilities under the Securities Act) and (ii) to provide, upon the request of any Holder of a transfer-restricted Initial Note, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Initial Notes pursuant to Rule 144A. SHELF REGISTRATION In the event that (i) any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, (ii) for any other reason the Registration Statement is not declared effective within 120 calendar days following the Closing Date or the Exchange Offer is not consummated within 150 calendar days following the Closing Date, (iii) upon the request of any of the Initial Purchasers or (iv) any holder of the Notes is not permitted to participate in the Exchange Offer or does not receive fully tradeable Exchange Notes pursuant to the Exchange Offer, the Company will, at its cost, (a) as promptly as practicable, file a shelf registration statement covering resales of the Notes (the "Shelf Registration"), (b) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act by the 150th calendar day after the Closing Date and (c) use its best efforts to keep effective the Shelf Registration Statement until two years after its effective date, or such shorter period which will terminate when all the Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration or Rule 144 or cease to be outstanding. The Company will, in the event of the filing of a Shelf Registration Statement, provide to each holder of the Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement for the Notes has become effective and take certain other actions as are required to generally permit unrestricted resales of the Notes. A holder of the Notes that sells such Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). In addition, each holder of the Notes will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Notes included in the Shelf Registration Statement and 24 30 to benefit from the provisions regarding liquidated damages ("Liquidated Damages") set forth in the following paragraph. LIQUIDATED DAMAGES In the event that (i) the Registration Statement is not filed with the Commission on or prior to the 45th calendar day following the Closing Date, (ii) the Registration Statement is not declared effective on or prior to the 120th calendar day following the Closing Date, (iii) the Exchange Offer is not consummated, or, if required, a Shelf Registration Statement with respect to the Notes is not declared effective, in either case, on or prior to the 150th calendar day following the Closing Date or (iv) the Registration Statement is declared effective but thereafter ceases to be effective or usable (each such event referred to in clauses (i) through (iv) above, a "Registration Default"), the interest rate borne by the Notes shall be increased by one-quarter of one percent (0.25%) per annum upon the occurrence of each Registration Default, which rate will increase by one-quarter of one percent (0.25%) each 90-day period that such additional interest continues to accrue under any circumstance, with an aggregate maximum increase in interest rate equal to one-half of one percent (0.50%) per annum until such Registration Default has been cured. Upon (w) the filing of the Registration Statement after the 45-day period described in clause (i) above, (x) the effectiveness of the Registration Statement after the 120-day period described in clause (ii) above, (y) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 150-day period described in clause (iii) above, or (z) the cure of any Registration Default described in clause (iv) above, the interest rate borne by the Notes from the date of such filing, effectiveness, consummation or cure, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that if, after any such reduction in interest rate, a different event specified in clause (i), (ii), (iii) or (iv) above occurs, the interest rate will again be increased pursuant to the foregoing provisions. EXCHANGE AGENT The First National Bank of Chicago has been appointed as Exchange Agent of the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Registered or Certified Mail: By Hand Delivery: The First National Bank of Chicago The First National Bank of Chicago One North State Street One North State Street 9th Floor 9th Floor Chicago, Illinois 60602 Chicago, Illinois 60602 By Overnight Delivery: By Facsimile: The First National Bank of Chicago (312) 407-4656 One North State Street Confirm by Telephone: 9th Floor (312) 407-2068 Chicago, Illinois 60602
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 25 31 FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated in the aggregate to be approximately $200,000. Such expenses include registration fees, fees and expenses of the Exchange Agent and the Trustee, accounting and legal fees and printing costs, among others. The Company will pay all transfer taxes, if any, applicable to the exchange of Initial Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of the Initial Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. CONSEQUENCE OF FAILURES TO EXCHANGE Participation in the Exchange Offer is voluntary. Holders of the Initial Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. The Initial Notes that are not exchanged for the Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Initial Notes may be resold only (i) to a person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a transaction meeting the requirements of Rule 144 under the Securities Act, (iii) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, (iv) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (v) to the Company or (vi) pursuant to an effective registration statement and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction. ACCOUNTING TREATMENT For accounting purposes, the Company will recognize no gain or loss as a result of the Exchange Offer. The expenses of the Exchange Offer will be amortized over the term of the Exchange Notes. USE OF PROCEEDS The net proceeds to the Company from the sale of the Notes in the Offering were approximately $394.3 million (after deducting Offering expenses and the Initial Purchasers' discount). Net proceeds from the Offering of $300.0 million were used to prepay all Term Loan borrowings, net proceeds of $80.0 million were used to repay a portion of the Revolving Credit Facility and the remaining net proceeds of $14.3 million were used for operating purposes. The Company will not receive any cash proceeds from the issuance of the Exchange Notes. In consideration for issuing the Exchange Notes as contemplated in this Prospectus, the Company will receive in exchange Initial Notes in like principal amount, which will be canceled and as such will not result in any increase in indebtedness of the Company. 26 32 THE ACQUISITION On October 31, 1997, Beckman acquired all of the outstanding capital stock of Coulter, which became a wholly owned subsidiary of Beckman. The purchase price for the Acquisition totaled $1,178.0 million, consisting of $875.0 million in cash, assumed liabilities of $170.0 million and purchase liabilities of $133.0 million. Purchase liabilities recorded included approximately $110.0 million for severance and related costs and approximately $23.0 million for costs associated with the closure of certain offices and manufacturing facilities. The Company expects to complete its termination of certain employees and closure of certain facilities in 1998. Assumed liabilities recorded included approximately $103.0 million of contractual obligations of Coulter to its employees, $36.0 million of change in control payments and $31.0 million of other assumed liabilities. The Company expects to pay for such liabilities throughout 1998. See Note 3 to Consolidated Financial Statements of Beckman. The stock purchase agreement (the "Stock Purchase Agreement") between Beckman, Coulter and the former stockholders of Coulter contains customary representations, warranties, covenants and agreements for the transactions contemplated therein. Subject to certain restrictions and limitations, the parties have agreed to indemnify a non-breaching party against certain liabilities associated therewith. Generally, a non-breaching party is entitled to indemnification of up to $50.0 million in respect of aggregate damages and claims that exceed $10.0 million. In addition, at the consummation of the Acquisition, Beckman, the former stockholders of Coulter and an escrow agent entered into an escrow agreement with customary terms and conditions whereby $50.0 million of the $875.0 million cash portion of the purchase price was deposited into an escrow account to secure the obligations of the former stockholders of Coulter to Beckman under the Stock Purchase Agreement. The $50.0 million of funds in the escrow are available to Beckman, subject to certain conditions, for aggregate damages and claims that exceed $10.0 million. One-half of the proceeds in the escrow will be distributed to the former stockholders of Coulter two years following the consummation of the Acquisition, less any reserves subject to indemnification, and the remaining proceeds will be distributed to the former stockholders of Coulter three years following the consummation of the Acquisition, less any reserves subject to indemnification. Concurrently with the consummation of the Acquisition, the Company entered into a credit facility (the "Credit Facility") which provides for aggregate commitments not exceeding $1.3 billion, including $800.0 million of commitments under an unsecured revolving credit facility (the "Revolving Credit Facility") and $500.0 million of commitments under an unsecured term loan facility (the "Term Loan"). On October 31, 1997, the Company borrowed $600.0 million under the Revolving Credit Facility and $500.0 million under the Term Loan to finance the Acquisition in part. Net proceeds from the Offering of $300.0 million were used to prepay all Term Loan borrowings, net proceeds of $80.0 million were used to repay a portion of the Revolving Credit Facility and the remaining net proceeds of $14.3 million were used for operating purposes. As of April 1, 1998, there were no amounts outstanding under the Term Loan and $670.0 million outstanding under the Revolving Credit Facility. See "Description of Credit Facility." 27 33 CAPITALIZATION The following table sets forth as of December 31, 1997 (i) the historical capitalization of the Company and (ii) the pro forma capitalization of the Company, adjusted to give effect to the Offering and the application of the net proceeds therefrom. See "Use of Proceeds." This table should be read in conjunction with the Pro Forma Financial Statements including the related notes thereto and the historical financial statements and information of both Beckman and Coulter and the related notes thereto included elsewhere in this Prospectus. See "Pro Forma Financial Statements," "Selected Historical Financial Information of Beckman," "Selected Historical Financial Information of Coulter" and the Consolidated Financial Statements of Beckman and Coulter.
AT DECEMBER 31, 1997 -------------------- AS ACTUAL ADJUSTED -------- -------- (IN MILLIONS) Cash and equivalents(a)..................................... $ 33.1 $ 47.4 ======== ======== Short-term borrowings....................................... $ 49.0 $ 49.0 Current portion of long-term debt........................... 19.9 19.9 -------- -------- Total short-term debt.................................. 68.9 68.9 Long-term debt, net of current portion: Revolving Credit Facility(b)........................... 600.0 520.0 Term Loan(b)........................................... 400.0 100.0 Initial 2003 Notes..................................... -- 160.0 Initial 2008 Notes..................................... -- 239.9 7.05% Debentures due 2026.............................. 100.0 100.0 Other long-term debt................................... 81.3 81.3 -------- -------- Total long-term debt, net of current portion........... 1,181.3 1,201.2 -------- -------- Total debt............................................. 1,250.2 1,270.1 Stockholders' equity(c)..................................... 81.8 80.8 -------- -------- Total capitalization................................... $1,332.0 $1,350.9 ======== ========
- --------------- (a) The as adjusted amount reflects net cash proceeds of $19.9 (after paydown of debt) less $5.6 million of cash used to pay fees and expenses associated with the issuance of the Initial Notes. (b) In January 1998 the Company borrowed an additional $150.0 million of indebtedness under the Revolving Credit Facility, $100.0 million of which was used to reduce outstanding commitments under the Term Loan. As of April 1, 1998, there were no amounts outstanding under the Term Loan and $670.0 million outstanding under the Revolving Credit Facility. As of such date, the Company was able to borrow up to an additional $130.0 million under the Revolving Credit Facility. (c) Does not include options to purchase 2.9 million shares of common stock of the Company. See Note 10 to Consolidated Financial Statements of Beckman. Included in the as adjusted amount is the effect of an extraordinary charge of $1.0 million, net of tax, which will be recognized upon the early extinguishment of the Term Loan. 28 34 PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma balance sheet as of December 31, 1997 has been prepared to illustrate the effect of the Offering and the application of the net proceeds therefrom, as if they had occurred on December 31, 1997. The following unaudited pro forma statement of operations of Beckman and Coulter for the year ended December 31, 1997 has been prepared to illustrate the effect of the Acquisition, the Offering and the application of the net proceeds therefrom, as if they had occurred as of January 1, 1997. The pro forma statement of operations for the year ended December 31, 1997 includes the results of Coulter for the ten months ended October 31, 1997. The results of Coulter for the two months ended December 31, 1997 are included in Beckman's consolidated statement of operations for the year ended December 31, 1997. The pro forma adjustments also give effect to the spin-off of Coulter's interest in Coulter Pharmaceutical, Inc. ("Coulter Pharmaceutical") and a spin-off of a portion of the capital stock of Coulter Cellular Therapies, Inc. ("Coulter Cellular"), which were completed prior to the Acquisition, as if such spin-offs were completed prior to January 1, 1997. The pro forma adjustments, and the assumptions on which they are based, are described in the accompanying notes to the Pro Forma Financial Statements. The unaudited pro forma financial statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations of the Company that would have been reported had the Acquisition, the Offering and the application of the net proceeds therefrom occurred on the dates indicated, nor do they represent a forecast of the consolidated financial position of the Company at any future date or the consolidated results of operations of the Company for any future period. Furthermore, no effect has been given in the pro forma statement of operations for synergies or costs, if any, that may be realized through the combination of Beckman and Coulter. The pro forma financial statements, including the notes thereto, should be read in conjunction with the Consolidated Financial Statements of Beckman and Coulter. 29 35 PRO FORMA BALANCE SHEET (DOLLARS IN MILLIONS) (UNAUDITED) ASSETS
BECKMAN PRO FORMA PRO FORMA DECEMBER 31, 1997 ADJUSTMENTS COMBINED ------------------ ----------- ---------- Current assets: Cash and equivalents............................... $ 33.1 $ 19.9(a) $ 47.4 (5.6)(b) Short-term investments............................. 0.4 0.4 Trade receivables and other........................ 524.6 524.6 Inventories........................................ 332.3 332.3 Deferred income taxes.............................. 53.0 53.0 Other current assets............................... 33.3 33.3 -------- -------- -------- Total current assets............................ 976.7 14.3 991.0 Property, plant and equipment, net................... 410.9 410.9 Intangible assets.................................... 444.9 444.9 Goodwill............................................. 402.8 402.8 Deferred income taxes................................ -- -- Other assets......................................... 95.7 5.6(b) 99.7 (1.6)(c) -------- -------- -------- Total assets............................... $2,331.0 $ 18.3 $2,349.3 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable...................................... $ 49.0 $ $ 49.0 Current maturities of long-term debt............... 19.9 19.9 Accounts payable................................... 96.3 96.3 Accrued compensation............................... 84.6 84.6 Other accrued expenses............................. 575.5 575.5 Income taxes....................................... 69.6 (0.6)(d) 69.0 -------- -------- -------- Total current liabilities....................... 894.9 (0.6) 894.3 Long-term debt, less current maturities.............. 1,181.3 399.9(e) 1,201.2 (380.0)(e) Deferred income taxes................................ 40.3 40.3 Other liabilities.................................... 132.7 132.7 -------- -------- -------- Total liabilities............................... 2,249.2 19.3 2,268.5 Stockholders' equity................................. 81.8 (1.6)(c) 80.8 0.6(d) -------- -------- -------- Total liabilities and stockholders' equity................................... $2,331.0 $ 18.3 $2,349.3 ======== ======== ========
See Notes to Pro Forma Financial Statements. 30 36 PRO FORMA STATEMENT OF OPERATIONS (DOLLARS IN MILLIONS, EXCEPT AMOUNTS PER SHARE) (UNAUDITED)
BECKMAN COULTER YEAR ENDED 10 MONTHS ENDED PRO FORMA PRO FORMA DECEMBER 31, 1997 OCTOBER 31, 1997(F) ADJUSTMENTS(G) COMBINED ----------------- ------------------- -------------- ------------ Sales............................. $1,198.0 $592.1 $1,790.1 Operating costs and expenses: Cost of sales................... 609.7 316.4 5.7(h) 931.8 Marketing, general and administrative............... 360.3 186.8 7.8(i) 568.4 13.5(i) Research and development........ 123.6 64.8 188.4 In-process research and development.................. 282.0 (282.0)(j) -- Restructuring charge............ 59.4 5.9 (59.4)(k) 5.9 -------- ------ ------ -------- Operating (loss) income........... (237.0) 18.2 314.4 95.6 Nonoperating expense: Interest income................. (6.1) (6.5) (12.6) Interest expense................ 29.4 10.6 50.6(l) 91.3 0.7(m) Other, net...................... (8.4) (8.3) 4.7(n) (12.0) -------- ------ ------ -------- Nonoperating expense, net......... 14.9 (4.2) 56.0 66.7 -------- ------ ------ -------- (Loss) earnings before income taxes........................... (251.9) 22.4 258.4 28.9 Income tax provision (benefit).... 12.5 13.0 (6.0)(d) 19.5 -------- ------ ------ -------- Net (loss) earnings............... $ (264.4) $ 9.4 $264.4 $ 9.4 ======== ====== ====== ======== Basic (loss) earnings per share... $ (9.58) $ 0.34 ======== ======== Weighted average number of shares outstanding..................... 27.6 27.6 ======== ======== Diluted (loss) earnings per share........................... $ (9.58) $ 0.33 ======== ======== Weighted average number of shares outstanding..................... 27.6 28.6 ======== ========
See Notes to Pro Forma Financial Statements. 31 37 NOTES TO PRO FORMA FINANCIAL STATEMENTS The pro forma financial statements and related notes give effect to the Acquisition accounted for as a purchase. The pro forma balance sheet assumes that the Offering and the application of the net proceeds therefrom were completed as of December 31, 1997 and the pro forma statement of operations assumes that the Acquisition, the Offering and the application of the net proceeds therefrom were completed on January 1, 1997. The Acquisition was consummated on October 31, 1997. Accordingly, the historical financial statements for the Company for the fiscal year ended December 31, 1997 include the results of Coulter from November 1, 1997, and the pro forma statement of operations for the year ended December 31, 1997 also includes the results of Coulter for the ten months ended October 31, 1997. All interim financial data used to develop the pro forma balance sheet and statement of operations are unaudited, but in the opinion of management, reflect all adjustments necessary (consisting only of normal recurring entries) for a fair presentation thereof. The unaudited pro forma statement of operations is not necessarily indicative of operating results which would have been achieved had the Acquisition, the Offering and the application of the net proceeds therefrom been consummated as of January 1, 1997 and should not be construed as representative of future earnings. Under purchase accounting, the total acquisition cost was allocated to Coulter's assets and liabilities based on their relative fair values. The final allocations may be different from the amounts reflected herein. The Company does not believe that the final purchase price allocation will differ significantly from the preliminary purchase price allocation recorded in Fiscal 1997. The Company's analysis resulted in an allocation of $282.0 million to in-process research and development which, under generally accepted accounting principles, was expensed immediately after the Acquisition was completed. For additional information on the allocation of the purchase price, see Note 3 to Consolidated Financial Statements of Beckman. The pro forma statement of operations for the year ended December 31, 1997 excludes the $282.0 million write-off of in-process research and development and the $59.4 million restructuring charge, as they are non-recurring charges associated with the Acquisition. The pro forma basic net earnings per share is based on the weighted average number of common shares of Beckman during the period ended December 31, 1997 and the pro forma diluted net earnings per share reflects the impact of dilutive securities issued and outstanding. The following adjustments were recorded in the pro forma financial statements: (a) Reflects cash proceeds from the Offering less amounts used to pay down existing debt. (b) Reflects financing fees and expenses related to the Notes estimated to be $5.6 million, which will be capitalized and amortized over the term of such debt. (c) To write-off unamortized financing fees and expenses on refinanced debt of Beckman and Coulter. (d) Reflects the tax effect of the pro forma adjustments. Pro forma goodwill amortization of $7.8 million and the $282.0 million write-off of in-process research and development are not deductible for tax purposes. An assumed effective tax rate of 38%, giving effect to the Acquisition, was applied to the other pro forma adjustments described. (e) Reflects the increase in debt as a result of the Offering and the reduction in debt upon application of the proceeds from the Offering to pay down the existing Term Loan and the Revolving Credit Facility. The adjustment also reflects the $0.1 original issue discount incurred on the Initial 2008 Notes. (f) Reflects ten months of operations for the period ended October 31, 1997. 32 38 NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (g) The pro forma adjustments to the statement of operations do not reflect the write-off of financing fees and expenses on refinanced debt of Beckman and Coulter as they will be recorded as extraordinary charges, net of tax. See (b), above. (h) Represents additional cost of sales as a result of a step-up in the basis of Coulter's inventory upon allocation of the acquisition cost. (i) Reflects the pro forma amortization of goodwill of $7.8 million and intangible assets of $13.5 million recorded as a result of the Acquisition. Amortization of intangible assets was calculated on a straight-line basis over periods ranging from 15-30 years. Amortization of goodwill was calculated on a straight-line basis over 40 years. (j) To eliminate the one-time write-off of $282.0 million of in-process research and development identified in the purchase price allocation of the Acquisition. The in-process research and development is based upon the economic value of projects in process, which cannot be capitalized under generally accepted accounting principles. (k) To eliminate a non-recurring restructuring charge of $59.4 million recorded in Fiscal 1997 for estimated costs for closing duplicate facilities of Beckman which, in the opinion of management, have no further useful life as a result of the Acquisition, and for implementation of operating efficiencies, and certain other costs. (l) Reflects interest expense for ten months at an assumed average rate of 7.25% on approximately $1,100 million of additional outstanding debt incurred to complete the Acquisition less amounts of Beckman and Coulter debt repaid with the proceeds of such additional debt. Also gives effect to the Offering and the application of the net proceeds therefrom as described in "Use of Proceeds," using the same assumed average rate of 7.25%. Excludes approximately $4.5 million of interest expense due to the fact that the incremental debt was assumed to be net of the $75.0 million paydown resulting from the Company's sale of financial assets, primarily consisting of equipment subject to customer leases and lease receivables. For each 0.25% change in assumed average interest expense on the outstanding indebtedness, annual pro forma interest expense would change by $2.3 million. (m) Reflects the amortization of $5.6 million of debt financing fees and expenses incurred in connection with the Offering over an assumed 7 1/2-year term. (n) Reflects the elimination of Coulter's proportionate share of the results of operations of Coulter Pharmaceutical and Coulter Cellular (net of the portion of Coulter Cellular which was retained) included in Coulter's historical results of operations. Prior to the Acquisition, Coulter distributed as dividends to its stockholders 100% of its interest in Coulter Pharmaceutical and two-thirds of its 68% equity interest in Coulter Cellular. 33 39 SELECTED HISTORICAL FINANCIAL INFORMATION OF BECKMAN The Selected Historical Financial Information and Other Data below should be read in conjunction with the Consolidated Financial Statements of the Company included elsewhere in this Prospectus, and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Selected Historical Financial Information for each of the years in the five-year period ended December 31, 1997 have been derived from audited financial statements.
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1997(A) 1996 1995 1994 1993 -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS, EXCEPT AMOUNTS PER SHARE) SUMMARY OF OPERATIONS: Sales..................................................... $1,198.0 $1,028.0 $ 930.1 $ 888.6 $ 875.7 Costs of sales............................................ 609.7 477.8 427.2 416.3 418.3 Marketing, general and administrative..................... 360.3 319.3 300.4 281.9 278.5 Research and development.................................. 123.6 108.4 91.7 91.5 93.3 In-process research and development(b).................... 282.0 -- -- -- -- Restructuring charge(c)................................... 59.4 -- 27.7 11.3 114.7 -------- -------- -------- -------- -------- Operating (loss) income................................... (237.0) 122.5 83.1 87.6 (29.1) Nonoperating expense, net................................. 14.9 11.0 10.7 12.7 24.8 -------- -------- -------- -------- -------- (Loss) earnings before income taxes....................... (251.9) 111.5 72.4 74.9 (53.9) Net (loss) earnings before accounting changes............. (264.4) 74.7 48.9 47.3 (33.6) Net (loss) earnings....................................... $ (264.4) $ 74.7 $ 48.9 $ 42.2 $ (37.6) ======== ======== ======== ======== ======== Weighted average common shares and dilutive common share equivalents (in millions)(d).............................. 27.6 28.9 28.8 28.1 27.8 Return on average stockholders' equity...................... (110.0%) 20.0% 14.7% 14.2% 11.9% Diluted (loss) earnings per share before accounting changes................................................... $ (9.58) $ 2.58 $ 1.70 $ 1.68 $ (1.21) Diluted (loss) earnings per share........................... (9.58) 2.58 1.70 1.50 (1.35) Dividends paid per share of common stock.................... $ 0.60 $ 0.52 $ 0.44 $ 0.40 $ 0.36 FINANCIAL POSITION (END OF YEAR): Current assets............................................ $ 976.7 $ 579.4 $ 533.3 $ 512.0 $ 544.5 Current liabilities....................................... 894.9 279.3 251.2 268.8 323.3 Working capital........................................... 81.8 300.1 282.1 243.2 221.2 Property, plant and equipment, net........................ 410.9 263.5 252.1 232.6 216.8 Total assets.............................................. 2,331.0 960.1 907.8 829.1 820.0 Long-term debt, less current maturities................... 1,181.3 176.6 162.7 117.3 113.7 Stockholders' equity...................................... 81.8 398.9 347.9 317.0 275.5 OTHER DATA: Capital expenditures(e)................................... $ 110.7 $ 117.4 $ 110.0 $ 98.7 $ 92.8 Depreciation and amortization............................. 109.1 87.8 79.1 70.1 63.5 Number of employees (unaudited)........................... 11,171 6,079 5,702 5,963 6,689 Ratio of earnings to fixed charges(f)..................... --(g) 5.0 4.1 4.5 --(g)
- --------------- (a) Historical financial information of the Company for the fiscal year ended December 31, 1997 includes results for Coulter from November 1, 1997. (b) The Company's allocation of purchase price in the Acquisition resulted in the allocation of $282.0 million of in-process research and development which, under generally accepted accounting principles, was expensed immediately after the Acquisition was completed. (c) The 1997 Beckman restructuring charge of $59.4 million was taken in conjunction with the Acquisition and includes costs associated with asset redeployment, reduction of duplicate overhead and implementation of operating efficiencies on a worldwide basis. The 1995 and 1994 Beckman restructuring charges include costs for facility moves and transition costs which were anticipated and directly associated with Beckman's 1993 restructuring plan but could not be recognized in establishment of the original restructuring reserve under generally accepted accounting principles. The Beckman restructuring in 1993 resulted from a redirected business strategy in response to unfavorable market conditions caused by a worldwide drive to contain healthcare costs and generally weak economic conditions. (d) Common share equivalents were not included prior to 1995 as the dilutive effect was not significant. (e) Capital expenditures include expenditures for customer leased equipment. For Fiscal 1997, customer leased equipment accounted for approximately 85% of Beckman's capital expenditures. (f) For purposes of this calculation, "earnings" consist of income (loss) before income taxes and fixed charges. "Fixed charges" consist of interest expense and a portion of rent expense deemed representative of the interest factor. (g) Earnings were inadequate to cover fixed charges for the years ended December 31, 1997 and 1993. The coverage deficiencies were approximately $251.9 and $53.9, respectively. 34 40 SELECTED HISTORICAL FINANCIAL INFORMATION OF COULTER The Selected Historical Financial Information below should be read in conjunction with the Consolidated Financial Statements of Coulter included elsewhere in this Prospectus, and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Selected Historical Financial Information for each of the years in the three-year period ended March 31, 1997 have been derived from audited financial statements. The Selected Historical Financial Information for the six-month periods ended September 30, 1997 and 1996 are derived from unaudited financial statements and, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the data for such periods.
SIX MONTHS ENDED SEPTEMBER 30, YEAR ENDED MARCH 31, ------------------ ------------------------------ 1997 1996 1997 1996 1995 ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) SUMMARY OF OPERATIONS: Sales..................................................... $330.3 $316.7 $700.9 $685.3 $654.3 Cost of sales............................................. 172.7 163.4 373.5 349.2 340.5 Selling, general and administrative expenses.............. 108.3 108.9 217.9 216.9 204.8 Research and development expenses......................... 36.8 43.0 85.8 87.3 73.5 Restructuring charges(a).................................. -- -- 5.9 -- -- ------ ------ ------ ------ ------ Operating income.......................................... 12.5 1.4 17.8 31.9 35.5 Other expense (income), net............................... 3.7 1.0 (2.3) (5.8) 10.7 ------ ------ ------ ------ ------ Income before income taxes................................ 8.8 0.4 20.1 37.7 24.8 ------ ------ ------ ------ ------ Net income................................................ $ 6.4 $ 0.3 $ 14.6 $ 33.0 $ 17.3 ====== ====== ====== ====== ====== FINANCIAL POSITION (END OF PERIOD): Current assets............................................ $355.6 $346.0 $381.0 $360.0 $347.0 Current liabilities....................................... 274.8 277.8 245.1 271.5 253.8 Working capital........................................... 80.8 68.2 135.9 88.5 93.2 Property, plant and equipment, net........................ 129.8 126.3 131.1 105.9 93.9 Total assets.............................................. 576.0 565.7 599.0 560.0 530.8 Long-term debt, less current maturities................... 83.0 84.6 135.5 71.9 72.5 Stockholders' equity...................................... 152.9 137.0 149.1 145.1 118.1 OTHER DATA: Capital expenditures...................................... $ 14.4 $ 36.9 $ 58.0 $ 31.1 $ 31.1 Depreciation and amortization............................. 12.5 11.8 25.1 23.7 18.8 Number of employees (unaudited)........................... 5,077 5,290 5,293 5,225 4,945
- --------------- (a) Restructuring charges represent costs for the termination of certain employees and the discontinuance of certain research and development activities. 35 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS The following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with the Consolidated Financial Statements of Beckman and Coulter. The following discussion and analysis covers certain periods before completion of the Acquisition, and unless otherwise indicated, the following discussion does not include pro forma financial information or adjustments. Accordingly, the discussion and analysis of such periods does not reflect the significant impact that the Acquisition will have on the Company. Historical results are not necessarily indicative of operating results for any future periods. See "Risk Factors," "Pro Forma Financial Statements" and the discussion below under "-- Summary of Effects of the Acquisition" and "-- Financial Condition." OVERVIEW Beckman Coulter is a world leader in providing systems that simplify and automate laboratory processes. The Company designs, manufactures and services a broad range of laboratory systems consisting of instruments, reagents and related products that customers use to conduct basic scientific research, drug discovery research and diagnostic analysis of patient samples. Approximately 75% of the Company's Pro Forma 1997 sales were for clinical diagnostics applications, principally in hospital laboratories, while the remaining sales were for life sciences and drug discovery applications in universities, medical schools, and pharmaceutical and biotechnology companies. The Company's diagnostics systems address over 75% of the hospital laboratory test volume, including virtually all routine laboratory tests. The Company believes that it is a worldwide market leader in its primary markets, with well-recognized systems and a reputation for high-quality, reliable service. THE ACQUISITION AND OTHER RECENT ACQUISITION ACTIVITIES The primary focus of Beckman's acquisition strategy has been to broaden its product offerings. Beckman significantly strengthened its diagnostic immunochemistry offerings, including products for cancer diagnostics, through the acquisition of Hybritech Incorporated in January 1996 and the Access immunoassay product line of Sanofi Diagnostics Pasteur in April 1997. Beckman also acquired high throughput screening and robotics technology for drug discovery from Sagian, Inc. in December 1996 and DNA sequencing technology through the acquisition of Genomyx Inc. in October 1996. The Acquisition represents a significant milestone in accomplishing the Company's strategy to solidify its position as a leading provider of laboratory systems, adding Coulter's leading market position in hematology and number two position in flow cytometry. The purchase price of the Acquisition totaled $1,178.0 million, consisting of $875.0 million in cash, assumed liabilities of $170.0 million and purchase liabilities of $133.0 million. See "-- Other Acquisition Activities." SUMMARY OF EFFECTS OF THE ACQUISITION The Acquisition and the related financings are expected to lower the net earnings of the Company through 1998 as a result of a substantial increase in interest expense, amortization of intangible assets and goodwill and various other adjustments resulting from purchase accounting. Pro Forma 1997 net earnings before nonrecurring charges would have been approximately $9.4 million, which is approximately 90% less than Beckman's actual historical results for 1996. See "Pro Forma Financial Statements" and "-- Financial Condition." Going forward, annual synergies from the Acquisition are expected to exceed $60 million in 1999, with further gains anticipated in 2000. These synergies are expected to be realized through both cost savings and increased revenues related to cross selling. Cost-saving initiatives are designed to rationalize manufacturing capacity, close duplicate field offices, align distribution networks, combine administrative functions and size the Company to match market conditions. The first of these changes has been announced and includes staff reductions in Florida, California and Europe, along with the termination of manufacturing at a Coulter facility in Luton, England. This first initiative affects about 600 positions. The Company believes that earnings beyond 1998 should improve as a result of these synergies as well as contemplated initiatives to reduce indebtedness and continued growth in its operations. No assurances can be given as to the amount or timing of 36 42 any synergies or debt reduction, if any, that may actually be realized or that any such growth may occur. See "Risk Factors -- Ability to Successfully Integrate Coulter." Purchase Accounting. The Acquisition was accounted for as a purchase. Under purchase accounting, the total purchase cost and fair value of liabilities assumed was allocated to the tangible and intangible assets of the Company based upon their respective fair values as of the closing of the Acquisition. Accordingly, the Company recorded $374.4 million in goodwill, and allocated $282.0 million to in-process research and development which was charged to expense in the fourth quarter of 1997. In addition, $17 million was allocated to the revaluation of inventories and is being charged to cost of sales over the period in which the inventories are sold, which is expected to be two quarters following the consummation of the Acquisition. Purchase liabilities recorded included approximately $110.0 million for severance and related costs and $23.0 million for costs associated with the closure of certain offices and manufacturing facilities. The Company expects to complete its termination of certain employees and closure of certain facilities in fiscal 1998. Assumed liabilities recorded included approximately $103.0 million of contractual obligations of Coulter to its employees, $36.0 million of change in control payments and $31.0 million of other assumed liabilities. The Company expects to pay for these obligations throughout fiscal 1998. At December 31, 1997 substantially all of the purchase liabilities and $150.4 million of the assumed liabilities remained on the balance sheet. The Company does not believe that the final purchase price allocation will differ significantly from the preliminary purchase price allocation recorded in Fiscal 1997. Future cost of sales and operating expenses may temporarily be substantially higher and income from operations may be substantially lower as a result of the effects of purchase accounting, as compared with the Company's historical results. EVENTS IMPACTING COMPARABILITY Acquired Research and Development. As a direct result of the Acquisition, the Company recorded a $282.0 million charge for purchased in-process research and development. This charge relates to projects that have economic value but cannot be capitalized under generally accepted accounting principles. Intangible Assets and Goodwill. As a result of the Acquisition, $404.0 million was recorded as the fair value of patents, trademarks and other intangibles ("Intangible Assets") and $374.4 million was recorded as the excess of purchase price, purchase liabilities and liabilities assumed over the fair value of identifiable net assets acquired and in-process research and development projects acquired ("Goodwill"). Intangible Assets are amortized using the straight-line method over their expected useful lives, over periods ranging from 15 to 30 years. Goodwill is amortized on a straight-line basis over 40 years. See Note 3 to Consolidated Financial Statements of Beckman. Restructuring Charges. The Company recorded a $59.4 million restructuring charge in the fourth quarter of 1997. This charge is the result of a restructuring plan focused on asset redeployment, reduction of duplicate overhead and improved operating efficiency, on a worldwide basis. On an after-tax basis, the restructuring charge was $36.4 million or $1.32 per share. The restructuring charges recorded in 1995 and 1994 were for facility moves and transition costs that were anticipated and directly associated with the Company's 1993 restructuring plan, but which could not be recognized in the establishment of the original restructuring reserve under generally accepted accounting principles. See Note 4 to Consolidated Financial Statements of Beckman. Sale of Assets. The Company has sold certain financial assets (primarily consisting of equipment subject to customer leases and lease receivables) as part of its plan to reduce debt and provide funds for integration purposes. The net book value of financial assets sold was approximately $71 million for which the Company received approximately $75 million in cash proceeds. The Company will continue to evaluate opportunities to provide additional cash flow by monetizing other assets during 1998 and beyond. The Company intends to consummate sale-leaseback transactions with respect to some of its real estate assets which the Company expects will generate proceeds to the Company of approximately $150 million in 1998 and approximately $40 million in 1999. Further, the Company expects to sell an additional $30 million of lease receivables in 1998. These sales are expected to marginally reduce operating income while decreasing nonoperating expenses, resulting in a slightly negative impact on the Company's pretax results. See Note 5 to Consolidated Financial Statements of Beckman. 37 43 Tax Aspects. As a result of expenses related to the Acquisition, including the Coulter bonus sharing plan payments, deductions for interest on indebtedness and certain other expenses incurred in connection with the Acquisition, the Company does not expect that it will have to pay federal income taxes for the next several years. The deferred income tax liability of $153.5 million, which is related to the intangible assets acquired, will be reduced by the tax effect of the amortization of the intangible assets, which is not deductible for income tax purposes. The amortization of goodwill of $1.6 million is not deductible for income tax purposes, which has the impact of increasing the effective tax rate by approximately 0.2 percentage points for Fiscal 1997. FOREIGN CURRENCY EXPOSURE During Fiscal 1997, approximately 50% of the Company's sales were generated outside the United States. Revenues from non-U.S. sales fluctuate with changes in foreign currency exchange rates. U.S. dollar-denominated costs and expenses represent a much greater percentage of the Company's operating costs and expenses than U.S. dollar-denominated sales represent of total net sales. As a result, appreciation of the U.S. dollar against the Company's major trading currencies has a negative impact on the Company's results of operations, and depreciation of the U.S. dollar against such currencies has a positive impact. Since the Company actively hedges its foreign currency exposure, the relative strength or weakness of the U.S. dollar is not likely to have a material short-term effect on the Company's business decisions. Long-term appreciation of the U.S. dollar could have a material adverse effect on the Company's business, financial condition or results of operations. The Company may adjust certain aspects of its operations in the event of a sustained material change in such exchange rates. Appreciation of the U.S. dollar over the last year has had a negative impact on the Company's sales in comparison to its costs, which has adversely affected gross profit. See "-- Results of Operations -- Beckman," "-- Results of Operations -- Coulter" and "-- Financial Instruments." OTHER NONOPERATING INCOME AND EXPENSES Other nonoperating income and expenses for the Company are generally comprised of five primary items: (i) interest expense, (ii) interest income, (iii) foreign exchange gains or losses, (iv) investments that are non-core or are accounted for as a minority interest and (v) nonoperating gains or losses. Interest income typically includes income from sales-type leases and interest on cash equivalents and other investments. Foreign exchange gains or losses are primarily the result of the Company's hedging activities (net of revaluation) and are recorded net of premiums paid. Other income, net as reported by Coulter includes the results of operations of two investments, Coulter Pharmaceutical and Coulter Cellular, which (except for a minority interest in Coulter Cellular) have been eliminated in the Pro Forma Financial Statements as a result of their spin-off prior to the Acquisition. See "Pro Forma Financial Statements." Other nonoperating gains and losses are most frequently the result of one-time items such as asset sales or other items. RESULTS OF OPERATIONS -- BECKMAN The following table sets forth, for the periods indicated, the results of operations as a percentage of sales:
YEAR ENDED DECEMBER 31, ------------------------- 1997(a) 1996 1995 ------- ----- ----- Sales....................................................... 100.0% 100.0% 100.0% Operating costs and expenses Cost of sales............................................. 50.9 46.5 45.9 Marketing, general and administrative..................... 30.1 31.1 32.3 Operating income before research and development(b)......... 19.0 22.4 21.8 Research and development(b)................................. 10.3 10.5 9.9 Operating income(b)......................................... 8.7 11.9 11.9 Net nonoperating expense.................................... 1.2 1.0 1.1 Earnings before income taxes(b)............................. 7.5 10.9 10.8 Net earnings(b)............................................. 4.5 7.3 7.1
38 44 - --------------- (a) Results of operations of Beckman for the fiscal year ended December 31, 1997 include results for Coulter from November 1, 1997. (b) Amounts exclude special charges. Special charges include a write-off of in-process research and development projects acquired of $282.0 million, 23.5% of sales, in 1997 and restructuring charges of $59.4 million, 5.0% of sales, in 1997 and $27.7 million, 3.0% of sales, in 1995. See "Business -- Business Strategy." Including the special charges, operating (loss) income was ($237.0) million in 1997 and $83.1 million, 8.9% of sales, in 1995. Including special charges, Beckman reported (losses) earnings before income taxes of ($251.9) million in 1997 and $72.4 million, 7.8% of sales, in 1995. Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996 Sales for 1997 were $1,198.0 million, an increase of 16.5% over the $1,028.0 million reported in 1996. The sales growth in constant currency over the prior year was 20.2%. More than half of the growth resulted from the Acquisition. Despite continuing market-driven pricing pressures and adverse currency fluctuations, core businesses grew in all geographic areas. As an example, the Company was able to leverage its product offerings that reduce total laboratory cost, provide workstation consolidation and progressive automation, into a $100.0 million, five-year contract signed with AmeriNet, Inc., one of the largest healthcare purchasing organizations in the United States. In addition, a new contract was signed with University Healthsystem Consortium ("UHC"). The UHC agreement will complement the existing agreement with Voluntary Hospitals of America ("VHA"), which has recently acquired UHC. In 1997 as in 1996, international sales accounted for approximately 50% of total sales. Gross profit at 49.1% of sales was 4.4 percentage points lower than the 1996 level of 53.5%. Cost of sales resulting from the inventory written-up to market value in connection with the Acquisition accounted for $11.3 million or one percentage point of the reduction. Unfavorable foreign currency fluctuations contributed another one percentage point. Lower margins for Coulter products and competitive pricing pressures made up the balance of the percentage reduction. Marketing, general and administrative expenses at 30.1% of sales were one percentage point lower than the 1996 level of 31.1%, despite the costs of acquisition activities incurred during the year. Research and development expenses remained at last year's levels, at just over 10% of sales. As a result, operating income before pretax special charges was $104.4 million or 8.7% of sales in 1997, compared with operating income of $122.5 million and 11.9%, respectively, in 1996. However, the 1997 operating income before pretax special charges was reduced by charges for inventory recorded at fair value and on-going goodwill and intangible amortization expenses arising out of the Acquisition. Without these items, the 1997 operating income margin would have been 10.0%. One-time charges of $282.0 million for in-process research and development expenses and restructuring charges of $59.4 million contributed significantly to the reported operating loss of $237.0 million. Incremental interest expense associated with the debt incurred by the Company to fund the Acquisition increased nonoperating expenses, but was partially offset by gains due to hedging activities. The net loss for the year was $264.4 million compared with net earnings of $74.7 million in 1996 due principally to the charges discussed above. Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995 Sales growth of 11%, 13% in constant currency, over the prior year was attributable to increased market share in diagnostics products, primarily in the North American and European markets; increased market share in life sciences products, primarily in non-European international markets; continued success from Beckman's SmithKline Diagnostics subsidiary's HEMOCCULT product; and sales from Hybritech products (Hybritech was acquired effective January 2, 1996). International sales represented approximately 50% of total sales. The gross profit percentage decrease resulted from changes in product mix, unfavorable foreign currency fluctuations and competitive pricing pressures. 39 45 The increase in operating costs was due to a higher rate of investment in research and development costs related to Hybritech products. Earnings before income taxes for the year ended December 31, 1996 compared to the same period of the prior year increased to $111.5 million from $72.4 million (1995 included a restructuring charge of $27.7 million). Net earnings for the year ended December 31, 1996 were $74.7 million or $2.58 per share, representing an increase of 53% and 52%, respectively, over the prior year. Net earnings in 1995 included a $17.2 million after tax restructuring charge which decreased net earnings per share by $0.59. RESULTS OF OPERATIONS -- COULTER The following table sets forth, for the period indicated, the results of operations as a percentage of sales:
SIX MONTHS ENDED SEPTEMBER 30, YEAR ENDED MARCH 31, -------------- -------------------- 1997 1996 1997 1996 1995 ---- ---- ---- ---- ---- (UNAUDITED) Sales............................................... 100% 100% 100% 100% 100% Operating costs and expenses Cost of sales..................................... 52.3 51.6 53.3 51.0 52.0 Selling, general and administrative expenses...... 32.8 34.4 31.1 31.6 31.3 Operating income before research and development expense(a)........................................ 14.9 14.0 15.6 17.4 16.7 Research and development............................ 11.1 13.6 12.2 12.8 11.2 Operating income(a)................................. 3.8 0.4 3.4 4.6 5.4 Other (income) expense.............................. 1.1 0.3 (0.3) (0.8) 1.6 Income before income taxes(a)....................... 2.7 0.1 3.7 5.4 3.8 Net earnings(a)..................................... 1.9 0.1 2.7 4.8 2.6
- --------------- (a) Amounts exclude restructuring charges of $5.9 million, 0.8% of sales for the year ended March 31, 1997. Including the restructuring charges, operating income was $17.8 million, 2.5% of sales for the year ended March 31, 1997. Income before income taxes was $20.1 million, 2.9% of sales for the year ended March 31, 1997. Six Months Ended September 30, 1997 as Compared to Six Months Ended September 30, 1996 Coulter experienced net sales growth of 4.3% compared to the comparable period in the prior year. Instrument sales increased 16.0% while reagent sales were relatively unchanged. The release of the GEN*S and AC*T series of hematology products during 1997 mainly accounted for the increase in instrument sales, while reagent sales were adversely affected by increased discounting in the U.S. and a strengthening dollar in overseas markets. Gross profit margin as a percentage of sales decreased by less than 1% as higher selling prices on GEN*S products were offset by increased warranty costs in direct sales markets. In addition, competitive market pressures in the U.S. and international markets contributed to overall lower sales prices on instrument and reagent products, resulting in a decrease in gross profit. Selling, general, and administrative expenses as a percentage of sales decreased by 1.6% primarily due to reduced expenses in the international operations resulting from cost reduction measures and a strengthening U.S. dollar. Research and development expenses as a percentage of sales decreased 2.5%, and in absolute dollars $6.2 million, due to a reorganization to improve productivity and efficiency. The net increase in non-operating expense of $2.7 million is attributable to an increase in foreign exchange gains in the U.S., offset by Coulter's portion of expenses relating to its investments in two development stage companies. 40 46 For the six months ended September 30, 1997, Coulter's income before provision of income taxes and net income increased $8.4 million and $6.1 million, respectively, compared to the comparable period in the prior year. Year Ended March 31, 1997 as Compared to Year Ended March 31, 1996 Sales grew 2% over the prior year driven primarily by the full year's impact of Coulter's June 1995 acquisition of Immunotech S.A. and increases in sales of P-24 Reagents, offset by unfavorable foreign currency fluctuations and continued pricing pressures. Gross profit as a percentage of sales decreased as a result of unfavorable foreign currency fluctuations and continued pricing pressures. Operating costs, excluding the $5.9 million restructuring charge described below, were essentially flat compared to the prior year. Currency fluctuations and lower variable compensation expense had a positive impact on operating costs. Operating income for Fiscal 1996 was also affected by a restructuring charge of $5.9 million to cover the costs associated with a reduction in its workforce across all functional areas. As a result of the foregoing, income before provision for income taxes for Fiscal 1996 decreased $17.6 million from the $37.7 million achieved in Fiscal 1995 to $20.1 million in Fiscal 1996. The effective tax rate increased to 27.5% from 12.3% in the prior year as a result of a change in the geographic mix of income, and to a lesser extent, the recognition of fewer deferred tax items than in the prior year. Net income for Fiscal 1996 was $14.6 million, representing a decrease of 55.8% from Fiscal 1995. Year Ended March 31, 1996 as Compared to Year Ended March 31, 1995 Sales grew nearly 5% over the prior year. Sales growth was positively affected by the acquisition of Immunotech S.A., partially offset by competitive pricing pressures. Gross profit as a percentage of sales increased during the period due to a favorable shift in product mix reflecting relatively more sales of reagents. Selling, general and administrative expenses increased as a percentage of sales due to inflationary pressures and increased operating costs resulting from the acquisition of Immunotech. The investment in research and development was higher due to the acquisition of Immunotech and the development of a new generation hematology analyzer. Other (income) expense increased over the prior year as a result of favorable currency gains on hedging contracts and the recognition of a gain on the termination of Coulter's domestic defined benefit plan of $3.8 million. As a result of the foregoing, income before provision for income taxes for Fiscal 1995 increased by $12.9 million or 52% from the prior year. The effective tax rate decreased to 12.3% from 30.2% in the prior year as a result of a change in geographic mix of income and recognition of certain deferred tax items. Net income for Fiscal 1995 was $33.0 million, representing an increase of 90.7% from Fiscal 1994. FINANCIAL CONDITION CASH FLOWS Beckman. For the year ended December 31, 1997, operating activities generated $137.8 million of cash flows compared with $139.1 million in 1996 and $60.2 million in 1995. The 1997 results were primarily achieved through net results from operations, after adding back the effects of depreciation, amortization and special charges, including the write-off of acquired in-process research and development in connection with the Acquisition. Additionally, the Company received $35.7 million in cash proceeds from the sale of sales-type lease receivables. See Note 5 to Consolidated Financial Statements of Beckman. 41 47 Investing activities used $929.1 million of cash. Investments and acquisitions used $893.9 million primarily relating to the Acquisition. Capital expenditures used $100.9 million of cash which is consistent with historical levels. The Company plans to invest at approximately the same level in 1998 and intends to finance this capital spending primarily through cash provided by operating activities. An additional $39.6 million of cash proceeds was provided through the sale and leaseback of instruments. See Note 5 to Consolidated Financial Statements of Beckman. Financing activities provided $790.6 million of cash. This was achieved primarily through borrowings of $827.8 million, net of repayments, under short term notes payable, long term debt, and credit facilities. These proceeds were primarily used to fund the Acquisition. Purchases of treasury stock used $20.6 million, net of proceeds from sales of treasury stock, and dividends to stockholders used $16.6 million. Coulter. For the six months ended September 30, 1997, net cash provided by operating activities was $29.8 million compared with $38.0 million of cash used in operating activities for the comparable period in the prior year. An increase in net income of $6.1 million and fluctuations in accounts receivable, inventories, other assets, and accrued liabilities accounted for the increase. A significant decrease in collection days in the U.S. contributed to a $28.9 decrease in accounts receivable compared to a $16.6 million decrease in the comparable period of the prior year. Inventory growth was $10.3 million, compared to $27.9 million in the prior year period, as inventory build up was reduced due to the release of the GEN*S and AC*T products in fiscal year 1997. In addition, a stronger U.S. dollar in overseas markets, especially Europe and Japan, also contributed to the reduction in inventory. Other assets increased $2.2 million, primarily due to a $3.0 million investment by Coulter for a 6.6% interest in Lab-Interlink, Inc. Accrued liabilities decreased $0.5 million, compared to a decrease of $26.6 million in the prior year period. Payments relating to the Success Sharing bonus program and the termination of Coulter's defined benefit plan accounted for the decrease in the comparable period of the prior year. For the six months ended September 30, 1997, net cash used in investing activities was $13.4 million compared with $27.9 million of cash used in investing activities for the comparable period in the prior year. Capital expenditures were $14.4 million, a reduction of $22.5 million from the prior year period, mainly caused by a decrease in spending for computer hardware and software. Offsetting the decrease in capital expenditures was an increase of $6.2 million in cash used from investing activities resulting from an increase in Coulter's leasing business due to the release of new products during the six months ended September 30, 1997. Net cash used in financing activities for the six months ended September 30, 1997 was $16.2 million compared to $47.9 million of net cash provided by financing activities for the comparable period in the prior year. A reduction of $54.0 million in proceeds from long-term debt coupled with an increase of $17.7 million in principal payments largely accounted for the increase in cash used in financing activities. LIQUIDITY AND CAPITAL RESOURCES General. The Company broadly defines liquidity as its ability to generate sufficient cash flow from operating activities to meet its obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments. Currently, the Company's liquidity needs arise primarily from debt service on the substantial indebtedness incurred in connection with the Acquisition, and the funding of costs of integrating the operations of Beckman and Coulter, as well as its working capital requirements and capital expenditures. Debt Service. The Company is highly leveraged. As of December 31, 1997, the outstanding indebtedness of the Company was $1,250.2 million, primarily consisting of $400.0 million in Term Loan borrowings under the $500.0 million Term Loan and $600.0 million of revolving credit borrowings under the $800.0 million 42 48 Revolving Credit Facility. Net proceeds from the Offering of $300.0 million were used to prepay all Term Loan borrowings, net proceeds of $80.0 million were used to repay a portion of the Revolving Credit Facility and the remaining net proceeds of $14.3 million were used for operating purposes. See "Risk Factors -- Substantial Leverage; Ability to Service Indebtedness," "The Acquisition" and "Use of Proceeds." As of April 1, 1998, there were no amounts outstanding under the Term Loan and $670.0 million outstanding under the Revolving Credit Facility. Principal and interest payments under the Credit Facility and interest payments on the Notes represent significant liquidity requirements for the Company. The Credit Facility provides for mandatory prepayment of revolving credit borrowings (and, to the extent provided, reductions in commitments) thereunder from excess cash flow (as defined therein), and from proceeds of certain equity or debt offerings, asset sales and extraordinary receipts. The Revolving Credit Facility is not subject to any scheduled principal amortization and has a five year term, maturing in October 2002, with all amounts then outstanding becoming due. See "Description of Credit Facility" and "Use of Proceeds." The loans under the Credit Facility bear interest at floating rates based upon the interest rate option elected by the Company (except in the case of competitive bid advances (as defined therein) which may bear interest at a fixed rate of interest), and the Company is accordingly subject to fluctuations in such interest rates, which could cause its interest expense to increase or decrease in the future. As a result of the substantial indebtedness incurred in connection with the Acquisition, the Company's interest expense will be higher and will have a much greater proportionate impact on net earnings in comparison to pre-Acquisition periods. Each holder of Old Debentures has the right to require the Company to redeem such holder's Old Debentures in June 2006. Certain Post-Acquisition Costs. The Company estimates, based upon current exchange rates, that its cash funding requirements for the costs associated with the Acquisition will amount to approximately $180.0 million from the consummation of the Acquisition through the end of 1998, and approximately $50.0 million to $65.0 million in each of the following two years. This includes up to $103.0 million of sharing bonus plan payments which will be made to Coulter's employees. Stock Repurchases and Dividends. The Company repurchased 998,936 shares of its common stock during 1997 and 991,543 shares during 1996. The Company elected to discontinue this stock repurchase program in connection with the Acquisition. The Credit Facility generally prohibits market repurchases of the Company's stock. Under the Company's dividend policy, the Company pays a regular quarterly dividend to its stockholders which amounted to approximately $16.6 million in 1997 and approximately $14.7 million in 1996. In February of 1998, the Board of Directors declared a quarterly dividend of $0.15 per share, which approximates $4.1 million in total. This dividend is payable April 2, 1998 to stockholders of record on February 3, 1998. The Company anticipates that it will continue to pay dividends at similar levels for the foreseeable future. The Credit Facility restricts and the Indenture will restrict (but, in each case, not prohibit) the Company's ability to pay dividends. Future Financing Sources and Cash Flows. As of April 1, 1998, the Company's remaining borrowing availability under the Revolving Credit Facility was $130.0 million. Undrawn amounts under the Revolving Credit Facility will be available to meet future working capital and other business needs of the Company. See "Description of Credit Facility." At December 31, 1997, no events of default existed under any of the then existing debt agreements of the Company. The Company maintains working capital facilities for its operations outside the United States. In June 1996, the Company issued $100.0 million of Old Debentures bearing an interest rate of 7.05% due June 1, 2026 ($100.0 million of which were outstanding as of April 1, 1998). The net proceeds received of $98.5 million were used to repay amounts then outstanding under the Company's commercial paper program. The Company also has the ability to issue up to $100.0 million of additional debt under a Form S-3 Registration Statement filed with the Securities and Exchange Commission, which was declared effective on April 16, 1996. 43 49 Subsequent to the consummation of the Acquisition, the Company has pursued sales of certain financial assets (primarily consisting of lease receivables and equipment subject to customer leases) and real estate assets, as part of its plan to reduce debt and provide funds for integration purposes. The Company has sold approximately $71 million of financial assets for cash proceeds of approximately $75 million and intends to consummate several sale leaseback transactions with respect to some of its real estate assets during 1998 and 1999, which the Company expects will generate proceeds of approximately $150 million in 1998 and approximately $40 million in 1999. Further, the Company expects to sell an additional $30 million of lease receivables in 1998. In addition to these asset sales, the Company's capital expenditures include expenditures for customer leased equipment. Such expenditures in the future may be reduced by increased reliance on third party leasing arrangements, which would accordingly reduce the Company's liquidity needs. See "-- Events Impacting Comparability -- Sale of Assets." Based upon current levels of operations and anticipated cost savings and future growth, the Company believes that its cash flow from operations, together with available borrowings under the Revolving Credit Facility and its other sources of liquidity (including leases, any other available financing sources, and the proceeds of the planned asset sales discussed above), will be adequate to meet its anticipated requirements for interest payments and other debt service obligations, working capital, capital expenditures, lease payments and other operating needs, until the maturity of the Revolving Credit Facility in 2002. There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels or that estimated cost savings or growth can be achieved. The Company's future operating performance and ability to service or refinance the Notes and to repay, extend or refinance the Credit Facility will be subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. See "Risk Factors." Financing Covenant Restrictions. The Credit Facility imposes restrictions on the Company's ability to make capital expenditures and both the Credit Facility and the Indenture governing the Notes limit the Company's ability to incur additional indebtedness. In addition, the Company is required to comply with specified financial ratios and tests under the Credit Facility, including minimum net worth, a minimum interest coverage ratio and a maximum leverage ratio. Such restrictions, together with the highly leveraged nature of the Company, could limit the Company's ability to respond to market conditions, to provide for capital investments or to take advantage of business opportunities. The covenants contained in the Credit Facility and the Indenture also impose restrictions on the operation of the Company's businesses. See "Risk Factors -- Restrictive Financing Covenants," "Description of Credit Facility" and "Description of Notes." INFLATION Inflation and the effects of changing prices are monitored continually by the Company. Inflation increases the cost of goods and services used by the Company. Competitive and regulatory conditions in many markets restrict the Company's ability to fully recover the higher costs of acquired goods and services through price increases. The Company attempts to mitigate the impact of inflation by implementing continuous process improvement solutions to enhance productivity and efficiency and, as a result, lower costs and operating expenses. The effects of inflation have, in the Company's opinion, been managed appropriately and as a result have not had a material impact on its operations and resulting financial position. FINANCIAL INSTRUMENTS The Company pursues a currency hedging program which utilizes derivatives in order to limit the impact of foreign currency exchange fluctuations on its financial results. Under this program, the Company enters into forward exchange and option contracts in the normal course of business to hedge certain foreign currency denominated transactions. Realized and unrealized gains and losses on these contracts are included in nonoperating (income) expense or other (income) expense in the Company's consolidated statements of earnings. The discount or premium on a forward exchange contract is included in the measurement of the basis of the related foreign currency transaction when recorded. The premium on an option contract is accounted for separately and amortized to nonoperating (income) expense or other (income) expense over the term of the contract. These instruments involve, to varying degrees, elements of market and credit risk in 44 50 excess of the amounts recognized in the consolidated balance sheets. The Company does not hold or issue financial instruments for trading purposes. See Note 7 to the Consolidated Financial Statements of Beckman, and Note G to the Consolidated Financial Statements of Coulter. In addition, the Company also selectively enters into certain financial instruments to manage its exposure to interest rate changes on its floating rate debt. These instruments are held for hedging purposes only and include interest rate swap agreements. OTHER ACQUISITION ACTIVITIES In April 1997, the Company acquired the Access immunoassay product line and related manufacturing facility of Sanofi Diagnostics Pasteur. The Access product line, together with the earlier acquisition of Hybritech Incorporated ("Hybritech") and the Company's own immunochemistry/protein products, created a major presence in immunochemistry. The acquisition was accounted for as a purchase. In December 1996, the Company acquired the assets and assumed certain of the liabilities of the laboratory robotics division of Sagian Inc. of Indianapolis, Indiana. By combining Sagian's scheduling software and robotics with its own biorobotics systems, the Company enhanced its ability to serve the pharmaceutical industry's need for high-throughput screening of candidate compounds for new drugs. The acquisition was accounted for as a purchase. In January 1996, the Company acquired the assets and assumed the liabilities of Hybritech, a San Diego-based diagnostics company. The acquisition expanded the Company's ability to develop and manufacture high sensitivity immunoassays, including cancer tests. The acquisition was accounted for as a purchase. In May 1995, the Company agreed to acquire Genomyx Corporation of Foster City, California. Genomyx is a developer and manufacturer of advanced DNA sequencing products and complements the Company's biotechnology business. The acquisition was completed on October 21, 1996 and was accounted for as a purchase. The purchase prices for these acquisitions and the results of operations from the acquired businesses were not material to the Company individually or in the aggregate. BUSINESS CLIMATE The clinical diagnostics and life sciences markets are each highly competitive and the Company encounters significant competition in each market from many manufacturers, both domestic and outside the United States. Competitive and regulatory conditions in many markets restrict the Company's ability to fully recover through price increases any increase in higher costs of acquired goods and services resulting from inflation. The Company historically has been able to partially offset the adverse impact of these competitive factors by improving productivity. The diagnostics and life sciences markets continue to be unfavorably affected by the economic weakness in Europe and Asia and by the cost containment initiatives in several European governmental and healthcare systems. The life sciences market also continues to be affected by consolidation of pharmaceutical companies and governmental constraints on research and development spending. In the United States, attempts to lower costs and increase efficiencies have led to consolidation among healthcare providers resulting in more powerful provider groups that leverage their purchasing power with suppliers to contain costs. Cost containment initiatives in U.S. and European healthcare systems are expected to be continuing factors which may affect the Company's ability to maintain or increase sales. The Company intends to grow its business through increased internal development efforts, and in part through collaborations that will help to expand its technology base. The continuing consolidation trend among United States healthcare providers has increased pressure on diagnostic equipment manufacturers to broaden their product offerings to encompass a wider range of testing capability, greater automation and higher volume capacity. The Acquisition was a clear indicator of the Company's resolve to complete a key initiative to become a broad-based world leader in IVD testing, by expanding its product offering. 45 51 The consolidation trend among U.S. healthcare providers has put pressure on diagnostic equipment manufacturers to broaden their product offerings to encompass a wider range of testing capability, greater automation and higher volume capacity. The Company offers a broad range of products that customers can utilize to meet a wide range of testing needs. TAXES The Company is subject to taxation in many jurisdictions throughout the world. The Company's effective tax rate and tax liability will be affected by a number of factors, such as the amount of taxable income in particular jurisdictions, the tax rates in such jurisdictions, tax treaties between jurisdictions, the extent to which the Company transfers funds between jurisdictions and income is repatriated, and future changes in the law. Generally, the tax liability for each legal entity is determined either (i) on a non-consolidated basis or (ii) on a consolidated basis only with other entities incorporated in the same jurisdiction, in either case without regard to the taxable losses of nonconsolidated affiliated entities. As a result, the Company may pay income taxes in certain jurisdictions even though the Company on an overall basis incurs a net loss for the period. YEAR 2000 CONVERSION The Company is in the process of modifying, upgrading or replacing its internal computer software applications and information systems. The Company is also in the process of evaluating all currently marketed and leased products and will upgrade those products that are intended for continued marketing and leasing beyond the year 1999. The Company is currently evaluating possible strategies to accommodate its installed analytical instrument systems owned by its customers. These tasks have been assigned to a senior executive of the Company who has established three projects: (i) product related matters; (ii) mainframe management information systems and software; and (iii) all other systems (e.g. personal computers, office machines and supplier systems). Each project is led by a project manager and staffed by software experts to perform the evaluation process. Analysis and evaluation activities were begun in 1996 and are in varying stages of completion as of the date of this Prospectus. The Company recently expended approximately $250,000 on new software that provides a suite of tools to assist in the year 2000 remediation process. Remediation activities have begun and are planned and expected to be completed by the end of 1998. Testing and validation of the remediated systems and any final revisions needed will be conducted in 1999. The Company does not expect that the cost of its year 2000 compliance program will be material to its business, results of operations or financial condition. The Company believes that it will be able to achieve compliance by the end of 1999 and does not currently anticipate any material disruption of its operations as the result of any failure by the Company to be in compliance. Although the impact on the Company caused by the failure of the Company's significant suppliers or customers to achieve year 2000 compliance in a timely or effective manner is uncertain, the Company's business and results of operations could be materially adversely affected by such failure. ENVIRONMENTAL MATTERS AND LITIGATION Environmental Matters. The Company is subject to federal, state, local and foreign environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations that would have a material impact on its operations or financial position. The Company believes that its operations comply in all material respects with applicable federal, state and local environmental laws and regulations. To address contingent environmental costs, the Company establishes reserves when such costs are probable and can be reasonably estimated. The Company believes that, based on current information and regulatory requirements (and taking third party indemnities into consideration), the reserves established by the Company for environmental expenditures are adequate. Based on current knowledge, to the extent that additional costs may be incurred that exceed the accrued reserves, such amounts are not expected to have a material impact on the 46 52 Company's operations or financial condition, although no assurance can be given in this regard. See "Risk Factors -- Environmental Matters" and "Business -- Environmental Matters." Litigation. The Company is currently, and is from time to time, subject to claims and lawsuits arising in the ordinary course of its business, including those relating to intellectual property, contractual obligations, competition and employment matters. In certain such actions, plaintiffs request punitive or other damages or nonmonetary relief, which may not be covered by insurance, and in the case of nonmonetary relief, could if granted materially affect the conduct of the Company's business. The Company accrues for the potential liabilities involved in these matters as they become known and can be reasonably estimated. In management's opinion (taking third party indemnities into consideration), the various asserted claims and litigation in which the Company is currently involved are not reasonably likely to have a material adverse effect on the Company's business, results of operations or financial position. However, no assurance can be given as to the ultimate outcome with respect to such claims and litigation. The resolution of such claims and litigation could be material to the Company's operating results for any particular period, depending on the level of income for such period. See "Business -- Legal Proceedings." RECENT ACCOUNTING DEVELOPMENTS The Company intends to adopt Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), and Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131), in fiscal 1998. Both standards will require additional disclosure, but will not have a material effect on the Company's financial position or results of operations. SFAS 130 establishes standards for the reporting and display of comprehensive income and is expected to first be reflected in the Company's first quarter of 1998 interim financial statements. Components of comprehensive income include items such as net earnings, foreign currency translation adjustments and changes in value of available-for-sale securities. SFAS 131 changes the way companies report segment information and requires segments to be determined and reported based on how management measures performance and makes decisions about allocating resources. SFAS 131 will first be reflected in the Company's 1998 Annual Report. FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS This Prospectus contains forward-looking statements, including statements regarding, among other items, (i) the Company's business strategy; (ii) anticipated trends in the Company's business; (iii) the Company's future liquidity requirements and capital resources; (iv) anticipated synergies; (v) future cost reductions; and (vi) the impact of the Acquisition on the Company's future performance. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company's control. Actual results could differ materially from those anticipated by these forward-looking statements, as a result of the factors described in "Risk Factors" or other factors, including difficulties, delays or failures in effectively integrating worldwide operations and/or completing the development phase of certain products, the amount and timing of any synergies, the impact of currency and interest rates, delays in receiving regulatory approvals for new products, changes in governmental medical reimbursement policies or programs, or changes in economic and business conditions. In light of these risks and uncertainties, there can be no assurance that events anticipated by the forward-looking statements contained in this Prospectus will in fact transpire as anticipated. 47 53 BUSINESS OVERVIEW Beckman Coulter is a world leader in providing systems that simplify and automate laboratory processes. The Company designs, manufactures and services a broad range of laboratory systems consisting of instruments, reagents and related products that customers use to conduct basic scientific research, drug discovery research and diagnostic analysis of patient samples. Approximately 75% of the Company's Pro Forma 1997 sales were for clinical diagnostics applications, principally in hospital laboratories, while the remaining sales were for life sciences and drug discovery applications in universities, medical schools, and pharmaceutical and biotechnology companies. The Company's systems address over 75% of the hospital laboratory test volume, including virtually all routine laboratory tests. The Company believes that it is a worldwide market leader in its primary markets, with well-recognized systems and a reputation for high-quality, reliable service. After giving effect to the Acquisition, the Company had sales and EBITDA of $1.8 billion and $278.2 million, respectively, for Pro Forma 1997. The Company's systems improve efficiency by integrating customer laboratory operations. The design of these systems draws upon the Company's extensive expertise in the chemical, biological, engineering and software sciences. Products for the clinical diagnostics market consist of systems (analytical instruments, reagents, accessories and software) that are used to detect, quantify and classify various substances and cells of clinical interest in human blood and other body fluids. Products for the life sciences market include centrifuges, flow cytometers, high performance liquid chromatographs, spectrophotometers, laboratory robotic workstations, capillary electrophoresis systems, DNA sequencers and synthesizers, and the reagents and supplies for their operation. Beckman Coulter has an installed base of approximately 75,000 systems in over 120 countries, which the Company believes will provide a recurring stream of revenue and cash flows from After Sales. Approximately 67% of the Company's Pro Forma 1997 sales were derived from After Sales, while the remaining 33% were derived from the direct placement of systems. THE ACQUISITION On October 31, 1997, Beckman acquired all of the outstanding capital stock of Coulter, which became a wholly owned subsidiary of Beckman. See "The Acquisition." The acquisition of Coulter represents a significant milestone in accomplishing the Company's strategy to solidify its position as a leading provider of laboratory systems through Coulter's leading market position in hematology and number two position in flow cytometry. Coulter is the world's leading manufacturer of IVD systems for blood cell analysis (hematology), with a market share in hematology approximately twice that of its next largest competitor. Coulter's hematology systems are used to provide complete blood counts and other blood-related diagnostic information to the same clinical IVD and medical research laboratories that utilize Beckman's systems. Flow cytometry is used by both researchers and clinicians to count and categorize various types of cells, such as the measurement of T-4 cells in AIDS patients and the diagnosis of leukemias and lymphomas. Going forward, annual synergies from the Acquisition are expected to exceed $60 million in 1999, with further gains anticipated in 2000. These synergies are expected to be realized through both cost savings and increased revenues related to cross selling. Cost-saving initiatives are designed to rationalize manufacturing capacity, close duplicate field offices, align distribution networks, combine administrative functions and size the Company to match market conditions. The first of these changes has been announced and includes staff reductions in Florida, California and Europe, along with the termination of manufacturing at a Coulter facility in Luton, England. This first initiative affects approximately 600 positions. See "Management's Discussion of Financial Condition and Results of Operations -- Summary of Effects of the Acquisition." 48 54 COMPETITIVE STRENGTHS LEADING POSITION IN THE SIMPLIFICATION AND AUTOMATION OF LABORATORY PROCESSES. The Acquisition significantly expanded Beckman's presence in the clinical diagnostics and life sciences markets and combined Beckman and Coulter, two of the most recognized global franchises and brand names in these markets. In particular, Coulter's number one market position in hematology significantly strengthens Beckman's global leadership in the clinical diagnostics market. This will enhance the Company's ability to offer integrated testing capabilities and automation options that can match a wider range of laboratory test volume, capitalizing on the efforts of laboratories to improve productivity and reduce costs. RECURRING AFTER SALES FROM SUBSTANTIAL INSTALLED BASE. The Company generates a recurring stream of revenues and cash flows from its large installed base of approximately 75,000 systems, which require the ongoing consumption of various reagents, consumables and services. After Sales revenue accounted for approximately 67% of the Company's Pro Forma 1997 sales. In addition, the Company's large installed base provides a strong foundation for new product introductions and upgrades, since many customers tend to remain with an existing supplier who can reliably provide quality products and services. BROAD PRODUCT OFFERING. The Company manufactures and markets a more comprehensive range of laboratory systems than any of its competitors. In hospitals, the Company's broad product line addresses approximately 75% of all testing volume, including virtually all routine laboratory tests. This broad-based capability allows the Company to capitalize on the trend among hospitals and laboratories toward preferred supplier arrangements and combined product purchases. The Company offers more than 180 different clinical diagnostics tests and a full range of hematology capabilities, giving customers the ability to diagnose and monitor a wide variety of diseases and conditions. The Company also provides a wide range of systems for life sciences applications and is the industry leader in centrifugation, capillary electrophoresis and high throughput screening for drug discovery. The Company believes that broadening its product portfolio targeted to its existing laboratory customer base will allow it to leverage its manufacturing and distribution capabilities, extensive worldwide sales and service infrastructure and product development capabilities as well as finance and administration activities. WORLDWIDE SALES AND SERVICE NETWORK. Beckman Coulter maintains an extensive worldwide sales, service and distribution network, generating approximately one-half of the Company's Pro Forma 1997 sales outside the United States. This sales and service network, furnishing service to customers in more than 120 countries, provides Beckman Coulter with recurring revenues and cash flows, access to new product and application ideas, and sales opportunities from new and existing customers. BUSINESS STRATEGY Beckman Coulter's goal is to profitably gain and retain customers by providing quality products and services that simplify and automate biochemical analyses across the technological continuum that extends from academic and commercial research to clinical diagnostics laboratories. In pursuit of this goal, the Company focuses on the following key initiatives: IMPROVE LABORATORY PRODUCTIVITY. By integrating its systems into customer processes, Beckman Coulter improves productivity and reduces costs in laboratories worldwide. Laboratories are increasingly focused on automation as a means of controlling labor costs, which typically account for over 50% of total laboratory costs. Marketed as "The Power of Process," the Company's approach is to link pre-analytical and analytical steps with robotics systems to automate nearly the entire testing process. The Company will continue to focus on its customers' needs to maximize laboratory operating efficiencies. EXPAND MARKET SHARE THROUGH PRODUCT DEVELOPMENT. The Company's expertise in simplifying and automating processes for biological laboratories forms a technological continuum, which Beckman Coulter can broadly apply to develop a range of products that are configured to meet specific customer needs in both the clinical diagnostics and life sciences markets. The Company believes that its close relationships with research laboratories allow the Company to identify and commercialize new research techniques. Once brought to the marketplace, the Company is in a position to translate technology into systems targeted for 49 55 diagnostic needs. Both Beckman and Coulter historically have invested considerable capital on research and development efforts, contributing to their leadership in their respective markets and allowing them to consistently provide new products. In Fiscal 1997, Beckman invested $123.6 million, or 10.3% of sales, on research and development. INCREASE INSTALLED BASE TO GENERATE AFTER SALES. One of the Company's primary objectives is to maximize systems installations to generate future After Sales revenue. Over the last six years, Beckman has ranked first in total systems placements in automated clinical chemistry, its largest product category. The Company believes that increasing its installed base of instruments will generate increased reagent, consumables and service revenue, and expand opportunities for new product sales and systems upgrades. In addition, management believes that providing a fully integrated system that is reliable and easy to use results in high switching costs and loyalty among customers who value consistency and accuracy in test results. PURSUE SELECTED ACQUISITION OPPORTUNITIES. The primary focus of Beckman's acquisition strategy has been to broaden its product offerings. Beckman significantly strengthened its diagnostic immunochemistry offerings, including products for cancer diagnostics, through the acquisitions of Hybritech Incorporated in January 1996 and the Access immunoassay product line of Sanofi Diagnostics Pasteur in April 1997. Beckman also acquired high throughput screening and robotics technology for drug discovery from Sagian, Inc. in December 1996 and DNA sequencing technology through the acquisition of Genomyx Inc. in October 1996. The acquisition of Coulter represents a significant milestone in accomplishing the Company's strategy to solidify its position as a leading provider of laboratory systems through Coulter's leading market position in hematology and number two position in flow cytometry. CONTINUE TO MAXIMIZE OPERATING EFFICIENCY. Beckman has a proven track record of managing costs and improving operating efficiency through integrating acquisitions, consolidating redundant functions and realizing potential synergies in its business. For example, during 1993, Beckman strategically repositioned itself in response to changes in the worldwide healthcare market by consolidating redundant functions and improving overall efficiency. This resulted in annualized savings of over $50 million in 1996. In connection with the Acquisition, management believes annual synergies of at least $60 million can be achieved by 1999 with further gains anticipated in 2000, stemming from a combination of increased revenues related to cross-selling opportunities as well as reduced operating costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Summary of Effects of the Acquisition." No assurances can be given as to whether and to what extent such annual synergies may be actually realized in the future. See "Risk Factors -- Ability to Successfully Integrate Coulter." BACKGROUND The Company is one of the world's leading manufacturers of analytical instrument systems, test kits and IVD systems for blood and other cell analysis and competes in the clinical diagnostics and life sciences markets. The Company's sales for Fiscal 1997 were approximately $1.2 billion. In Fiscal 1997, the Company generated approximately 67% of its sales through After Sales revenue from an installed base of over 75,000 systems. Founded by Dr. Arnold O. Beckman in 1934, Beckman entered the laboratory market by introducing the world's first pH meter. The Company became a publicly-traded corporation in 1952. In 1968 the Company expanded its laboratory instrument focus to include healthcare applications in clinical diagnostics. The Company was acquired by SmithKline Corporation to form SmithKline Beckman Corporation in 1982, and the Company was operated as a subsidiary of SmithKline Beckman until 1989 when it was divested. Since that time, the Company has operated as a fully independent, publicly-owned company. With the acquisition of Coulter, Beckman became the world's leading manufacturer of IVD systems for blood and other cell analysis. Coulter was founded in 1958 by Joseph Coulter, Jr. and Wallace Coulter, who discovered the "Coulter Principle," a revolutionary technology, essentially creating the automated hematology industry. Coulter's systems are used to provide diagnostic information to many of the same IVD laboratories that utilize Beckman's clinical systems. 50 56 The Company's principal executive offices are located at 4300 North Harbor Boulevard, Fullerton, California 92835, and its telephone number is (714) 871-4848. CUSTOMERS AND MARKETS The two primary markets which the Company serves are the clinical diagnostics and life sciences markets. The Company's clinical diagnostics customers include hospital clinical laboratories, physicians' offices and group practices and commercial reference laboratories (large central laboratories to which hospitals and physicians refer tests), and its life sciences customers include universities conducting academic research, medical research laboratories, pharmaceutical companies and biotechnology firms. Beckman Coulter's customers are continually searching for processes and systems that can perform tests faster, more efficiently and at lower costs. The Company believes that its focus on automated and high throughput systems position it to capitalize on this need. Virtually all new analytical methods and tests originate in academic research in universities and medical schools. If the utility of a new method or test is demonstrated by fundamental research, it often will then be used by pharmaceutical investigators, biotechnology companies, teaching hospitals or specialized clinical laboratories in an investigatory mode. In some cases, these new techniques eventually emerge in routine, high volume clinical testing at hospitals and reference labs. Generally, instruments used at each stage from research to routine clinical applications employ the same fundamental processes but may differ in operating features such as number of tests performed per hour and degree of automation. By serving several customer groups with differing needs related through common science and technology, the Company has the opportunity to broadly apply and leverage its expertise. The clinical diagnostics and life sciences markets are both highly competitive and the Company encounters significant competition in each market from many manufacturers, both domestic and from outside the United States. These markets continue to be unfavorably impacted by the economic weakness in Europe and Asia and cost containment initiatives in several European governmental and healthcare systems. The life sciences market also continues to be affected by consolidation of pharmaceutical companies and governmental constraints on research and development spending. Attempts to lower costs and increase efficiencies have led to consolidation among healthcare providers in the United States, resulting in more powerful provider groups that leverage their purchasing power with suppliers to contain costs. The consolidation trend among U.S. healthcare providers has put pressure on diagnostic equipment manufacturers to broaden their product offerings to encompass a wider range of testing capability, greater automation and higher volume capacity. The size and growth of the Company's markets are influenced by technological innovation in bioanalytical practice; government funding for basic and disease-related research (for example, heart disease, AIDS and cancer); research and development spending by biotechnology and pharmaceutical companies; and healthcare spending and physician practice. The Company expects worldwide healthcare expenditures and diagnostic testing to increase over the long-term, primarily as a result of the following three factors: (i) growing demand for services generated by the aging of the world population, (ii) increasing expenditures on diseases requiring costly treatment (for example, AIDS and cancer) and (iii) expanding demand for improved healthcare services in developing countries. CLINICAL DIAGNOSTICS The clinical diagnostics industry encompasses the study and analysis of disease by means of laboratory evaluation and analysis of bodily fluids and other substances from patients. Due to its important role in the diagnosis and treatment of patients, IVD testing is an integral part of overall patient care. Additionally, IVD testing is increasingly valued as an effective method of reducing healthcare costs by providing accurate, early detection of health disorders and also reducing the length of hospital stays. The major diagnostic fields that comprise the IVD industry include clinical chemistry, immunochemistry, microbiology, hematology and blood banking. The worldwide IVD industry was estimated to be $19 billion in 51 57 1996 and is estimated to grow at a 4% compound annual rate through the year 2001. The Company primarily serves the hospital and reference laboratory segments of the IVD market, which tend to use more precise, higher volume and more automated IVD systems. The hospital and reference laboratory segments constituted approximately $15.5 billion of the worldwide IVD market in 1996. IVD systems are composed of instruments, reagents, consumables, service and data management systems. Instruments typically have a five- to ten-year life and serve to automate repetitive manual tasks, improve test accuracy and speed the reporting of results. Reagents are substances that react with the patient sample to produce measurable, objective results. Consumables vary across application segments but are generally items such as sample containers, adapters, pipette tips, etc., used during test procedures. Reagents, accessories, consumables and services generate significant ongoing revenues for suppliers. Sample handling and preparation devices as well as data management systems are becoming increasingly important components of IVD systems. These system additions further improve safety and reduce costs through automation. The Company believes that the most important criteria customers use to evaluate IVD systems are operating costs, reliability, reagent quality and service, and that providing a fully integrated system that is reliable and easy to use results in high switching costs and loyalty among customers who value consistency and accuracy in test results. Attempts to lower costs and increase efficiencies have led to consolidation among healthcare providers in the United States, resulting in more powerful provider groups that leverage their purchasing power with suppliers to contain costs. Preferred supplier arrangements and combined purchases are becoming more commonplace. Consequently, it has become essential for manufacturers to provide cost-effective diagnostic systems to remain competitive. In addition, consolidation has put pressure on diagnostic equipment manufacturers to broaden their product offerings to encompass a wider range of testing capability, greater automation and higher volume capacity. Manufacturers that have the ability to automate a wide variety of tests on integrated workstations have a distinct competitive advantage. Broad testing menus that include immunoassays and routine chemistry tests are highly attractive to laboratories seeking to reduce the number of vendors they utilize. Finally, consolidation has made it increasingly important for suppliers to deploy a highly focused salesforce that is able to execute innovative marketing approaches and to maintain a reliable after-sale service network. LIFE SCIENCES RESEARCH AND DRUG DISCOVERY Life sciences research is the study of the characteristics, behavior and structure of living organisms and their component systems. Life sciences researchers utilize a variety of instruments and related biochemicals and supplies in the study of life processes, drug discovery and biotechnology. The Company estimates that in 1996 annual sales to the global life sciences industry for instrumentation and related service and biochemicals totaled approximately $6.4 billion. The segments of this market on which the Company focuses are centrifugation and other separation systems, biorobotics for drug screening, electrophoresis for R&D and quality control uses, spectrophotometry, protein purification, DNA synthesis and sequencing, and liquid scintillation, for which the Company estimates 1996 worldwide sales totaled approximately $4.2 billion in the aggregate. Trends in the life sciences industry include the growth in funding for drug discovery by the pharmaceutical and biotechnology industries, driven principally by the desire to accelerate drug discovery and development and the demand for increased automation and efficiency at pharmaceutical and biotechnology laboratories. An important application of the Company's systems is for use as a part of the drug discovery process. Pharmaceutical groups require the capability to screen millions of potential drug leads against many new disease targets in shorter time periods. Makers of bioanalytical instruments have addressed this need and helped to make the new approach to drug discovery possible by combining the detection capabilities of bioanalytical instruments with advances in high throughput screening. "High throughput screening" is a general term that refers to the automated systems and new instruments currently being used to accelerate drug discovery. 52 58 SYSTEMS -- INSTRUMENTS, SOFTWARE AND RELATED PRODUCTS The Company offers a wide range of analytical and diagnostic systems that consist of instruments, software and related products, including reagents, consumables, and services. These systems can be grouped into categories by type of laboratory process or application: (i) Life Sciences Research and Drug Discovery Products, (ii) Clinical Chemistry Diagnostics Systems, (iii) Blood Cell Systems, (iv) Immunochemistry Diagnostic Systems and (v) Rapid Test Kits. LIFE SCIENCES RESEARCH AND DRUG DISCOVERY PRODUCTS The Company's life sciences and drug discovery systems are used to advance basic understanding of life processes and in the related activities of therapeutic development. Product categories include centrifuges, flow cytometers, life sciences laboratory automation, DNA synthesizers and sequencers, high performance liquid chromatography ("HPLC"), capillary electrophoresis, spectrophotometry and liquid scintillation. Centrifuges separate liquid samples based on the density of the components. Samples are spun at up to 120,000 revolutions per minute to create forces that exceed 800,000 times the force of gravity. These forces result in a nondestructive separation that allows proteins, DNA and other cellular components to retain their biological activity. Centrifuges are offered in a wide range of models priced from $2,000 to $150,000. Flow cytometers rapidly count and categorize multiple types of cells in suspension. Common research applications include blood, bone marrow and tumor cells for the study of AIDS, leukemias and lymphomas. These systems are also useful in clinical applications and sell in the $150,000 to $400,000 range. Life sciences laboratory automation consists of integrated workstations and robotics that automatically perform exacting and repetitive processes in biotechnology and drug discovery laboratories. Operations include the dispensing, measuring, dilution and mixing of samples and analysis of reactions. A key application is for high throughput screening of candidate compounds in drug discovery research. These systems become functional through sophisticated scheduling and data handling software. Prices range from $50,000 to $500,000. DNA synthesizers and sequencers allow researchers to assemble strands of DNA molecules or to determine their component sequence through electrophoretic separation. These techniques are central to biotechnology science and the genetic understanding of life processes. Systems sell in the range of $12,000 to $45,000. HPLC uses high pressure (5,000 to 15,000 pounds per square inch) to force liquid samples through dense columns of separating agents. This technique is capable of separating very complex mixtures of both organic and inorganic molecules. The Company focuses on biologically related applications, including protein purification, with systems that range from $20,000 to $50,000. In addition, the Company also provides specialized software that is capable of recording, manipulating and archiving data from multiple HPLC systems. This type of software is essential to the pharmaceutical development process and installations can range from $20,000 to over $1,000,000. Capillary electrophoresis uses the electrical charge found on biological molecules to separate mixtures into their component parts. Its chief advantages are its ability to process very small sample volumes, separation speed and high resolution. The technique is considered a complement to HPLC. The Company has systems for basic research and pharmaceutical methods development and quality control that sell in the range of $30,000 to $60,000. Spectrophotometry is the optical measurement of compounds in liquid mixtures. Among its applications is the ability to measure changes during biological reactions. The Company's spectrophotometers are characterized by adaptive software that allows users to control the time, temperature and wavelength of light used for measurement while computing and recording experimental results. Spectrophotometers sell in the $5,000 to $30,000 range. Liquid scintillation techniques allow researchers to insert radioactive "labeled" atoms into compounds that then are introduced into biological systems. The compounds can be traced to a specific tissue or waste 53 59 product by measuring the amount of radioactive label that is present with a liquid scintillation counter. Liquid scintillation systems sell in the $16,000 to $30,000 range. CLINICAL CHEMISTRY DIAGNOSTICS SYSTEMS Clinical chemistry systems use electrochemical detection or chemical reactions with patient samples to detect and quantify substances of diagnostic interest or "analytes" in blood, urine or other body fluids. Commonly performed tests include protein, glucose, cholesterol, triglycerides and enzymes. The Company offers a range of automated clinical chemistry systems to meet the testing requirements of varying size laboratories, together with software that allows these systems to communicate with central hospital computers. To save time and reduce errors, systems identify patient samples through bar codes. Automated clinical chemistry systems are designed to be available for testing on short notice 24 hours a day. The Company has generally configured its systems for the work flow in medium and large hospitals, but the systems also have application in regional reference labs. Over 180 tests for individual analytes are offered for use with the Company's clinical chemistry systems, which range in price from $60,000 to over $300,000. BLOOD CELL SYSTEMS The Company's blood cell systems use the principles of physics, optics, electronics and chemistry to separate cells of diagnostic interest and then quantify and characterize them. These systems fall into two categories: hematology and cytometry. Hematology systems allow clinicians to study formed elements in blood such as red and white cells and platelets. The most common diagnostic result is a "CBC" or complete blood count, which provides five to eight blood cell parameters. Flow cytometers can extend analysis beyond blood to include bone marrow, tumor and other cells. The rise of the AIDS epidemic and the need to monitor subclasses of white cells moved cytometry from largely a research technique into general clinical practice. These systems are automated, use bar codes to identify samples and can communicate with central computers. Prices range from $7,500 to $400,000. IMMUNOCHEMISTRY DIAGNOSTIC SYSTEMS Immunochemistry systems, like clinical chemistry systems, use chemical reactions to detect and quantify chemical substances of diagnostic interest in blood, urine or other body fluids. The key difference is that immunochemistry systems use antibodies harvested from living organisms as the central component in analytical reactions. These antibodies are created by the organism's immune system and when incorporated in test kits, provide the ability to detect and quantify very low analyte concentrations. Commonly performed tests assess thyroid function, screen and monitor for cancer and calibrate cardiac risk. Immunochemistry systems have been constructed to meet the special requirements of these reactions and to simplify lab processes. They are able to automatically identify individual patient sample tubes and communicate with central computers. The Company offers over 60 immunochemistry-based test kits for individual analytes and a range of systems priced from $60,000 to $90,000. RAPID TEST KITS The Company produces a line of single use, self contained, diagnostic test kits for use in physician's offices, clinics, hospitals and other medical settings. The kits rapidly provide clinicians with results for colorectal cancer screening and detection of ulcer disease, pregnancy and Strep A. Because answers are available while the patient is with the physician, the delay associated with follow-up interpretation and diagnosis is reduced, treatment begins sooner and overall healthcare expenditures are reduced. Individual test kits range in price from approximately $2.00 to $6.00. RESEARCH AND DEVELOPMENT The Company's new products originate from four sources: internal research and development programs; external collaborative efforts with individuals in academic institutions and technology companies; devices or techniques that are generated in customers' laboratories; and business and technology acquisitions. Develop- 54 60 ment programs focus on production of new generations of existing product lines as well as new product categories not currently offered. Areas of pursuit include innovative approaches to cell characterization, immunochemistry, molecular biology, advanced electrophoresis technologies, automated sample processing and information technologies. The Company's research and development teams are skilled in optics, chemistry, electronics, software and mechanical and other engineering disciplines, in addition to a broad range of biological and chemical sciences. Historically, the Company has invested considerable capital on research and development efforts, contributing to their leadership in their respective markets and a consistent flow of new products. The Company's research and development expenditures for Fiscal 1997 were $123.6 million, or 10.3% of sales. SALES AND SERVICE Most of the Company's products are distributed directly by the Company's sales groups. However, the Company employs independent distributors to serve those markets that are more efficiently reached through such channels. Although there is essentially no overlap in the product offerings of the respective companies, the customer bases of Beckman and Coulter are substantially the same, which the Company believes provides opportunities for cross-selling and reduced operating costs. The Company's sales representatives are technically educated and trained in the operation and application of the Company's products. The sales force is supported by a staff of scientists and technical specialists in each product line and in each major scientific discipline served by the Company's products. The Company's ability to provide immediate after sales service and technical support are critical to customer satisfaction. This includes capabilities to provide immediate technical support by phone and to deliver parts or have a service engineer on site within hours. To have such capabilities on a global basis requires a major investment in personnel, facilities, and other resources. A large, existing installed base of instruments is a prerequisite to make the required service and support infrastructure financially viable. The Company considers its reputation for service responsiveness and competence and its worldwide sales and service network to be important competitive assets. In addition to direct sales of its instruments, the Company leases certain instruments to its customers, principally those used for clinical diagnostics applications in hospitals. This method of instrument placement is a significant competitive factor for the clinical diagnostics market. COMPETITION The markets for Beckman Coulter's products are highly competitive, with many companies participating in one or more segments of the market. Competitors in the clinical diagnostics market include Abbott Laboratories (Abbott Diagnostics Division), Bayer Diagnostics, Dade Behring, Inc., Becton Dickinson and Company, Johnson & Johnson (Ortho Diagnostics Division), Roche (Roche Boehringer Manheim Diagnostics Division) and Sysmex Corporation of America (a subsidiary of TOA Medical Electronics Co. Ltd.). Competitors focused more directly in the life sciences market include Amersham Pharmacia Biotech plc, Bio-Rad Laboratories Inc., Hewlett-Packard Company, Hitachi, Packard BioScience Company, The Perkin-Elmer Corporation, Sorvall Products LP. and Waters Corporation. Competitors include divisions or subsidiaries of corporations with substantial resources. In addition, the Company competes with several companies that offer reagents, consumables and service for laboratory instruments that are manufactured by the Company and others. Beckman Coulter competes primarily on the basis of improved laboratory productivity, product quality, products combining to meet multiple instrument needs, technology, product reliability, service and price. Management believes that its extensive installed instrument base provides the Company with a competitive advantage in obtaining both follow-on instrument sales and After Sales business. See "Risk Factors -- Highly Competitive Industries." 55 61 PATENTS AND TRADEMARKS To complement and protect the innovations created by Beckman's research and development efforts, the Company has an active patent protection program which includes nearly 700 active U.S. patents and patent applications. The Company also files important corresponding applications in principal foreign countries. The Company has taken an aggressive posture in protecting its patent rights; however, no one patent is considered essential to the success of the Company's business. See "-- Legal Proceedings" and "Risk Factors -- Reliance on Patents and Other Intellectual Property; Risk of Intellectual Property Litigation." The Company's primary trademarks are "Beckman," with the trade name also being Beckman or Beckman Coulter, Inc., and "Coulter." The Company vigorously protects its primary trademarks, which are used on products and are recognized throughout the worldwide scientific and diagnostics community. The Company owns and uses secondary trademarks on various products, but none of these secondary trademarks is considered of primary importance to the business. EMPLOYEES As of December 31, 1997, the Company had approximately 7,900 employees located in the United States and approximately 3,200 in international operations. The Company believes its relations with its employees are good. LEGAL PROCEEDINGS The Company is currently, and is from time to time, subject to claims and suits arising in the ordinary course of its business, including those relating to intellectual property, contractual obligations, competition and employment matters. In certain such actions, plaintiffs request punitive or other damages or nonmonetary relief, which may not be covered by insurance, and in the case of nonmonetary relief, could, if granted, materially affect the conduct of the Company's business. The Company accrues for potential liabilities involved in these matters as they become known and can be reasonably estimated. In management's opinion (taking third party indemnities into consideration), the various asserted claims and litigation in which the Company is currently involved are not reasonably likely to have a material adverse effect on the Company's operations or financial position. However, no assurance can be given as to the ultimate outcome with respect to such claims and litigation. The resolution of such claims and litigation could be material to the Company's operating results for any particular period, depending upon the level of income for such period. In January 1996, Coulter, then unrelated to Beckman, notified Hematronix, a competitive reagent manufacturer, that Hematronix was selling reagents and certain controls that infringed upon certain of Coulter's patents. In response, Hematronix filed a complaint in April 1996, in the United States District Court of the Eastern District of California against Coulter. The complaint seeks a declaratory judgment to invalidate the patents. The complaint also includes antitrust and related business tort claims directed at Coulter's business and leasing activities, and seeks actual, treble and punitive damages in an unspecified amount, as well as injunctive relief. Coulter answered the complaint by denying violations of the antitrust laws and business tort claims and counterclaimed that Hematronix has willfully infringed the patents at issue. In March 1998, the matter was resolved and the lawsuit was dismissed without material adverse effect on the Company's earnings or financial position. Through its Hybritech acquisition the Company obtained a patent, referred to as the Tandem Patent, that generates significant royalty income. The Tandem Patent is involved in an interference action in the U.S. Patent and Trademark Office with a patent application owned by La Jolla Cancer Research Foundation (the "Foundation"). If the Foundation wins the interference, the Company would lose the Tandem Patent and the royalty income, and a new patent would issue to the Foundation covering those products. The Company believes it has the stronger case and will prevail and does not expect this matter to have a material adverse effect on its operations or financial position. In 1991, Forest City Properties Corporation and F.C. Irvine, Inc. (collectively, "Forest City"), former owners and developers of a portion of the same real property in Irvine referred to under "-- Environmental 56 62 Matters," filed suit against The Prudential Insurance Company of America ("Prudential") in the California Superior Court for the County of Los Angeles, alleging breach of contract and damages caused by the pollution of the property. Forest City originally sought damages of more than $20 million but subsequently increased its demand to $40 million. Forest City also sought additional remediation of the property. Although the Company is not a named defendant in the Forest City action, it is obligated to contribute to the resolution of that action pursuant to Beckman's 1990 settlement agreement with Prudential. The trial of this matter was conducted in 1995, resulting in a jury verdict in favor of Prudential. The Court subsequently granted Forest City's motion for a new trial, which Prudential appealed. Prior to the Court's consideration of the appeal, Prudential settled the lawsuit with Forest City and requested Beckman to pay a portion of the settlement pursuant to the 1990 settlement agreement. Beckman does not agree with Prudential's claims and recently negotiated a settlement of them for an amount not material to the Company's operations or financial position. Since 1992, six toxic tort lawsuits have been filed in Maricopa County Superior Court, Arizona by a number of residents of the Phoenix/Scottsdale area against the Company (relating to a former manufacturing site) and a number of other defendants, including Motorola, Inc., Siemens Corporation, the cities of Phoenix and Scottsdale, and others. The Company is indemnified by SmithKline Beecham p.l.c., the successor of its former controlling stockholder, for any costs incurred in these matters in excess of applicable insurance, and thus the outcome of these litigations, even if unfavorable to the Company, should have no material effect on the Company's operations or financial position. These suits are currently in the discovery phase, with the first of several anticipated trials in the actions scheduled for June 1998. The public prosecutor in Palermo (Sicily), Italy is investigating the activities of officials at a local government hospital and laboratory as well as representatives of the principal worldwide companies marketing diagnostic equipment in Palermo, including the Company's Italian subsidiary (the "Subsidiary"). The inquiry focuses on past leasing practices for placement of diagnostic equipment which were common industry-wide practices throughout Italy, but now are alleged to be improper. The Company believes the prosecutor's evidence is weak and insufficient to support a criminal conviction against certain identified employees (the Subsidiary is not a defendant). The Court has appointed economic experts to evaluate and present a comprehensive economic report on the leasing practices of the industry. Although it is very difficult to evaluate the political climate in Italy and the activities of the Italian public prosecutors, the Company does not expect this matter to have a material adverse effect on its operations or financial position. In addition, the Company is involved in a number of lawsuits which the Company considers ordinary and routine in view of its size and the nature of its business. The Company does not believe that any ultimate liability resulting from any such lawsuits will have a material adverse effect on the operations or financial position of the Company. ENVIRONMENTAL MATTERS The Company is subject to federal, state, local and foreign environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations that would have a material impact on the Company's operations or financial position. The Company believes that its operations comply in all material respects with all applicable federal, state and local environmental laws and regulations. To address contingent environmental costs, the Company establishes reserves when such costs are probable and can be reasonably estimated. The Company believes that, based on current information and regulatory requirements (and taking third party indemnities into consideration), the reserves established by the Company for environmental expenditures are adequate. Based on current knowledge, to the extent that additional costs may be incurred that exceed the reserves, such amounts are not expected to have a material impact on the Company's operations or financial condition although no assurance can be given in this regard. In 1983 the Company discovered organic chemicals in the groundwater near a waste storage pond at its manufacturing facility in Porterville, California. SmithKline Beckman, the Company's former controlling stockholder, agreed to indemnify the Company with respect to this matter for any costs incurred in excess of applicable insurance, eliminating any impact on the Company's earnings or financial position. SmithKline 57 63 Beecham p.l.c., the surviving entity of the 1989 merger between SmithKline Beckman and Beecham, assumed the obligations of SmithKline Beckman in this respect. In 1987 soil and groundwater contamination was discovered on property in Irvine, California (the "Property") formerly owned by the Company. In 1988, Prudential, which purchased the Property from the Company, filed suit against the Company in U.S. District Court in California for recovery of costs and other alleged damages with respect to the soil and groundwater contamination. In 1990 the Company entered into an agreement with Prudential for settlement of the lawsuit and for sharing current and future costs of investigation, remediation and other claims. Soil and groundwater remediation of the Property have been in process since 1988. During 1994, the County agency overseeing the site remediation formally acknowledged completion of remediation of a major portion of the soil, although there remain other areas of soil contamination that may require further remediation. In July 1997 the California Regional Water Quality Control Board, the agency overseeing the site groundwater remediation, issued a closure letter for the upper water bearing unit. The Company and Prudential continued to operate a groundwater treatment system throughout 1997 and expect to continue its operation in 1998. Investigations on the Property are continuing and there can be no assurance that further investigation will not reveal additional contamination or result in additional costs. The Company believes that additional remediation costs, if any, beyond those already provided for the contamination discovered by the current investigations will not have a material adverse effect on the Company's operations or financial position. PROPERTIES The Company's primary instrument assembly and manufacturing facilities are located in Fullerton, Brea, and Palo Alto, California; Chaska, Minnesota; and Hialeah, Opa Locka and Miami Lakes, Florida. The Company recently announced the termination effective June 1998 of manufacturing operations at a Coulter facility located in Luton, England. Component manufacturing support facilities for parts and electronic subassemblies are located in Fullerton and Porterville, California. An additional manufacturing facility is located in Galway, Ireland. Reagents are manufactured in Carlsbad, San Diego and Palo Alto, California; Chaska, Minnesota; Naguabo, Puerto Rico; Florence, Kentucky; Galway, Ireland; Germany; France; Japan; Brazil; Australia; Argentina and Hong Kong. The Company's computer software products business is located in Allendale, New Jersey and its facility for the production of Hemoccult(R) test kits and related products is located in Sharon Hill, Pennsylvania. A portion of the Company's laboratory robotics operations (Sagian) are conducted in leased facilities in Indianapolis, Indiana and some of its DNA sequencing activities are performed in leased facilities in Foster City, California. All of the Company's U.S. manufacturing facilities, including land and buildings, are owned with the exception of Allendale, Foster City, Indianapolis, San Diego, Sharon Hill, Opa Locka, Miami Lakes, eight of the facilities in Hialeah and Florence which are leased facilities, and Palo Alto, where the Company has built and owns its buildings on a long-term land lease expiring in 2054. All manufacturing facilities outside the U.S. are leased with the exception of Germany, France, Japan, Brazil and Australia. The component production facilities for the Company also include plastics molding and machine shop capabilities in Fullerton. This facility, in conjunction with electronic subassembly work done in Porterville, supplies the primary parts and subassemblies to the various instrument assembly locations in California. The Company's principal distribution locations are in Brea and Fullerton, California; Chaska, Minnesota; Somerset, New Jersey; Frankfurt, Germany; and Paris, France. In 1994 the Company established a European Administration Center at a facility in Nyon, Switzerland. The Company intends to consummate sale-leaseback transactions with respect to some of its real estate assets which the Company expects will generate proceeds of approximately $150.0 million in 1998 and approximately $40.0 million in 1999. The Company believes that its production facilities meet applicable government environmental, health and safety regulations and industry standards for maintenance, and that its facilities in general are adequate for its current business. 58 64 GOVERNMENT REGULATION Certain of the Company's products are subject to regulations of the FDA which require such products to be manufactured in accordance with "good manufacturing practices." Such laws and regulations also require that such products be safe and effective and that the labeling of those products conform with specific requirements. Testing is conducted to demonstrate performance claims and to provide other necessary assurances. Clinical systems and reagents must be reviewed by the FDA before sale and, in some instances, are subject to product standards, other special controls or a formal FDA premarket approval process. New federal regulations under the Clinical Laboratory Improvement Amendments of 1988 will, when fully implemented, require regulatory review and approval of quality assurance protocols for the Company's clinical reagent products. While adding to the overall regulatory review process, this is not expected to materially affect the sale of the Company's products. Certain of the Company's products are subject to comparable regulations in other countries as well. In 1993 the member states of the European Union ("EU") began implementation of their plan for a new unified EU market with reduced trade barriers and harmonized regulations. The EU adopted a significant international quality standard, the International Organization for Standardization Series 9000 Quality Standards ("ISO 9000"). The Company's manufacturing operations in its Brea, Carlsbad, Fullerton, Palo Alto, Porterville and San Diego, California; Chaska, Minnesota; Allendale, New Jersey; Sharon Hill, Pennsylvania; Miami and Hialeah, Florida; Florence, Kentucky; Naguabo, Puerto Rico; Galway, Ireland; Australia, France, Germany, Hong Kong, Ireland, South Africa and the United Kingdom facilities have been certified as complying with the requirements of ISO 9000. Many of the Company's international sales and service subsidiaries have also been certified, including those located in Australia, Austria, Canada, China, France, Germany, Italy, The Netherlands, Poland, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom. The design of the Company's products and the potential market for their use may be directly or indirectly affected by U.S. and foreign regulations concerning reimbursement for clinical testing services. The configuration of new products, such as the SYNCHRON(R) series of clinical analyzers, reflects the Company's response to the changes in hospital capital spending patterns such as those engendered by the Medicare Diagnostic Related Groups ("DRGs"). Under the DRG system, a hospital is reimbursed a fixed sum for the services rendered in treating a patient, regardless of the actual cost of the services provided. Japan, France, Germany and Italy are among the other countries that are in the process of adopting reimbursement policies designed to lower the cost of healthcare. Medicare reimbursement of inpatient capital costs incurred by a hospital (to the extent of Medicare utilization) is in a 10-year transition period begun in 1991 from the "capital cost passthrough" payment methodology to a "prospective capital" payment methodology based on Medicare DRGs. To date, the Company has not experienced, and does not expect to experience in the future, any material financial impact from the change in Medicare's payment for inpatient capital costs. The current healthcare reform efforts in the United States and in some foreign countries are expected to further alter the methods and financial aspects of doing business in the healthcare field. The Company is closely following these developments so that it may position itself to take advantage of them. However, the Company cannot predict the effect on its business of these reforms should they occur nor of any other future government regulation. 59 65 MANAGEMENT EXECUTIVE OFFICERS OF THE COMPANY The following table sets forth certain information as to the executive officers of the Company.
NAME AGE POSITION ---- --- -------- Louis T. Rosso 64 Chairman of the Board and Chief Executive Officer John P. Wareham 56 President and Chief Operating Officer Dennis K. Wilson 62 Vice President, Finance and Chief Financial Officer James T. Glover 48 Vice President and Controller Fidencio M. Mares 51 Vice President, Human Resources William H. May 55 Vice President, General Counsel and Secretary Bruce A. Tatarian 49 Vice President, Beckman Distribution Markets Operation Albert R. Ziegler 59 Vice President, Clinical Chemistry Division Paul Glyer 41 Treasurer
LOUIS T. ROSSO. Mr. Rosso has been Chief Executive Officer of the Company since 1988 and Chairman of the Board since 1989. He served as the Company's President from 1982 until 1993. He also served as a Vice President of SmithKline Beckman from 1982 to 1989. Mr. Rosso first joined the Company in 1959 and was named Corporate Vice President in 1974. He is a director of Allergan, Inc. and American Health Properties, Inc. He is a member of the Board of Trustees of St. Jude Heritage Foundation in Fullerton, California and of Harvey Mudd College. Mr. Rosso has been a director of the Company since 1988. JOHN P. WAREHAM. Mr. Wareham has been President and Chief Operating Officer of the Company since 1993. He served as the Company's Vice President, Diagnostic Systems Group from 1984 to 1993. Prior thereto, he had been President of Norden Laboratories, Inc., a wholly owned subsidiary of SmithKline Beckman engaged in developing, manufacturing and marketing veterinary pharmaceuticals and vaccines. Mr. Wareham first joined SmithKline Corporation, a predecessor of SmithKline Beckman, in 1968. He is a director of the Little Rapids Corporation and the Health Industry Manufacturers Association. Mr. Wareham has been a director of the Company since 1993. DENNIS K. WILSON. Mr. Wilson has been Vice President, Finance and Chief Financial Officer of the Company since 1993. He served as Vice President, Treasurer of the Company from 1989 until his current appointment. Prior thereto he had been Vice President, Corporate Accounting and Assistant Controller of SmithKline Beckman since 1984. Mr. Wilson first joined the Company in 1969. JAMES T. GLOVER. Mr. Glover has been Vice President and Controller of the Company since 1993. From 1989 until assuming his current position, he was Vice President, Controller - Diagnostic Systems Group. Mr. Glover joined the Company in 1983, serving in several management positions, including a two-year term at Allergan, Inc., then a Company affiliate. Prior to 1983, he held management positions with KPMG Peat Marwick LLP and another Fortune 500 Company. FIDENCIO M. MARES. Mr. Mares was named Vice President, Human Resources of the Company in 1995. Prior thereto he had been President of The Gas Company of Hawaii. Before that he was Senior Vice President of Administration and Human Resources for Pacific Resources, Inc., Corporate Wage and Salary Manager and Corporate Human Resources Services Manager for Getty Oil Company/Texaco, Inc., and held various human resources managerial positions at Southern California Edison. WILLIAM H. MAY. Mr. May has been General Counsel and Secretary of the Company since 1984 and has been Vice President, General Counsel and Secretary of the Company since 1985. Mr. May first joined the Company in 1976. BRUCE A. TATARIAN. Mr. Tatarian was named Vice President, Beckman Distribution Markets Operation of the Company in October 1997. He had been Vice President, Field Operations - Emerging Markets since 1995 and Vice President, Bioresearch Commercial Operations International since 1994. Prior thereto, he had 60 66 been Vice President, Marketing Operations for the Bioanalytical Systems Group since 1991. Mr. Tatarian originally joined the Company in 1973. ALBERT R. ZIEGLER. Mr. Ziegler was named Vice President, Chemical Chemistry Division of the Company in October 1997. He had been Vice President, Diagnostics Development Center of the Company since 1994. He joined the Company in 1986 as Vice President, North America Operations for the Diagnostic Systems Group. Prior thereto he had been President of Branson Ultrasonics Corporation, a manufacturer of industrial ultrasound instruments and a subsidiary of SmithKline Beckman until the divestiture of SmithKline Beckman's industrial instruments businesses in 1984. Mr. Ziegler first joined SmithKline Beckman in 1971. PAUL GLYER. Mr. Glyer has been Treasurer of the Company since 1993. In 1995 he additionally assumed the position of Director, Corporate Business Development and Licensing. He served as Assistant Treasurer since 1989, when he first joined the Company. 61 67 DESCRIPTION OF CREDIT FACILITY In connection with the Acquisition, the Company entered into the Credit Facility with a syndicate of financial institutions for which Citicorp USA, Inc. acted as agent (the "Agent"), Citicorp Securities, Inc. acted as arranger (the "Arranger") and Merrill Lynch & Co. acted as syndication agent (the "Syndication Agent"). The following is a summary of the material terms and conditions of the Credit Facility and is subject to the detailed provisions of the credit agreement (the "Credit Agreement") entered into on October 31, 1997 by and among the Company, the lenders party thereto (the "Lenders"), the Agent, the Arranger and the Syndication Agent, and various related documents entered into in connection therewith. Capitalized terms used but not defined herein have the respective meanings assigned to them in the Credit Agreement. To the extent such summary contains descriptions of the Credit Facility and other loan documents, such descriptions do not purport to be complete and are qualified in their entirety by reference to such documents, which are available upon request from the Company. GENERAL The Credit Facility provides up to a maximum aggregate amount of $1,300.0 million financing through a (i) $500.0 million Term Loan and (ii) $800.0 million Revolving Credit Facility for working capital and general corporate purposes and under which standby and trade letters of credit may be issued in a maximum aggregate amount up to $25 million. As of April 1, 1998, there were no amounts outstanding under the Term Loan and $670.0 million was outstanding under the Revolving Credit Facility. Proceeds of the Credit Facility are restricted to funding the Acquisition, refinancing certain existing indebtedness of Beckman and Coulter, paying transaction costs, providing working capital for the Company and its domestic subsidiaries and for general corporate purposes, subject to certain limitations. INTEREST RATES; FEES Interest is computed on the outstanding daily balance of the loans under the Credit Facility at the Company's option, at the Applicable Margin above the Agent's Base Rate or the Eurodollar Rate as determined by a pricing grid or, in the case of Competitive Bid Advances, at a fixed rate of interest or the LIBO Rate. Interest is calculated on the basis of a 360-day year for actual days elapsed or 365 or 366 days for Base Rate loans, and will be payable in arrears, monthly, in the case of Base Rate interest, and at least quarterly, in the case of Eurodollar Rate interest. During the continuance of an event of default, the applicable interest rate will increase by 2% per annum. Under the pricing grid, the Applicable Margin generally varies depending on the Company's (i) senior unsecured debt rating from at least two of Standard & Poor's Ratings Services, Duff & Phelps Credit Rating Co. and Moody's Investors Service, Inc. or (ii) leverage ratio from time to time. As of the Issue Date, such Applicable Margin was zero for Base Rate loans and 0.50% for Eurodollar Rate Advances under the Revolving Credit Facility, and 0.25% for Base Rate loans and 0.75% for Eurodollar Rate Advances under the Term Loan. The Company is charged a per annum facility fee (at the rate determined by the pricing grid) on the Revolving Credit Facility, whether used or unused, payable quarterly in arrears and varying from 0.125% to 0.375%. Such fee is expected to be 0.250% as of the Issue Date. The Company also pays the Agent certain fees as agreed upon between the Agent and the Company. Fees for letters of credit issued as part of the Revolving Credit Facility will be equal to the Applicable Margin for Eurodollar Rate Advances under the Revolving Credit Facility plus customary issuance fees and costs of the Issuing Bank. AMORTIZATION; PREPAYMENTS The Revolving Credit Facility matures in October 2002. The Company is required to make prepayments on loans under the Revolving Credit Facility in an amount equal to the net cash proceeds received by the Company and/or its subsidiaries from the disposition of certain assets, all net cash proceeds of Extraordinary Receipts, all cash proceeds from the issuance of additional debt or equity permitted under the loan documentation (with limited exceptions), and 50% of the Company's Excess Cash Flow (commencing for the 62 68 1998 fiscal year). Such required prepayments will be applied to reduce the commitments under the Revolving Credit Facility on a pro rata basis. However, no reductions in the Revolving Credit Facility commitments will be required from Excess Cash Flow after the Company's Debt to Earnings Ratio is less than or equal to 3.25 to 1.0 at the end of a fiscal year. CONDITIONS AND COVENANTS The obligations of the Lenders under the Credit Agreement are subject to the satisfaction of certain conditions precedent customary in credit facilities of this type or otherwise appropriate under the circumstances. The Company and each of its subsidiaries are subject to certain affirmative and negative covenants contained in the Credit Agreement, including without limitation covenants that restrict, subject to specified exceptions, (i) the incurrence of indebtedness, guaranties and other obligations, (ii) the granting of liens, (iii) mergers, acquisitions, investments and dispositions of assets, (iv) capital expenditures, (v) loans, advances, dividends, distributions and stock repurchases and redemptions, (vi) engaging in certain transactions with affiliates and subsidiaries, (vii) prepayments, redemption or defeasance of debt, (viii) the use of proceeds and (ix) changes of lines of business. The Credit Agreement covenants also include covenants relating to compliance with ERISA and environmental and other laws, payment of taxes, maintenance of corporate existence and rights, maintenance of insurance, and financial and other reporting. Certain of the Credit Agreement covenants are significantly more restrictive than those set forth in the Indenture. In addition, the Credit Agreement requires the Company to maintain compliance with certain specified financial ratios and tests, including minimum net worth, maximum capital expenditures, a maximum debt to earnings ratio, a minimum interest coverage ratio and a maximum amount of debt incurrence. GUARANTEES Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated and SmithKline Diagnostics, Inc. unconditionally guarantee the obligations of the Company under the Credit Facility. Such subsidiaries also guarantee payment on the Notes as provided in the Indenture and guarantee payment of the Old Debentures as provided in the indenture governing the Old Debentures. See "Description of Notes -- Note Guarantees." EVENTS OF DEFAULT The Credit Facility includes events of default that are customary in credit facilities of this type or otherwise appropriate under the circumstances, including, without limitation, with respect to change in ownership or control. The occurrence of any of such events of default could result in acceleration of the Company's obligations under the Credit Facility, which could have a material adverse effect on holders of the Notes. 63 69 DESCRIPTION OF NOTES GENERAL The Initial Notes were issued under the Indenture, dated as of March 4, 1998 (the "Indenture"), among the Company, as issuer, the Note Guarantors and The First National Bank of Chicago, as Trustee (the "Trustee"). Upon the issuance of the Exchange Notes, the Indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes except that (i) the Exchange Notes will have been registered under the Securities Act, pursuant to the Registration Statement and therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Initial Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Initial Notes (which they replace) and will be entitled to the benefits of the Indenture. The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture, including the definitions of certain terms contained therein and those terms made part of the Indenture by reference to the Trust Indenture Act. A copy of the Indenture is filed as an exhibit to the Registration Statement of which this Prospectus is a part. For definitions of certain capitalized terms used in the following summary, see "-- Certain Definitions." Reference is made to the Indenture for the full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided. As used in the following summary, the "Notes" means the Initial Notes and the Exchange Notes, and references to (i) the "2003 Notes" include the Initial 2003 Notes and the Exchange 2003 Notes and (ii) the "2008 Notes" include the Initial 2008 Notes and the Exchange 2008 Notes. As used in the following summary, the "Company" means Beckman Coulter, Inc. (formerly known as Beckman Instruments, Inc.), but not any of its subsidiaries (unless the context otherwise requires), and the term "Credit Facility" refers to the Credit Facility, as each such term is more particularly defined in "-- Certain Definitions." MATURITY AND INTEREST The 2003 Notes are unsecured obligations of the Company in an aggregate principal amount of $160.0 million and mature on March 4, 2003. The 2003 Notes bear interest at a rate of 7.10% from March 4, 1998, payable semiannually in arrears on each March 4 and September 4, commencing September 4, 1998, to Persons in whose names the 2003 Notes are registered on the preceding February 19 and August 19, respectively. The 2008 Notes are unsecured obligations of the Company in an aggregate principal amount of $240.0 million and mature on March 4, 2008. The 2008 Notes bear interest at a rate of 7.45% from March 4, 1998, payable semiannually in arrears on each March 4 and September 4, commencing September 4, 1998, to Persons in whose names the 2008 Notes are registered on the preceding February 19 and August 19, respectively. Under certain circumstances, additional interest may be payable in respect of the Initial Notes in the event that the Company does not timely file a registration statement with respect to the Exchange Notes, cause such a registration statement to become effective or consummate the Exchange Offer, in each case within certain time periods. See "The Exchange Offer." Principal of and any premium and interest on the Notes will be payable, and the Notes may be presented for exchange or for registration of transfer, at the office or agency of the Company maintained for such purposes (which initially will be the corporate trust office of the Trustee in The City of New York), except that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address appears in the Note Register. The Notes are issued only in fully registered form, without coupons, only in denominations of $1,000 and integral multiples thereof. No service charge will be made for any registration of transfer or exchange or redemption of Notes, but the Company may require a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 64 70 RANKING The Notes are unsecured senior obligations of the Company, and the Indebtedness evidenced by the Notes ranks pari passu in right of payment with all other existing and future senior obligations of the Company, including borrowings under the Credit Facility, and senior in right of payment to all future obligations of the Company subordinated in right of payment to the Notes. The Notes, however, are effectively subordinated to secured senior obligations of the Company with respect to the assets of the Company securing such obligations, and to all obligations of the Company's subsidiaries (other than Note Guarantors) with respect to their assets. The Notes are fully and unconditionally Guaranteed on an unsecured, senior basis by certain Note Guarantors that guarantee Bank Indebtedness of the Company, consisting of Coulter and certain other existing and future subsidiaries of the Company. Each such Note Guarantor's Note Guarantee is an unsecured, senior obligation of such Note Guarantor, and ranks pari passu in right of payment with all other existing and future senior obligations of such Note Guarantor, including any Guarantee of borrowings under the Credit Facility, and senior in right of payment to all future obligations of such Note Guarantor subordinated in right of payment to its Note Guarantee. Each such Note Guarantee will be subject to release and discharge as provided in the Indenture. See "-- Note Guarantees." As of December 31, 1997, the outstanding Indebtedness of the Company and the Note Guarantors was $1,127.4 million (excluding capital lease obligations), none of which was secured Indebtedness, and the outstanding Indebtedness of the Company's subsidiaries (other than the Note Guarantors) was approximately $98.2 million (excluding capital lease obligations). Subject to certain limitations, the Company and its Subsidiaries may incur additional Indebtedness in the future. See "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness." OPTIONAL REDEMPTION The Notes are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Notes or (ii) as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the date of redemption. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Notes to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Notes or portions thereof called for redemption. The Notes are not entitled to the benefit of a sinking fund. NOTE GUARANTEES The Indenture provides that the Company is required to cause any of its Restricted Subsidiaries that Guarantee Bank Indebtedness of the Company to, as primary obligors and not merely as sureties, fully, irrevocably and unconditionally Guarantee pursuant to a Note Guarantee, on an unsecured, senior basis, the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indenture and the Notes, whether for payment of principal of or premium, if any, or interest on the Notes, expenses, indemnification or otherwise. Such Note Guarantors agree to pay, in addition to the amount stated above, any and all expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the holders in enforcing any rights under any such Note Guarantee. Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated and SmithKline Diagnostics, Inc. have guaranteed the Indebtedness of the Company under the Credit Facility, the Notes and the Old Debentures. In addition, the Company will cause Restricted Subsidiaries that guarantee any Bank Indebtedness of the Company to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes. 65 71 Each Note Guarantee is limited to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Note Guarantor without rendering such Note Guarantee, as it relates to such Note Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each Note Guarantee is a continuing Guarantee and (a) will remain in full force and effect until payment in full of all the obligations of the Company under the Notes and the Indenture, except to the extent such Note Guarantee is released in accordance with the Indenture, (b) is binding upon each Note Guarantor and (c) inures to the benefit of and be enforceable by the Trustee, the Noteholders and their successors, transferees and assigns. Any such Note Guarantee provides by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Capital Stock held by the Company and its Subsidiaries in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture) or (ii) the release and discharge of all Guarantees by such Restricted Subsidiary of any Bank Indebtedness of the Company, other than by reason of payment under such Guarantee. The Company expects that in the future it may renegotiate the terms under the Credit Facility relating to guarantees, such that any Guarantee by its Restricted Subsidiaries of its Indebtedness under the Credit Facility will terminate. Accordingly, it is expected that all Note Guarantees will terminate at that time. CHANGE OF CONTROL Upon the occurrence of a Change of Control Triggering Event, each holder of the Notes shall have the right to require that the Company repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's Notes at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of such repurchase. Within 30 days following any such Change of Control Triggering Event, the Company will be required to mail a notice to each holder of a Note (with a copy to the Trustee) stating (1) that a Change of Control Triggering Event has occurred and that such holder has the right to require the Company to repurchase such holder's Notes at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of repurchase (the "Change of Control Offer"); (2) the repurchase date, which shall be a Business Day and be not earlier than 20 Business Days or later than 60 Business Days from the date such notice is mailed (the "Repurchase Date"); (3) that interest on any Note tendered will continue to accrue; (4) that interest on any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue after the repurchase of any Note on the Repurchase Date; (5) that holders electing to have a Note purchased pursuant to the Change of Control Offer will be required to surrender such Note, with the form entitled "Option to Elect Purchase" on the reverse of the Note completed, to the Trustee at the address specified in the notice prior to the close of business on the Business Day prior to the Repurchase Date; (6) that holders of Notes will be entitled to withdraw their election on the terms and conditions set forth in such notice; and (7) that holders of Notes that elect to have their Notes purchased only in part will be issued new Notes in a principal amount equal to the then unpurchased portion of the Notes surrendered. For so long as the Notes are in global form, upon any such Change of Control Triggering Event, the Company will be required to deliver to The Depository Trust Company ("DTC"), within the time periods specified above, for re-transmittal to its participants, a notice substantially to the effect specified in clauses (1) through (4) and (6) of the previous paragraph. Such notice shall also specify the required procedures (furnished by DTC) for holders of interests in the Global Security to tender and receive payment of the purchase price for interests in accordance with DTC's rules, regulations and practices (including DTC's "Repayment Option Procedures" to the extent applicable). On the Repurchase Date, the Company shall (i) accept for payment such surrendered Notes or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so accepted with an officers' certificate identifying the Notes or portions thereof so 66 72 tendered. The Company will publicly announce the result of the Change of Control Offer as soon as practicable after the Repurchase Date. The Company has agreed to comply with all applicable tender offer rules, including, without limitation, Rule 14e-1 under the Exchange Act in connection with a Change of Control Offer. The phrase "all or substantially all" as used in the definition of "Change of Control" has not been interpreted under New York law (which is the governing law of the Indenture) to represent a specific quantitative test. As a consequence, in the event that the holders of the 2003 Notes or 2008 Notes, as the case may be, elected to exercise their rights under the Indenture and the Company elected to contest such election, there could be no assurance as to how a court interpreting New York law would interpret such phrase. The Change of Control provisions may not be waived by the Trustee or the Board of Directors of the Company. The Change of Control provisions may in certain circumstances make more difficult or discourage a takeover of the Company and, thus, the removal of incumbent management. The Change of Control provisions, however, are not the result of management's knowledge of any specific effort to accumulate shares of capital stock of the Company or to obtain control of the Company by a merger, tender offer, solicitation or otherwise, or part of a plan by management to adopt a series of anti-takeover provisions. In addition, the Change of Control provisions will not necessarily afford protection to holders of Notes including protection against an adverse effect on the value of the Notes, in the event that the Company or its subsidiaries and affiliates incur additional Indebtedness, whether through recapitalizations or otherwise. If a Change of Control Triggering Event were to occur, there can be no assurance that the Company would have sufficient funds to pay the Change of Control purchase price for all Notes tendered by the holders thereof. In addition, the Company's ability to make such payment may be limited by the terms of its then-existing borrowing and other agreements. The Credit Facility is expected to have, and certain agreements relating to other indebtedness of the Company may have, similar change of control provisions and restrictions on the prepayment of Indebtedness that may have the effect of further limiting the Company's ability to pay the Change of Control purchase price for the Notes tendered by the holders thereof. The failure of the Company to make such payment to holders of Notes, if continued for 60 days after receipt of written notice of Default from the Trustee or the holders of at least 25% of the aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, specifying such Default and requiring that it be remedied, would constitute an Event of Default under the terms of the Indenture. The Credit Facility may limit the Company's ability to repurchase or redeem any Notes, whether on a Change of Control or otherwise. Failure to make any such repayment or redemption may result in a default under the Indenture and the Credit Facility. RESTRICTIVE COVENANTS The Indenture provides for certain restrictive covenants of the Company, including the following: LIMITATION ON LIENS The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, create, incur, issue, assume or guarantee any indebtedness of the Company or any Subsidiary secured by a Lien upon any Principal Property, or upon shares of capital stock or evidences of indebtedness issued by any Restricted Subsidiary and owned by the Company or any Restricted Subsidiary, now owned or hereafter owned by the Company, without making effective provision to secure all of the Notes then outstanding by such Lien, equally and ratably with any and all other indebtedness thereby secured, so long as such indebtedness shall be so secured. The foregoing restrictions shall not apply, however, to (1) Liens on any property existing at the time of the acquisition thereof; (2) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of such corporation (or a division thereof) as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary, provided that such Lien as a result of such merger, 67 73 consolidation, sale, lease or other disposition is not extended to property owned by the Company or such Restricted Subsidiary immediately prior thereto; (3) Liens on property of a corporation existing at the time such corporation becomes a Restricted Subsidiary; (4) Liens securing indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (5) Liens to secure all or part of the cost of acquisition, construction, development or improvement of the underlying property, or to secure indebtedness incurred to provide funds for any such purpose, provided that the commitment of the creditor to extend the credit secured by any such Lien shall have been obtained not later than twenty-four months after the later of (a) the completion of the acquisition, construction, development or improvement of such property or (b) the placing in operation of such property or of such property as so constructed, developed or improved; (6) Liens on any property created, assumed or otherwise brought into existence in contemplation of the sale or other disposition of the underlying property, whether directly or indirectly, by way of share disposition or otherwise; provided that the Company must have disposed of such property within 180 days from the creation of such Liens and any indebtedness secured by such Liens shall be without recourse to the Company or any Subsidiary; (7) Liens in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments; (8) Liens to secure indebtedness of joint ventures in which the Company or a Restricted Subsidiary has an interest, to the extent such Liens are on property or assets of, or equity interests in, such joint ventures; (9) Liens on Equipment Held for Resale; and (10) any indebtedness secured by Liens existing on the date of the Indenture or any extension, renewal or replacement or refunding of any Lien existing on the date of the Indenture or referred to in clauses (1) to (3) or (5); provided, however, that the aggregate principal amount of indebtedness secured thereby and not otherwise authorized by clauses (1) to (3) or (5), shall not exceed the aggregate principal amount of indebtedness, plus any premium or fee payable in connection with any such extension, renewal, replacement, or refunding, so secured at the time of such extension, renewal, replacement or refunding. Notwithstanding the restrictions described above, the Company and its Restricted Subsidiaries may incur, issue, assume or guarantee debt secured by Liens without equally and ratably securing the Notes then outstanding, provided, that at the time of such incurrence, issuance, assumption or guarantee, after giving effect thereto and to the retirement of any indebtedness which is concurrently being retired, the aggregate amount of all outstanding indebtedness secured by Liens so incurred, other than any indebtedness secured by Liens permitted as described in clauses (1) through (10) above, and together with all outstanding Attributable Value of all sale and leaseback transactions permitted as described in "-- Limitation on Sale and Leaseback Transactions," does not exceed 15% of the Consolidated Net Tangible Assets of the Company. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS Sale and leaseback transactions by the Company or any Restricted Subsidiary involving any Principal Property are prohibited unless either (1) the Company or its Restricted Subsidiaries would be entitled pursuant to the provisions described in clauses (1) through (10) above under "Limitation on Liens" to issue, assume or guarantee indebtedness secured by a Lien on such Principal Property without equally and ratably securing the Notes then outstanding or (2) the Company or such Restricted Subsidiary shall apply, or cause to be applied, to the retirement of its secured debt within 120 days after the effective date of the sale and leaseback transaction, an amount not less than the greater of (i) the net proceeds (net of all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such sale) of the sale of the Principal Property leased pursuant to such arrangement or (ii) the fair market value of the Principal Property so leased. This restriction does not apply to a sale and leaseback transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries or involving the taking back of a lease for a period of less than three years. Notwithstanding the restrictions described above, the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction provided, that at the time of such transaction, after giving effect thereto, the Attributable Value thereof, together with all indebtedness secured by Liens permitted pursuant to the Indenture as described above under "Limitation on Liens" other than all indebtedness secured by Liens 68 74 permitted as described in clauses (1) through (10) above under "Limitation on Liens" and other than the Attributable Value of such sale and leaseback transactions permitted by the preceding paragraph, does not exceed 15% of Consolidated Net Tangible Assets of the Company. COVENANTS IN EFFECT PRIOR TO AN INVESTMENT GRADE RATING DATE The following two covenants will cease to be effective upon the Investment Grade Rating Date. LIMITATION ON INCURRENCE OF INDEBTEDNESS The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or directly or indirectly enter into any Guarantee of, or in any other manner become directly or indirectly liable for ("incur"), any Indebtedness (including Acquired Debt), except that the Company may incur Indebtedness if, at the time of, and immediately after giving pro forma effect to, such incurrence of Indebtedness, the Consolidated Coverage Ratio of the Company for the most recently ended four fiscal quarters for which financial statements are available would be at least 2.0 to 1. The foregoing limitations will not apply to the incurrence by the Company or any Restricted Subsidiary, as the case may be, of any Permitted Indebtedness of such Person. LIMITATION ON RESTRICTED PAYMENTS The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment, unless at the time of and immediately after giving effect to the proposed Restricted Payment (with the value of any such Restricted Payment, if other than cash, to be as determined in good faith by the Board of Directors of the Company, which determination shall be conclusive), (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, (ii) the Company could incur at least $1.00 of additional Indebtedness pursuant to the first sentence of the covenant described under "-- Limitation on Incurrence of Indebtedness" and (iii) the aggregate amount of all Restricted Payments made after the Issue Date shall not exceed the Restricted Payment Amount. The foregoing provisions do not prohibit the following actions (collectively, "Permitted Payments"): (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such payment would have been permitted under the Indenture and such payment shall be deemed to have been paid on such date of declaration for purposes of clause (iii) of the preceding paragraph; (ii) the redemption, repurchase, retirement or other acquisition of any Capital Stock or any Indebtedness of the Company that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary) of Capital Stock of the Company (other than any Disqualified Stock); (iii) the defeasance, redemption, repurchase, retirement or other acquisition of any Indebtedness of the Company that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, the substantially concurrent sale of Refinancing Indebtedness that is (x) at least as subordinated in right of payment to the Notes as the Indebtedness being refinanced and (y) permitted to be incurred pursuant to the covenant described in "-- Limitation on Incurrence of Indebtedness"; (iv) the redemption, repurchase, retirement or other acquisition of any Indebtedness of the Company that is subordinated in right of payment to the Notes upon a Change of Control to the extent required by the agreement governing such Indebtedness but only if the Company shall have complied with the covenant described in "-- Change of Control" and purchased all Notes tendered pursuant to the offer to repurchase all of the Notes required thereby, prior to purchasing or repaying such Indebtedness; (v) payments by the Company to purchase or otherwise acquire Capital Stock of the Company (including options, warrants or other rights to acquire such Capital Stock) from departing or deceased 69 75 directors, officers or employees of the Company or its Subsidiaries, whether pursuant to the terms of an employee benefit plan or employment agreement or otherwise; provided that the aggregate amount of all such repurchases shall not exceed $2 million in any fiscal year; and (vi) the payment by the Company of dividends on the common stock of the Company in an amount not to exceed $25 million in any fiscal year; provided that, in the case of clauses (v) and (vi), no Default or Event of Default shall have occurred or be continuing at the time of such Permitted Payment after giving effect thereto. For purposes of clause (iii) of the first paragraph of this covenant, Permitted Payments made pursuant to clauses (i), (v) and (vi) of the immediately preceding paragraph shall be included (with respect to clause (i), as of the date of declaration) as Restricted Payments made since the Issue Date. ADDITIONAL COVENANTS The Indenture also contains covenants with respect to the following matters: (i) payment of principal, premium and interest; (ii) maintenance of an office or agency in The City of New York; (iii) maintenance of corporate existence; (iv) payment of taxes and other claims; and (v) maintenance of properties. CONSOLIDATION, MERGER AND SALE OF ASSETS The Indenture provides that the Company may not consolidate with or merge into, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person (a "successor Person"), and may not permit any Person to merge into, or convey, transfer or lease its properties and assets substantially as an entirety to, the Company, unless (i) the successor Person (if any) is a corporation, partnership, trust or other entity organized and validly existing under the laws of any U.S. domestic jurisdiction and expressly assumes the Company's obligations on the Notes and under the Indenture, (ii) immediately after giving effect to the transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing under the Indenture, (iii) if, as a result of the transaction, property of the Company would become subject to a Lien that would not be permitted under the covenant described in "-- Restrictive Covenants -- Limitation on Liens," the Company takes such steps as shall be necessary to secure the Notes equally and ratably with (or prior to) the indebtedness secured by such Lien, (iv) if such transaction occurs prior to an Investment Grade Rating Date, the Company could incur at least $1.00 of additional Indebtedness pursuant to the first sentence of the covenant described under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness," on a pro forma basis after giving effect to such transaction, and (v) certain other conditions are met. EVENTS OF DEFAULT Each of the following constitutes an Event of Default under the Indenture with respect to the 2003 Notes or 2008 Notes, as the case may be: (a) failure to pay principal of or any premium on any Note of that series when due; (b) failure to pay any interest on any Note of that series when due, continued for 30 days; (c) failure to offer to repurchase or to repurchase the Notes in the event of a Change of Control in accordance in all material respects with the provisions described in "-- Change of Control" or to perform or comply with any provision described in "-- Consolidation, Merger and Sale of Assets"; (d) failure to perform any other covenant of the Company in the Indenture, continued for 60 days after written notice has been given as provided in the Indenture; (e) failure to pay when due (subject to any applicable grace period) the principal of, or acceleration of, any indebtedness for money borrowed by the Company or any Restricted Subsidiary (including a default with respect to any Note of the other such series) having an aggregate principal amount outstanding of at least $20 million, if in the case of any such failure, such indebtedness has not been discharged or, in the case of any such acceleration, such acceleration has not been rescinded or annulled, in each case within 10 days after written notice has been given by the Trustee, or the Holders of at least 25% in aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, as provided in the Indenture; (f) certain events in respect of bankruptcy, insolvency or reorganization involving the Company or any Restricted Subsidiary; and (g) any Note Guarantee ceases to be in full force and effect or any Note 70 76 Guarantor denies in writing that it has any liability under its Note Guarantee (other than by reason of the termination of the Indenture or the release of any such Note Guarantee in accordance with the Indenture). If an Event of Default (other than an Event of Default described in clause (f) above) with respect to the 2003 Notes or 2008 Notes, as the case may be, shall occur and be continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of such 2003 Notes or 2008 Notes, as the case may be, then outstanding by notice as provided in the Indenture may declare the aggregate principal amount of such Notes to be due and payable immediately. If an Event of Default described in clause (f) above shall occur, the aggregate principal amount of all Notes will automatically, and without any action by the Trustee or any holder, become immediately due and payable. After any such acceleration, but before a judgment or decree for payment of money has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment of accelerated principal (or other specified amount), have been cured or waived as provided in the Indenture. For information as to waiver of defaults, see "-- Modification and Waiver." Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default shall occur and be continuing, the Indenture provides that the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Trustee, the Indenture provides that holders of at least a majority in aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to such Notes. No holder of any 2003 Note or 2008 Note has any right to institute any proceeding with respect to the Indenture, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless (i) such holder has previously given to the Trustee written notice of a continuing Event of Default with respect to the 2003 Notes or 2008 Notes, as the case may be, (ii) the holders of at least 25% in aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, have made written request, and such holder or holders have offered reasonable indemnity, to the Trustee to institute such proceeding as trustee and (iii) the Trustee has failed to institute such proceeding, and has not received from the holders of a majority in aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, a direction inconsistent with such request, within 60 days after such notice, request and offer. However, such limitations do not apply to a suit instituted by a holder of a Note for the enforcement of payment of the principal of or any premium or interest on such Note on or after the applicable due date specified in such Note. The Company is required to furnish to the Trustee annually a statement by certain of its officers as to whether or not the Company, to their knowledge, is in default in the performance or observance of any of the terms, provisions and conditions of the Indenture and, if so, specifying all such known defaults. MODIFICATION AND WAIVER Modifications and amendments of the Indenture may be made by the Company, the Note Guarantors and the Trustee with the consent of the holders of at least a majority in aggregate principal amount of the outstanding Notes of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding 2003 Note or 2008 Note, as the case may be, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any 2003 Note or 2008 Note, as the case may be, (b) reduce the principal amount of, or any premium or interest on, any 2003 Note or 2008 Note, as the case may be, (c) reduce the amount of principal of any 2003 Note or 2008 Note, as the case may be, payable upon acceleration of the Maturity thereof, (d) change the place or currency of payment of principal of, or any premium or interest on, any 2003 Note or 2008 Note, as the case may be, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any 2003 Note or 2008 Note, as the case may be, (f) reduce the percentage in principal 71 77 amount of outstanding 2003 Notes or 2008 Notes, as the case may be, the consent of whose Holders is required for modification or amendment of the Indenture, (g) reduce the percentage in principal amount of outstanding 2003 Notes or 2008 Notes, as the case may be, necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults or (h) modify such provisions with respect to modification and waiver. The holders of at least a majority in aggregate principal amount of the outstanding Notes of each series affected may waive compliance by the Company and the Note Guarantors with certain restrictive provisions of the Indenture. The holders of at least a majority in aggregate principal amount of the outstanding 2003 Notes or 2008 Notes, as the case may be, may waive any past default under the Indenture with respect to such 2003 Notes or 2008 Notes, as the case may be, except a default in the payment of principal, premium or interest and certain covenants and provisions of the Indenture which cannot be amended without the consent of the holder of each outstanding 2003 Note or 2008 Note, as the case may be. Until an amendment, modification or waiver becomes effective, a consent to it by a holder is a continuing consent by such holder and by every subsequent holder of such prior holder's Note or any portion of such Note that evidences the same debt. Any such holder or subsequent holder may revoke the consent as to such Note or portion thereof by written notice to the Trustee or the Company received by the Trustee or the Company, as the case may be, before the date on which the Trustee receives an Officers' Certificate from the Company certifying that the holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, modification or waiver. Except in certain limited circumstances, the Company is entitled to set any day as a record date for the purpose of determining the holders of outstanding 2003 Notes or 2008 Notes, as the case may be, entitled to give or take any direction, notice, consent, waiver or other action under the Indenture, in the manner and subject to the limitations provided in the Indenture. If a record date is set for any action to be taken by holders of a particular series, such action may be taken only by persons who are holders of outstanding 2003 Notes or 2008 Notes, as the case may be, on the record date. To be effective, such action must be taken by holders of the requisite principal amount of such Notes within a specified period following the record date. For any particular record date, this period will be 180 days or such other period as may be specified by the Company, and may be shortened or lengthened from time to time. DEFEASANCE AND COVENANT DEFEASANCE Defeasance and Discharge. The Indenture provides that, upon the Company's exercise of its defeasance and discharge option with respect to the 2003 Notes or 2008 Notes, as the case may be, the Company and each Note Guarantor will be discharged from all its respective obligations with respect to such Notes, except for certain obligations to exchange or register the transfer of Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold moneys for payment in trust, upon the deposit in trust for the benefit of the holders of such Notes of money or U.S. Government Obligations, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of and any premium and interest on such Notes on the respective Stated Maturities in accordance with the terms of the Indenture and such Notes. Such defeasance or discharge may occur only if, among other things, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that holders of such Notes will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge were not to occur. Defeasance of Certain Covenants. The Indenture provides that, upon the Company's exercise of its covenant defeasance option with respect to the 2003 Notes or 2008 Notes, as the case may be, the Company may omit to comply with certain restrictive covenants, including those described in "-- Restrictive Covenants" and in clause (iii) under "-- Consolidation, Merger and Sale of Assets," and the occurrence of certain 72 78 Events of Default, which are described above in clause (d) (with respect to such restrictive covenants) and clause (e) under "-- Events of Default," will be deemed not to be or result in an Event of Default, in each case with respect to such Notes. The Company, in order to exercise such option, is required to deposit, in trust for the benefit of the Holders of such Notes, money or U.S. Government Obligations, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of and any premium, if any, and interest on such Notes on the respective Stated Maturities in accordance with the terms of the Indenture and such Notes. The Company is also required, among other things, to deliver to the Trustee an Opinion of Counsel satisfying the requirements of the Indenture, to the effect that holders of such Notes will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance were not to occur. In the event the Company exercised this option with respect to any Notes and such Notes were declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations so deposited in trust would be sufficient to pay amounts due on such Notes at the time of their respective Stated Maturities but may not be sufficient to pay amounts due on such Notes at the time of any acceleration resulting from such Event of Default. In such case, the Company would remain liable for such payments. REPORTING REQUIREMENTS The Indenture provides that, whether or not the Company is then subject to Section 13(a) or 15(d) of the Exchange Act, the Company will file (unless such filing is not permitted under the Exchange Act) with the Commission, so long as Notes are outstanding, the annual reports, quarterly reports and other periodic reports that the Company would have been required to file with the Commission pursuant to such Section 13(a) or 15(d) if the Company were so subject, and such documents shall be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company will also in any event (i) within 15 days of each Required Filing Date, (a) transmit by mail to all holders of Notes, as their names and addresses appear in the Note Register, without cost to such holders and (b) file with the Trustee copies of the annual reports, quarterly reports and other periodic reports which the Company would have been required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were subject to such Sections and (ii) if filing such documents by the Company with the Commission is prohibited under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder at the Company's cost. NOTICES Notices to holders of Notes will be given by mail to the addresses of such holders as they may appear in the Note Register. TITLE The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name a Note is registered as the absolute owner thereof (whether or not such Note may be overdue) for the purpose of making payment and for all other purposes. GOVERNING LAW The Indenture and the Notes are governed by, and construed in accordance with, the law of the State of New York. THE TRUSTEE The Company maintains banking relationships in the ordinary course of business with the Trustee. The First National Bank of Chicago also acts as the trustee under the indenture governing the Old Debentures. 73 79 The occurrence of a default under the Indenture with respect to the 2003 Notes or 2008 Notes, as the case may be, could create a conflicting interest for the Trustee under the Trust Indenture Act. If the default has not been cured or waived within 90 days after the Trustee has or acquires a conflicting interest, the Trustee generally is required by the Trust Indenture Act to eliminate such conflicting interest or resign as Trustee with respect to the affected Notes. In the event of the Trustee's resignation, the Company shall promptly appoint a successor trustee with respect to the affected Notes. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for the definition of all other terms used in the Indenture. "Acquired Debt" means (x) Indebtedness of any Person (the "Acquired Person") existing at the time the Acquired Person merges or consolidates with or into, or becomes a Restricted Subsidiary of, the Company or any Restricted Subsidiary, or (y) Indebtedness of any Person assumed by the Company or any Restricted Subsidiary in connection with its acquisition of assets from such Person, in each case excluding Indebtedness incurred in connection with, or in contemplation of, the Acquired Person merging or consolidating with or into, or becoming a Restricted Subsidiary of, the Company or any Restricted Subsidiary, or such acquisition of assets. "Acquisition" means the acquisition by the Company of all of the capital stock of Coulter on October 31, 1997. "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 0.25% in the case of the 2003 Notes, and 0.375%, in the case of the 2008 Notes. "Asset Sale" means (i) any sale, lease, conveyance or other disposition by the Company or any Restricted Subsidiary of any assets (including by way of a sale-and-leaseback) other than (a) in the ordinary course of business, (b) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company, which shall not be an "Asset Sale" but instead shall be governed by the provisions of the Indenture described under "-- Consolidation, Merger and Sale of Assets", and (c) any "fee in lieu of" or other disposition of assets to any governmental authority or agency that continue in use by the Company or any Restricted Subsidiary, so long as the Company or any Restricted Subsidiary may obtain title to such assets at any time upon reasonable notice by paying a nominal fee, or (ii) the issuance or sale of Capital Stock of any Restricted Subsidiary, in the case of each of clauses (i) and (ii), whether in a single transaction or a series of related transactions, to any Person (other than the Company or a Restricted Subsidiary) for Net Proceeds in excess of $1.0 million. "Attributable Value," when used with respect to any sale and leaseback transaction means, as of the time of determination, the total obligation (discounted to present value at the interest rate assumed in making calculations in accordance with FAS 13) of the lessee for rental payments (other than amounts required to be paid on account of property taxes as well as maintenance, repairs, insurance, water rates and other items which do not constitute payments for property rights) during the remaining portion of the base term of the lease included in such sale and leaseback transaction. "Bank Indebtedness" means any and all Indebtedness or other amounts, whether outstanding on the Issue Date or thereafter incurred, payable under or in respect of the Credit Facility or any refinancing in respect thereof, and any Refinancing Indebtedness in respect thereof, including in each case (without limitation) principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees, other monetary obligations of any nature and all other amounts payable under or in respect of any of the foregoing (and, without limitation, whether incurred in accordance with any clause of the definition of 74 80 "Permitted Indebtedness" or the first sentence of the covenant described under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness" or otherwise). "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "Capital Lease Obligation" of any Person means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease for property leased by such Person that would at such time be required to be capitalized on the balance sheet of such Person in accordance with GAAP. "Capital Stock" of any Person means (i) in the case of a corporation, corporate stock, (ii) in the case of an association, limited liability company or business entity, any and all Equity Interests, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, including any Preferred Stock. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any instrumentality or agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality or agency thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Services or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's Rating Group or at least P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit, time deposits or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by (x) any lender under the Credit Agreement or (y) a commercial banking institution that is a member of the Federal Reserve System or a commercial banking institution organized and located in a country recognized by the United States of America, in each case, having combined capital and surplus and undivided profits in excess of $500,000,000 (or the foreign currency equivalent thereof); (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above; and (vii) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management not exceeding $20 million in aggregate principal amount outstanding at any time. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, or (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the voting stock of the Company. "Change of Control Downgrade" means, with respect to any Change of Control, a downgrade in the rating assigned to any Notes arising out of or otherwise attributable to such Change of Control (whether or not such Change of Control has occurred at the time of such downgrade), which downgrade (i) if prior to an Investment Grade Rating Date, is by any Rating Agency and (ii) if on or after an Investment Grade Rating Date, is by any two Rating Agencies unless, after giving effect to such downgrade, the rating assigned to such Notes by either of such two Rating Agencies is Investment Grade. For purposes of the foregoing, and without limiting the generality thereof, a Change of Control Downgrade with respect to any Change of Control shall be 75 81 deemed to have occurred if such Change of Control Downgrade occurs during any 90-day period beginning prior to and ending after the occurrence of such Change of Control. "Change of Control Triggering Event" means the later to occur of (i) any Change of Control and (ii) a Change of Control Downgrade with respect to such Change of Control. Both a Change of Control and a Change of Control Downgrade shall be required for a Change of Control Triggering Event to occur. "Commodity Price Protection Agreement" means any forward contract, commodity swap, commodity option or other similar financial agreement or arrangement relating to, or the value which is dependent upon, fluctuations in commodity prices. "Company" means Beckman Coulter, Inc. (formerly known as Beckman Instruments, Inc.), a Delaware corporation, until a successor Person shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "Company" shall mean such successor Person. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate securities of comparable maturity to the remaining term of such Notes. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Treasury Reference Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Consolidated Cash Flow" means, with respect to any period, the Consolidated Net Income for such period, plus without duplication (i) Consolidated Interest Expense for such period, plus (ii) provision for taxes based on income, profits or capital, to the extent such provision for taxes was included in computing such Consolidated Net Income, plus (iii) depreciation, amortization (including, without limitation, amortization of goodwill and other intangibles) and all other non-cash charges (excluding any non-cash charge which requires an accrual or reserve for cash charges for any future period), to the extent such depreciation, amortization and other non-cash charges were deducted in computing such Consolidated Net Income. "Consolidated Coverage Ratio" means, with respect to any date of determination, the ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of the most recent four consecutive fiscal quarters ended prior to such date for which consolidated financial statements of the Company are available, to (ii) Consolidated Interest Expense for such four fiscal quarters, provided that: (1) if since the beginning of such period the Company or any Restricted Subsidiary has incurred any Indebtedness that remains outstanding on such date of determination, or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves an incurrence of Indebtedness (including without limitation any Acquired Debt), Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness and the application of the proceeds thereof (and, in the case of any Acquired Debt, the related 76 82 acquisition) as if such Indebtedness had been incurred (and any such acquisition had occurred) on the first day of such period; (2) if since the beginning of such period the Company or any Restricted Subsidiary has repaid, repurchased, defeased, retired or otherwise discharged (a "Discharge") any Indebtedness that is no longer outstanding on such date of determination, or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a Discharge of Indebtedness, Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving effect to such Discharge of such Indebtedness, including the proceeds of any such new Indebtedness, as if such Discharge had occurred on the first day of such period; (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have disposed of any company, any business, any group of assets constituting an operating unit, or any other assets out of the ordinary course of business (a "Sale"), (x) Consolidated Cash Flow for such period shall be reduced by an amount equal to the Consolidated Cash Flow (if positive) directly attributable to the assets that are the subject of such Sale for such period or increased by an amount equal to the Consolidated Cash Flow (if negative) directly attributable thereto for such period and (y) Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Sale for such period (and, if the Capital Stock of any Restricted Subsidiary is sold, transferred or otherwise disposed of, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale, transfer or disposition); (4) if since the beginning of such period the Company or any Restricted Subsidiary shall have acquired (by merger or otherwise, and whether accounted for as a purchase, a pooling of interests or otherwise) any company, any business, any group of assets constituting an operating unit, or any other assets out of the ordinary course of business (a "Purchase"), Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the incurrence of any related Indebtedness) as if such Purchase had occurred on the first day of such period; and (5) if since the beginning of such period any Person became a Restricted Subsidiary or was merged or consolidated with or into the Company or any Restricted Subsidiary, in each case in a Purchase, and since the beginning of such period such Person shall have Discharged any Indebtedness or made any Sale or Purchase that would have required an adjustment pursuant to clause (2), (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Discharge, Sale or Purchase occurred on the first day of such period. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company, either a fixed or floating rate. If any Indebtedness that is being given pro forma effect was incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period (being the relevant four-quarter period or, if shorter, the portion thereof beginning on the date such facility was first drawn upon). In making any calculation of the Consolidated Coverage Ratio for any period prior to the date of the closing of the Acquisition, the Acquisition shall be deemed to have taken place on the first day of such period. 77 83 "Consolidated Interest Expense" means, with respect to any period, the sum (without duplication) of (i) the interest expense of the Company and its Restricted Subsidiaries for such period, plus (ii) all cash dividends paid during such period by the Company and its Restricted Subsidiaries with respect to any Disqualified Stock (other than to the Company or a Restricted Subsidiary), and minus (iii) to the extent otherwise included in Consolidated Interest Expense, amortization or write-off of financing costs, in each case under clauses (i) through (iii) as determined on a consolidated basis in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any period, the net income (or loss) of the Company and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied, adjusted by excluding, to the extent included in calculating such net income (or loss), without duplication, (i) any extraordinary gain or loss as recorded on the statement of operations in accordance with GAAP, (ii) the portion of net income (or loss) of the Company and its Restricted Subsidiaries allocable to the Company's equity in the net income (or loss) of any unconsolidated Person or Unrestricted Subsidiary, except (in the case of such net income) to the extent of the amount of dividends or distributions actually paid or made to the Company or any of its Restricted Subsidiaries by such other Person during such period, (iii) net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss realized upon any Asset Sale (other than sales of leases of customer-leased equipment) and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, (v) the net income of any Restricted Subsidiary if the declaration of dividends or similar distributions by that Restricted Subsidiary of that net income to the Company is at the time restricted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation (other than pursuant to any statute, rule or governmental regulation that permits such dividends or similar distributions payments after the passage of time, not to exceed 120 days, or after the filing or providing of notice with respect to such dividends or similar distributions) applicable to that Restricted Subsidiary or its stockholders (other than pursuant to the Notes or the Indenture), except to the extent that any dividend or distribution was or could have been made by the Restricted Subsidiary to the Company or another Restricted Subsidiary during such period in compliance with such restrictions, (vi) non-cash, nonrecurring charges (excluding any non-cash charge which requires an accrual or reserve for cash charges for any future period), (vii) any nonrecurring charges related to the Acquisition or any acquisition by the Company or any Restricted Subsidiary after the Issue Date and (viii) all deferred financing costs written off and premium paid in connection to any early extinguishment of Indebtedness. "Consolidated Net Tangible Assets" of the Company means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Company but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with GAAP. "Coulter" means Coulter Corporation, a Delaware corporation. "Credit Agreement" means the credit agreement dated as of October 31, 1997, among the Company, the banks and other financial institutions party thereto from time to time, Citicorp USA, Inc., as agent, Citicorp Securities, Inc., as arranger, and Merrill Lynch & Co., as syndication agent, as such agreement may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original agents and lenders or other agents and lenders or otherwise, and whether provided under the original Credit Agreement or otherwise). "Credit Facility" means the collective reference to the Credit Agreement, any notes and letters of credit issued pursuant thereto and any guarantees, security agreements, pledges, mortgages, letter of credit applications and other collateral documents, and other instruments and documents, executed and delivered 78 84 pursuant to or in connection with any of the foregoing, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original agents and lenders or other agents and lenders or otherwise, and whether provided under the original Credit Agreement or otherwise). "Currency Hedging Arrangements" means one or more of the following agreements which shall be entered into by one or more financial institutions: foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values. "Default" means any event that is, or after the giving of notice or passage of time or both would be, an Event of Default. "Disqualified Stock" means (i) any Preferred Stock of any Restricted Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than upon a change of control of the Company in circumstances where the holders of the Notes would have similar rights), in whole or in part on or prior to the stated maturity of any Notes. "Dollars" and "$" means lawful money of the United States of America. "Equipment Held for Resale" means instrument systems and related accessories and components manufactured or assembled by the Company that are owned and held for placement in facilities of the Company's customers. "Equity Interest" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including limited liability company interests, in such Person. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is (i) not organized under the laws of the United States of America or any state thereof or the District of Columbia and (ii) conducts its principal operations outside the United States. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statement by such other entity as approved by a significant segment of the United States accounting profession. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person, and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Indebtedness" means, with respect to any Person, without duplication, and whether or not contingent, (i) all indebtedness of such Person for borrowed money or which is evidenced by a note, bond, debenture or 79 85 similar instrument, (ii) all obligations of such Person to pay the deferred or unpaid purchase price of property or services, which purchase price is due more than one year after the date of placing such property in service or taking delivery and title thereto or the completion of such service, (iii) all Capital Lease Obligations of such Person, (iv) all obligations of such Person in respect of letters of credit or bankers' acceptances issued or created for the account of such Person, (v) to the extent not otherwise included in this definition, all net obligations of such Person under all Interest Rate Agreement Obligations, Currency Agreement Obligations or Commodity Price Protection Agreements of such Person, (vi) all liabilities of others of the kind described in the preceding clause (i), (ii) or (iii) secured by any Lien on any property owned by such Person even if such Person has not assumed or otherwise become liable for the payment thereof, to the extent of the value of the property subject to such Lien, (vii) all Disqualified Stock issued by such Person, and (viii) to the extent not otherwise included, any Guarantee by such Person of any other Person's indebtedness or other obligations described in clauses (i) through (vii) above. "Indebtedness" of the Company and its Restricted Subsidiaries shall not include (i) current trade payables incurred in the ordinary course of business and payable in accordance with customary practices and (ii) non-interest bearing installment obligations and accrued liabilities incurred in the ordinary course of business which are not more than 90 days past due. "Interest Rate Agreements" means one or more of the following agreements which shall be entered into by one or more financial institutions: interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements from time to time. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar arrangement, but excluding advances, loans and other extension of credit to customers, directors, officers and employees in the ordinary course of business) to, capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to, or any purchase or acquisition of Capital Stock, bonds, notes, securities or other similar instruments issued by, such Person and shall include the designation of a Restricted Subsidiary as an Unrestricted Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "-- Restrictive Covenants -- Limitation on Restricted Payments," (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the assets (net of liabilities) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the assets (net of liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, in each case as determined by the Board of Directors in good faith. "Investment Grade" means a rating in one of the four highest categories (without regard to subcategories within such rating categories) by a Rating Agency. "Investment Grade Rating Date" means the first date on which the Notes are rated Investment Grade by two Rating Agencies. "Issue Date" means March 4, 1998. "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, security interest, lien, encumbrance, or other security arrangement of any kind or nature whatsoever on or with respect to such property or assets (including any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Net Proceeds" from an Asset Sale means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Sale or received in any other noncash form) therefrom, in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, 80 86 foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Sale, (ii) all payments made on any Indebtedness that is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale, or to any other Person (other than the Company or a Restricted Subsidiary) owning a beneficial interest in the assets disposed of in such Asset Sale and (iv) appropriate amounts to be provided as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale. "Note Guarantee" means each Guarantee of the Notes by Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated and SmithKline Diagnostics, Inc., and any Guarantee of the Notes that may from time to time be executed and delivered pursuant to the terms of the Indenture. Each such Note Guarantee shall be in the form prescribed by the Indenture. "Note Guarantor" means any Restricted Subsidiary that has issued a Note Guarantee. "Permitted Indebtedness" means: (i) Indebtedness incurred by the Company pursuant to the Credit Facility in an aggregate principal amount not to exceed $1,100.0 million outstanding at any time, minus the aggregate amount of all scheduled repayments of principal, and all mandatory prepayments of principal with Net Proceeds from Asset Sales, and plus (in the case of any refinancing thereof) the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing; provided that, so long as no term loan Indebtedness remains outstanding under the Credit Facility, the Company shall be permitted to incur revolving credit Indebtedness thereunder in an aggregate principal amount not to exceed $800 million outstanding at any time; (ii) Indebtedness of Foreign Subsidiaries in an aggregate principal amount outstanding at any time not exceeding, as to all such Foreign Subsidiaries, the greater of (a) $75 million and (b) an amount equal to the sum of (x) 80% of the combined book value of the net account receivables owned by Foreign Subsidiaries that are shown on the consolidated balance sheet of the Company as of the end of the most recently ended fiscal quarter for which financial statements of the Company are available plus (y) 50% of the combined book value of the inventory owned by Foreign Subsidiaries that is shown on such balance sheet, all as calculated on a combined basis and in accordance with GAAP; (iii) Indebtedness represented by the Notes or the Exchange Notes, any Guarantees in respect thereof, and any Indebtedness arising by reason of any Lien granted to secure any of the foregoing Indebtedness; (iv) Indebtedness owed by any Restricted Subsidiary to the Company or to another Restricted Subsidiary, or owed by the Company to any Restricted Subsidiary; provided, however, that any such Indebtedness shall be at all times held by a Person that is either the Company or a Restricted Subsidiary of the Company; provided, further however, that upon either (a) the transfer or other disposition of any such Indebtedness to a Person other than the Company or another Restricted Subsidiary or (b) the sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of any such Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary, the incurrence of such Indebtedness shall be deemed to be an incurrence that is not permitted by this clause (iv); (v) Indebtedness of the Company or any Restricted Subsidiary in the form of Purchase Money Obligations or Capital Lease Obligations, in an aggregate amount not in excess of $30 million outstanding at any time; (vi) Indebtedness of the Company or any Restricted Subsidiary arising in the ordinary course of business (a) pursuant to Interest Rate Agreements designed to protect the Company or any Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Subsidiary as long as such obligations do not exceed the aggregate principal amount of such Indebtedness then outstanding, 81 87 (b) under any Currency Hedging Arrangements, which if related to Indebtedness do not increase the amount of such Indebtedness other than as a result of foreign exchange fluctuations, or (c) under any Commodity Price Protection Agreements, which if related to Indebtedness do not increase the amount of such Indebtedness other than as a result of foreign exchange fluctuations; (vii) Indebtedness of the Company or any Restricted Subsidiary arising from the honoring of a check, draft or similar instrument of such Person drawn against insufficient funds, provided that such Indebtedness is extinguished within five Business Days of its incurrence; (viii) Indebtedness of the Company or any Restricted Subsidiary consisting of Guarantees, indemnities, or obligations in respect of purchase price adjustments, in connection with the acquisition or disposition of assets; (ix) Indebtedness of the Company or any Restricted Subsidiary in respect of (a) judgment, performance, surety and other bonds provided by such Person with respect to obligations of such Person in the ordinary course of business, (b) letters of credit securing obligations incurred in the ordinary course of business or (c) other letters of credit in an amount not to exceed $5 million in the aggregate outstanding at any time; (x) Indebtedness of the Company or any Restricted Subsidiary consisting of Guarantees in respect of loans or advances made to officers or employees of the Company or any Restricted Subsidiary, or Guarantees otherwise made on their behalf, (a) in respect of travel, entertainment and moving related expenses incurred in the ordinary course of business, or (b) in the ordinary course of business not exceeding $500,000 in the aggregate outstanding at any time; (xi) Any Refinancing Indebtedness incurred in respect of any Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii) of this definition of "Permitted Indebtedness," any Capital Lease Obligations described in clause (v) of this definition of "Permitted Indebtedness" or any Indebtedness permitted to be incurred pursuant to the first sentence of the covenant described in "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness;" (xii) Indebtedness of the Company or any Restricted Subsidiary that is outstanding on the Issue Date; (xiii) Acquired Debt of any Restricted Subsidiary, provided that at the time of the incurrence thereof and after giving effect thereto on a pro forma basis, (x) no Default or Event of Default will have occurred and be continuing or would result therefrom and (y) the Company could incur at least $1.00 of additional Indebtedness pursuant to the first sentence of the covenant described in "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness;" (xiv) Indebtedness of any Restricted Subsidiary in an aggregate principal amount not exceeding $10 million outstanding at any time, as to all such Restricted Subsidiaries that incur Indebtedness pursuant to this clause (xiv); (xv) Guarantees by the Company of any Indebtedness of any Restricted Subsidiary incurred by such Subsidiary in compliance with the covenant described under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness," provided that if such Indebtedness is subordinated in right of payment to any other Indebtedness, such Guarantee shall be subordinated in right of payment to the Notes at least to the same extent as such Indebtedness is so subordinated to such other Indebtedness; (xvi) any Guarantee by any Note Guarantor of Bank Indebtedness of the Company incurred pursuant to clause (i), (xi) or (xvii) of this definition of "Permitted Indebtedness" or the first sentence of the covenant described under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness," provided that (a) if such Indebtedness is subordinated in right of payment to any other Indebtedness, such Guarantee shall be subordinated in right of payment to the Notes at least to the same extent as such Indebtedness is so subordinated to such other Indebtedness, and (b) upon such Person no longer being a Note Guarantor, there shall be deemed to have occurred a new incurrence of such Guarantee not permitted by this clause (xvi); and 82 88 (xvii) Indebtedness of the Company in addition to that described in clauses (i), (iii) through (xii) and (xv) above, and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, so long as the aggregate principal amount of all such Indebtedness incurred pursuant to this clause (xvii) does not exceed $50 million outstanding at any time. For purposes of determining compliance with any such Dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the Dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt, provided that (x) the Dollar-equivalent principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date, (y) if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such Dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced, and (z) the Dollar-equivalent principal amount of Indebtedness denominated in a foreign currency and incurred pursuant to the Credit Facility shall be calculated based on the relevant currency exchange rate in effect on, at the Company's option, (i) the Issue Date, (ii) any date on which any of the respective commitments under the Credit Facility shall be reallocated between or among facilities or subfacilities thereunder, or on which such rate is otherwise calculated for any purpose thereunder, or (iii) the date of such incurrence. The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing. For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness incurred pursuant to and in compliance with, the covenant described under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness," (i) any other obligation of the obligor on such Indebtedness (or of any other Person that could have incurred such Indebtedness as the obligor thereon in compliance with such covenant) arising under any Guarantee, Lien or letter of credit supporting such Indebtedness shall be disregarded to the extent that such Guarantee, Lien or letter of credit secures the principal amount of such Indebtedness; (ii) in the event that Indebtedness is entitled to be incurred pursuant to the first paragraph of such covenant or meets the criteria of more than one of the types of Indebtedness described in the definition of "Permitted Indebtedness," the Company, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; and (iii) the amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in accordance with GAAP. Indebtedness of any Person that is not a Restricted Subsidiary, which Indebtedness is outstanding at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or a Restricted Subsidiary, shall be deemed to have been incurred at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or a Restricted Subsidiary, and Indebtedness which is assumed at the time of the acquisition of any asset shall be deemed to have been incurred at the time of such acquisition. Accrual of interest, the accretion of accreted value of principal, and the payment of interest in the form of additional Indebtedness having the same terms as the original Indebtedness on which such payment is made (which payment is made pursuant to the terms of such original Indebtedness as initially issued), will not be deemed an incurrence of Indebtedness for purposes of the covenant described under "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness." "Permitted Investments" means (i) any Investment in the Company or any Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any Investment in a Person if, as a result of such Investment, (a) such Person becomes a Restricted Subsidiary, or (b) such Person either (1) is merged, consolidated or amalgamated with or into the Company or one of its Restricted Subsidiaries and the Company or such Restricted Subsidiary is the surviving Person, or (2) transfers or conveys substantially all of its assets to, or is 83 89 liquidated into, the Company or one of its Restricted Subsidiaries; (iv) Investments in accounts and notes receivable acquired in the ordinary course of business; (v) any securities or other Investments received in connection with any sale or other disposition of property or assets (including Equity Interests); (vi) obligations under any Interest Rate Agreement, Currency Hedging Arrangement or Commodity Price Protection Agreement permitted pursuant to the covenant described in "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness"; (vii) securities or other Investments received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments, including in connection with any bankruptcy proceeding or other reorganization of another Person; (viii) Investments in existence or made pursuant to legally binding written commitments in existence on the Issue Date; (ix) pledges or deposits with respect to leases or utilities, provided to third parties in the ordinary course of business; (x) bonds secured by assets leased to and operated by the Company or any Restricted Subsidiary that were issued in connection with the financing of such assets so long as the Company or any Restricted Subsidiary may obtain title to such assets at any time by paying a nominal fee, canceling such bonds and terminating the transaction; (xi) Investments in a joint venture or similar entity that is not a Restricted Subsidiary, made in the ordinary course of business; (xii) Investments in customers or suppliers, not to exceed $10 million in the aggregate outstanding at any time; and (xiii) Investments in an amount not exceeding $50 million in the aggregate outstanding at any time. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "Principal Property" means any real property of the Company or any of its Subsidiaries, and any equipment located at or comprising a part of any such property, having a net book value, as of the date of determination, in excess of the greater of $50 million and 10% of Consolidated Net Tangible Assets of the Company; provided, however, that Principal Property shall not include Equipment Held for Resale. "Purchase Money Obligation" means any Indebtedness secured by a Lien on assets related to the business of the Company or the Restricted Subsidiaries, and any additions and accessions thereto, which are purchased or constructed by the Company or any Restricted Subsidiary at any time after the Issue Date; provided that (i) any security agreement or conditional sales or other title retention contract pursuant to which the Lien on such assets is created (collectively a "Security Agreement") shall be entered into within 180 days after the purchase or substantial completion of the construction of such assets and shall at all times be confined solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom, (ii) at no time shall the aggregate principal amount of the outstanding Indebtedness secured thereby be increased, except in connection with the purchase of additions and accessions thereto and except in respect of fees and other obligations in respect of such Indebtedness and (iii) (a) the aggregate outstanding principal amount of Indebtedness secured thereby (determined on a per asset basis in the case of any additions and accessions) shall not at the time such Security Agreement is entered into exceed 100% of the purchase price to the Company or any Restricted Subsidiary of the assets subject thereto or (b) the Indebtedness secured thereby shall be with recourse solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom. "Rating Agency" means each of Standard & Poor's Ratings Services, Duff & Phelps Credit Rating Co. and Moody's Investors Service, Inc. (or, in any case, if such Person ceases to rate the Notes for reasons outside the control of the Company, any other "nationally recognized statistical rating organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act) selected by the Company as a replacement Rating Agency). 84 90 "Reference Treasury Dealer" means each of Merrill Lynch & Co., Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated, BancAmerica Robertson Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. "Refinancing Indebtedness" means any Indebtedness incurred in connection with or given in exchange for the renewal, extension, substitution, refunding, defeasance, refinancing, repayment or replacement (a "refinancing") of any Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii) of the definition of "Permitted Indebtedness," any Capital Lease Obligations described in clause (v) of the definition of "Permitted Indebtedness" or any Indebtedness permitted to be incurred pursuant to the first sentence of the covenant described in "-- Restrictive Covenants -- Limitation on Incurrence of Indebtedness"; provided, however, that (a) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount (or accrued amount, if less) of the Indebtedness so renewed, extended, substituted, refunded, defeased, refinanced or replaced ("refinanced"), plus the reasonable fees, underwriting discounts, premiums and other costs and expenses incurred in connection therewith, (b) such Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; (c) if the Indebtedness being refinanced is subordinated in right of payment to any Notes, such Refinancing Indebtedness shall be at least as subordinated in right of payment to the Notes as the Indebtedness being refinanced; and (d) the obligor on such Refinancing Indebtedness shall be the obligor on the Indebtedness being refinanced, the Company, or (in the case of Indebtedness of a Foreign Subsidiary that is being refinanced) any Foreign Subsidiary; it being understood that any Indebtedness incurred pursuant to clauses (i), (ii) or (v) of the definition of "Permitted Indebtedness" that is so refinanced shall be deemed to remain outstanding for the purpose of determining compliance with any limitations or restrictions set forth in such clauses. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means (i) any dividend or other distribution declared or paid on any Capital Stock of the Company or any of its Restricted Subsidiaries (other than dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or distributions payable to the Company or any Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or distributions has any stockholder other than the Company or another Restricted Subsidiary, to such stockholder on no more than a pro rata basis, measured by value)); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Restricted Subsidiary (other than any Capital Stock owned by the Company or any Restricted Subsidiary, or from all holders of such Capital Stock of a Restricted Subsidiary on a pro rata basis); (iii) any payment to purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to any Notes (other than a purchase, redemption, defeasance or other acquisition or retirement for value in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such acquisition or retirement); or (iv) any Restricted Investment. "Restricted Payment Amount" means the sum of: (a) an amount equal to 50% of the Company's aggregate cumulative Consolidated Net Income accrued on a cumulative basis from the Issue Date (or, if such aggregate cumulative Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit), plus (b) the aggregate amount of all net cash proceeds received since the Issue Date by the Company (1) as capital contributions in the form of common equity to the Company after the Issue Date, (2) from the issuance and sale (other than to a Restricted Subsidiary) of its Capital Stock (other than Disqualified Stock), (3) from the issuance to a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of any Notes) and (4) from the issuance and 85 91 sale by the Company or any Restricted Subsidiary after the Issue Date of Disqualified Stock or debt securities that have been converted into or exchanged for Capital Stock of the Company (other than Disqualified Stock), plus the amount of cash received by the Company or any Restricted Subsidiary upon such conversion or exchange, in each case to the extent that such proceeds are not used to redeem, repurchase, retire or otherwise acquire Capital Stock or any Indebtedness of the Company or any Restricted Subsidiary, pursuant to clause (ii) or (iii) of the second paragraph of the covenant described under "-- Limitation on Restricted Payments," plus (c) the amount of the net reduction in Investments by the Company in Unrestricted Subsidiaries resulting from (x) the payment of cash dividends or the repayment in cash of the principal of loans or the cash return on any Investment, in each case to the extent received by the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or extinguishment of any Guarantee of Indebtedness of any Unrestricted Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the Company (valued as provided in the definition of "Investment"), such aggregate amount of the net reduction in Investments not to exceed in the case of any Unrestricted Subsidiaries the amount of Restricted Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments, plus (d) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the amount of cash proceeds received with respect to such Restricted Investment, net of taxes and the cost of disposition, not to exceed the amount of Restricted Investments made after the Issue Date. "Restricted Subsidiary" means any Subsidiary of the Company which owns or leases a Principal Property; provided that, prior to an Investment Grade Rating Date, "Restricted Subsidiary" means any Subsidiary of the Company (other than an Unrestricted Subsidiary) for all purposes other than as used in the covenants described in "-- Restrictive Covenants -- Limitation on Liens and "-- Restrictive Covenants -- Limitation on Sale and Leaseback Transactions." "Stated Maturity" means, when used with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the purchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subsidiary" of a Person means a Person more than 50% of the outstanding voting stock or other Equity Interests of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting" stock or other Equity Interests means stock or other Equity Interests which ordinarily has voting power for the election of directors, trustees or similar managers, whether at all times or only so long as no senior class of stock or other Equity Interests has such voting power by reason of any contingency. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors as provided below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate (a "Designation") any Subsidiary of the Company (other than a Subsidiary that owns any Capital Stock of, or owns, or holds any Lien on, any property of the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated) to be an Unrestricted Subsidiary if: (a) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (b) the Company could make an Investment (other than a Permitted Investment) at the time of such Designation (assuming the effectiveness thereof) in an amount (the "Designation Amount") equal to the Fair Market Value of the Capital Stock of such Subsidiary on such date; and (c) the Company could incur $1.00 of additional Indebtedness under the first sentence of the covenant described in "-- Restrictive Covenants -- Limitation on Indebtedness" at the time of such Designation (assuming the effectiveness thereof). The Board of Directors may revoke (a "Revocation") any Designation of a Subsidiary as an Unrestricted Subsidiary if: (a) no Default shall have 86 92 occurred and be continuing at the time of and after giving effect to such Revocation; (b) the Company could incur $1.00 of additional Indebtedness under the first sentence of the covenant described in "-- Restrictive Covenants -- Limitation on Indebtedness" at the time of such Revocation (assuming the effectiveness thereof); and (c) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred under the Indenture. Any Designation or Revocation must be evidenced by a Board Resolution certifying compliance with the foregoing provisions. In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant described in "-- Restrictive Covenants -- Limitation on Restricted Payments" for all purposes of the Indenture in the Designation Amount. The Company shall not, and shall not permit any Restricted Subsidiary to, at any time (i) provide a Guarantee of any Indebtedness of any Unrestricted Subsidiary, (ii) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (iii) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except to the extent permitted under the covenant described in "-- Restrictive Covenants -- Limitation on Restricted Payments." "Voting Stock" of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment at final maturity, in respect thereof, with (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding aggregate principal amount of such Indebtedness. BOOK-ENTRY; DELIVERY AND FORM Except as set forth below, the Notes are initially issued in the form of a global note (the "Global Note"). The Global Note is deposited with, or on behalf of, DTC and registered in its name or in the name of Cede & Co., as its nominee. Notwithstanding the foregoing, Notes (i) originally issued to or transferred to institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not qualified institutional buyers or to any other persons who are not qualified institutional buyers or (ii) held by qualified institutional buyers who elect to take physical delivery of their certificates instead of holding their interest through the Global Note (and which are thus ineligible to trade through DTC) (collectively referred to herein as "Non-Global Purchasers") will be issued, in registered form, without interest coupons as "Certificated Notes." Upon the transfer to a qualified institutional buyer of such Certificated Notes initially issued to a Non-Global Purchaser, such Certificated Notes will, unless the transferee requests otherwise or the Global Note has previously been exchanged in whole for Certificated Securities, be exchanged for an interest in the Global Note representing the principal amount of Notes being transferred. DTC has advised the Company that it is (i) a limited-purpose trust company organized under the laws of the State of New York, (ii) is a member of the Federal Reserve System, (iii) a "clearing operation" within the meaning of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the "Participants" or the "DTC's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in 87 93 accounts of its Participants, thereby eliminating the need for physical movement of certificates. DTC's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "DTC's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Qualified institutional buyers may elect to hold Notes purchased by them through DTC. Qualified institutional buyers who are not Participants may beneficially own securities held by or on behalf of DTC only through Participants or Indirect Participants. Persons that are not qualified institutional buyers may not hold Notes through DTC. The Company expects that pursuant to procedures established by DTC (i) upon deposit of the Global Note, DTC will credit the accounts of Participants designated by the Initial Purchasers with an interest in the Global Note and (ii) ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of DTC's Participants), DTC's Participants and DTC's Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own and that security interests in negotiable instruments can only be perfected by delivery of certificates representing the instruments. Consequently, the ability to transfer Notes or to pledge the Notes as collateral will be limited to such extent. So long as DTC or its nominee is the registered owner or holder of the Global Note, DTC or such nominee will be considered the sole owner or holder of the Notes represented by the Global Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in the Global Note will not be entitled to have Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Notes, and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. As a result, the ability of a person having a beneficial interest in Notes represented by the Global Note to pledge such interest to persons or entities that do not participate in DTC's system, or to otherwise take actions with respect to such interest, may be affected by the lack of a physical certificate evidencing such interest. Accordingly, each qualified institutional buyer owing a beneficial interest in the Global Note must rely on the procedures of DTC and, if such qualified institutional buyer is not a Participant or an Indirect Participant, on the procedures of the Participant through which such qualified institutional buyer owns its interest, to exercise any rights of a holder under the Indenture or the Global Note. The Company understands that under existing industry practice, in the event the Company requests any action of holders of Notes or a qualified institutional buyer that is an owner of a beneficial interest in the Global Note desires to take any action that DTC, as the holder of the Global Note, is entitled to take, DTC would authorize the Participants to take such action and the Participants would authorize the qualified institutional buyers owning through such Participants to take such action or would otherwise act upon the instructions of such qualified institutional buyers. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of DTC or for maintaining, supervising or reviewing any records of DTC relating to the Notes. Payments with respect to the principal of, premium, if any, interest and Liquidated Damages, if any, on any Notes represented by the Global Note registered in the name of DTC or its nominee on the applicable record date will be payable by the Trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the Global Note representing such Notes under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names the Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments and for any and all purposes whatsoever. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes. The Company believes, however, that it is currently the policy of DTC to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the Global Note as shown on the records of DTC. Payments by DTC's Participants and DTC's Indirect Participants to the beneficial owners of Exchange Notes will be governed by standing instructions and customary practice and will be the responsibility of DTC's Participants or DTC's Indirect Participants. 88 94 Neither the Company nor the Trustee will be liable for any delay by DTC or any Participant or Indirect Participant in identifying the beneficial owners of the related Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts of the Notes to be issued). The Indenture requires that payments in respect of the Notes having a principal amount in excess of $1.0 million (including principal, premium, if any, interest and Liquidated Damages, if any) be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the Notes represented by the Global Note are expected to be eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Exchange Notes will, therefore, be required by DTC to be settled in immediately available funds. CERTIFICATED NOTES Subject to certain conditions, any person having a beneficial interest in the Global Note may, upon request to the Trustee, exchange such beneficial interest for Certificated Notes. Upon any such issuance, the Trustee is required to register such Certificated Notes in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). All such Certificated Notes evidencing Notes will be subject to the legend requirements applicable to the Notes. In addition, if (i) the Company notifies the Trustee in writing that DTC is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in definitive form under the Indenture, then, upon surrender by DTC of the Global Note, Certificated Notes will be issued to each person that DTC identifies as being the beneficial owner of the Notes represented by the Global Note. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources the Company believes to be reliable. The Company will have no responsibility for the performance by DTC or its Participants of their respective obligations as described hereunder or under the rules and procedures governing their respective operations. 89 95 CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS In the opinion of Latham & Watkins, counsel to the Company, the following are the material federal income tax consequences expected to result to holders whose Initial Notes are exchanged for Exchange Notes in the Exchange Offer. This discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "Service") will not take a contrary view, and no ruling from the Service has been or will be sought with respect to the Exchange Offer. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. EACH HOLDER OF INITIAL NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING INITIAL NOTES FOR EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS. The exchange of Initial Notes for Exchange Notes will be treated as a "non-event" for federal income tax purposes because the Exchange Notes will not be considered to differ materially in kind or extent from the Initial Notes. As a result, no material federal income tax consequences will result to holders exchanging Initial Notes for Exchange Notes. PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with the resale of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired as a result of market-making activities or other trading activities. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers or any other persons. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company has agreed to pay all expenses incident to the Company's performance of, or compliance with, the Registration Rights Agreement and will indemnify the holders of Initial Notes (including any broker-dealers), and certain parties related to such holders, against certain liabilities, including liabilities under the Securities Act. 90 96 AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (of which this Prospectus is a part) (together with all amendments thereto, the "Registration Statement") under the Securities Act, with respect to the Exchange Notes offered hereby. This Prospectus does not and any Prospectus Supplement will not contain all of the information set forth in the Registration Statement, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. Statements contained in this Prospectus and in any Prospectus Supplement as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto. For further information regarding the Company and the Notes, reference is hereby made to the Registration Statement and the exhibits and schedules thereto which may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the Commission. The Registration Statement, the exhibits and schedules forming a part thereof and the reports, proxy statements and other information filed by the Company with the Commission in accordance with the Exchange Act can be inspected and copied at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Company's common stock is listed on the New York Stock Exchange and similar information concerning the Company can be inspected and copied at the New York Stock Exchange, 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the Commission and are incorporated by reference herein: (i) Annual Report on Form 10-K for the year ended December 31, 1997; (ii) Proxy Statement dated February 26, 1998 (except for the statements made under the headings "Performance Graph" and "Comparison of Five Year Cumulative Return" which are not incorporated herein by reference); and (iii) Current Reports on Form 8-K dated February 18, 1998 and February 26, 1998. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made hereby shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus or any Prospectus Supplement to the extent that a statement contained herein, or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or any Prospectus Supplement. This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents are available upon request from Beckman Coulter, Inc., 4300 North Harbor Boulevard, Fullerton, California 92835, Attention: Office of Investor Relations, telephone (714) 773-7620. LEGAL MATTERS Certain legal matters with respect to the Exchange Offer will be passed upon for the Company by Latham & Watkins, Los Angeles, California. 91 97 INDEPENDENT PUBLIC ACCOUNTANTS The consolidated financial statements of Beckman as of December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995 included in this Prospectus have been audited by KPMG Peat Marwick LLP, independent certified public accountants, to the extent and for the periods indicated in their report thereon. Such financial statements have been included in reliance upon the report of KPMG Peat Marwick LLP. The consolidated statements of operations, stockholders' equity and cash flows of Coulter for the seven months ended October 31, 1997 included in this Prospectus have been audited by KPMG Peat Marwick LLP, independent certified public accountants, to the extent and for the periods indicated in their report thereon. Such financial statements have been included in reliance upon the report of KPMG Peat Marwick LLP. The consolidated financial statements of Coulter as of March 31, 1997 and 1996 and for the years ended March 31, 1997, 1996 and 1995 included in this Prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report with respect thereto, and are included in reliance upon the report of Arthur Andersen LLP. 92 98 INDEX TO FINANCIAL STATEMENTS
PAGE ---- BECKMAN COULTER, INC. AND SUBSIDIARIES: Independent Auditors' Report (KPMG Peat Marwick LLP)........ F-2 Consolidated Balance Sheets as of December 31, 1997 and 1996...................................................... F-3 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995.......................... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995.............. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995.......................... F-6 Notes to Consolidated Financial Statements.................. F-7 Quarterly Information (Unaudited)........................... F-35 COULTER CORPORATION AND SUBSIDIARIES: Independent Auditors' Report (KPMG Peat Marwick LLP)........ F-36 Report of Independent Certified Public Accountants (Arthur Andersen LLP)............................................. F-37 Consolidated Balance Sheets as of March 31, 1997 and 1996... F-38 Consolidated Statements of Operations for the seven months ended October 31, 1997 and the years ended March 31, 1997, 1996 and 1995............................................. F-39 Consolidated Statements of Stockholders' Equity for the seven months ended October 31, 1997 and the years ended March 31, 1997, 1996 and 1995............................. F-40 Consolidated Statements of Cash Flows for the seven months ended October 31, 1997 and the years ended March 31, 1997, 1996 and 1995............................................. F-41 Notes to Consolidated Financial Statements.................. F-42 Unaudited Condensed Consolidated Statements of Operations for the six months ended September 30, 1997 and 1996...... F-67 Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 1997 and 1996...... F-68 Notes to Unaudited Condensed Consolidated Financial Statements................................................ F-69
F-1 99 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Beckman Coulter, Inc.: We have audited the accompanying consolidated balance sheets of Beckman Coulter, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Beckman Coulter, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Orange County, California January 23, 1998, except as to note 16, which is as of March 4, 1998 F-2 100 BECKMAN COULTER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN MILLIONS) ASSETS
DECEMBER 31, ------------------ 1997 1996 -------- ------ Current assets Cash and equivalents...................................... $ 33.1 $ 34.6 Short-term investments.................................... 0.4 8.1 Trade receivables and other............................... 524.6 309.5 Inventories............................................... 332.3 190.4 Deferred income taxes..................................... 53.0 21.4 Other current assets...................................... 33.3 15.4 -------- ------ Total current assets................................... 976.7 579.4 Property, plant and equipment, net.......................... 410.9 263.5 Intangibles, less accumulated amortization of $10.6 in 1997 and $4.2 in 1996.......................................... 444.9 34.1 Goodwill, less accumulated amortization of $6.0 in 1997 and $3.1 in 1996.............................................. 402.8 13.7 Deferred income taxes....................................... -- 50.8 Other assets................................................ 95.7 18.6 -------- ------ Total assets........................................... $2,331.0 $960.1 ======== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable............................................. $ 49.0 $ 15.1 Current maturities of long-term debt...................... 19.9 4.3 Accounts payable.......................................... 96.3 45.6 Accrued compensation...................................... 84.6 47.4 Other accrued expenses.................................... 575.5 115.2 Income taxes.............................................. 69.6 51.7 -------- ------ Total current liabilities.............................. 894.9 279.3 Long-term debt, less current maturities..................... 1,181.3 176.6 Deferred income taxes....................................... 40.3 -- Other liabilities........................................... 132.7 105.3 -------- ------ Total liabilities...................................... 2,249.2 561.2 Commitments and contingencies (Note 12) Stockholders' equity Preferred stock, $0.10 par value; authorized 10.0 shares; none issued............................................ -- -- Common stock, $0.10 par value; authorized 75.0 shares; shares issued 29.1 at 1997 and 1996; shares outstanding 27.6 at 1997 and 28.0 at 1996.......................... 2.9 2.9 Additional paid-in capital................................ 126.6 128.9 Foreign currency translation adjustment................... (13.8) 3.9 Retained earnings......................................... 19.0 300.0 Treasury stock, at cost................................... (52.9) (36.8) -------- ------ Total stockholders' equity............................. 81.8 398.9 -------- ------ Total liabilities and stockholders' equity............. $2,331.0 $960.1 ======== ======
See accompanying notes to consolidated financial statements. F-3 101 BECKMAN COULTER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
YEARS ENDED DECEMBER 31, --------------------------------- 1997 1996 1995 --------- --------- ------- Sales...................................................... $ 1,198.0 $ 1,028.0 $ 930.1 Operating costs and expenses Cost of sales............................................ 609.7 477.8 427.2 Marketing, general and administrative.................... 360.3 319.3 300.4 Research and development................................. 123.6 108.4 91.7 In-process research and development...................... 282.0 -- -- Restructuring charge..................................... 59.4 -- 27.7 --------- --------- ------- 1,435.0 905.5 847.0 --------- --------- ------- Operating (loss) income.................................... (237.0) 122.5 83.1 Nonoperating expense: Interest income.......................................... (6.1) (5.8) (5.3) Interest expense......................................... 29.4 18.1 13.4 Other, net............................................... (8.4) (1.3) 2.6 --------- --------- ------- 14.9 11.0 10.7 --------- --------- ------- (Loss) earnings before income taxes........................ (251.9) 111.5 72.4 Income taxes............................................... 12.5 36.8 23.5 --------- --------- ------- Net (loss) earnings........................................ $ (264.4) $ 74.7 $ 48.9 ========= ========= ======= Basic (loss) earnings per share............................ $ (9.58) $ 2.66 $ 1.74 ========= ========= ======= Weighted average number of shares outstanding.............. 27.6 28.0 28.1 ========= ========= ======= Diluted (loss) earnings per share.......................... $ (9.58) $ 2.58 $ 1.70 ========= ========= ======= Weighted average number of shares outstanding.............. 27.6 28.9 28.8 ========= ========= =======
See accompanying notes to consolidated financial statements. F-4 102 BECKMAN COULTER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
FOREIGN ADDITIONAL CURRENCY MINIMUM COMMON PAID-IN TRANSLATION RETAINED PENSION TREASURY STOCK CAPITAL ADJUSTMENT EARNINGS LIABILITY STOCK TOTAL ------ ---------- ----------- -------- --------- -------- ------- Balances, December 31, 1994......... $2.9 $130.0 $ 8.6 $203.4 -- $(27.9) $ 317.0 Net earnings........................ 48.9 48.9 Foreign currency translation adjustments....................... (0.2) (0.2) Dividends to stockholders, $0.44 per share............................. (12.3) (12.3) Purchases of treasury stock......... (13.3) (13.3) Vesting of restricted stock......... 0.1 0.1 Employee stock purchases............ (1.1) 18.7 17.6 Minimum pension liability........... (9.9) (9.9) ---- ------ ------ ------ ----- ------ ------- Balances, December 31, 1995......... $2.9 $129.0 $ 8.4 $240.0 $(9.9) $(22.5) $ 347.9 Net earnings........................ 74.7 74.7 Foreign currency translation adjustments....................... (4.5) (4.5) Dividends to stockholders, $0.52 per share............................. (14.7) (14.7) Purchases of treasury stock......... (35.9) (35.9) Employee stock purchases............ (0.1) 21.6 21.5 Minimum pension liability........... 9.9 9.9 ---- ------ ------ ------ ----- ------ ------- Balances, December 31, 1996......... $2.9 $128.9 $ 3.9 $300.0 $ -- $(36.8) $ 398.9 Net (loss).......................... (264.4) (264.4) Foreign currency translation adjustments....................... (17.7) (17.7) Dividends to stockholders, $0.60 per share............................. (16.6) (16.6) Purchases of treasury stock......... (43.7) (43.7) Employee stock purchases............ (2.3) 27.6 25.3 ---- ------ ------ ------ ----- ------ ------- Balances, December 31, 1997......... $2.9 $126.6 $(13.8) $ 19.0 $ -- $(52.9) $ 81.8 ==== ====== ====== ====== ===== ====== =======
See accompanying notes to consolidated financial statements. F-5 103 BECKMAN COULTER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS)
YEARS ENDED DECEMBER 31, ------------------------------ 1997 1996 1995 -------- ------- ------- Cash Flows from Operating Activities Net (loss) earnings......................................... $ (264.4) $ 74.7 $ 48.9 Adjustments to reconcile net (loss) earnings to net cash provided by operating activities Depreciation and amortization............................. 109.1 87.8 79.1 Net deferred income taxes................................. (5.1) 11.3 10.2 Write-off of acquired in-process research and development............................................ 282.0 -- -- Proceeds from sale of sales-type lease receivables........ 35.7 -- -- Changes in assets and liabilities, net of acquisitions Trade receivables and other............................... (53.1) (26.1) (23.7) Inventories............................................... 18.2 (26.4) (15.7) Accounts payable and accrued expenses..................... (3.4) 30.7 0.7 Accrued restructuring costs............................... 44.4 (10.6) (12.9) Accrued income taxes...................................... 1.0 7.0 (8.8) Other..................................................... (26.6) (9.3) (17.6) -------- ------- ------- Net cash provided by operating activities.............. 137.8 139.1 60.2 -------- ------- ------- Cash Flows from Investing Activities Additions to property, plant and equipment................ (100.9) (110.5) (103.2) Net disposals of property, plant and equipment............ 18.4 18.7 13.2 Sales (purchases) of short-term investments............... 7.7 0.2 (7.5) Proceeds from sale-leaseback transaction.................. 39.6 -- -- Investments and acquisitions.............................. (893.9) (23.0) (15.5) -------- ------- ------- Net cash used by investing activities.................. (929.1) (114.6) (113.0) -------- ------- ------- Cash Flows from Financing Activities Dividends to stockholders................................. (16.6) (14.7) (12.3) Proceeds from issuance of stock........................... 23.1 21.5 17.6 Purchases of treasury stock............................... (43.7) (35.9) (13.3) Notes payable borrowings (reductions)..................... 11.7 (2.4) 2.9 Long-term debt borrowings................................. 1,164.2 128.3 43.4 Long-term debt reductions................................. (348.1) (113.0) (3.5) -------- ------- ------- Net cash provided (used) by financing activities....... 790.6 (16.2) 34.8 -------- ------- ------- Effect of exchange rates on cash and equivalents............ (0.8) 0.1 -- -------- ------- ------- (Decrease) increase in cash and equivalents................. (1.5) 8.4 (18.0) Cash and equivalents -- beginning of year................... 34.6 26.2 44.2 -------- ------- ------- Cash and equivalents -- end of year......................... $ 33.1 $ 34.6 $ 26.2 ======== ======= ======= Supplemental Disclosures of Cash Flow Information Cash payments for income taxes............................ $ 12.9 $ 19.2 $ 22.0 Cash payments for interest................................ 18.7 18.3 12.0 Noncash Investing and Financing Activities Conversion of notes receivable............................ -- 8.1 -- Minimum pension liability................................. -- (9.9) 9.9 Purchase of equipment under capital lease obligation...... 9.8 6.9 6.8 Issuance of restricted stock as employee compensation..... 2.2 -- --
See accompanying notes to consolidated financial statements. F-6 104 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Beckman Coulter, Inc., formerly known as Beckman Instruments, Inc. ("Beckman"), and its wholly owned subsidiaries. The consolidated entity is referred to as the Company in the accompanying consolidated financial statements. All significant transactions among the consolidated entities have been eliminated from the consolidated financial statements. The accounts of many of the Company's non-U.S. subsidiaries are included on the basis of their fiscal years ended November 30. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FINANCIAL INSTRUMENTS The carrying values of the Company's financial instruments approximate their fair value at December 31, 1997 and 1996. Market value of cash and cash equivalents, trade and other receivables, other current assets, investments, notes payable, accounts payable, and amounts included in other accrued expenses meeting the definition of a financial instrument are based upon management estimates. Market values of the Company's debt and derivative instruments are determined by quotes from financial institutions. FOREIGN CURRENCY TRANSLATION Non-U.S. assets and liabilities are translated into U.S. dollars using year-end exchange rates. Operating results are translated at exchange rates prevailing during the year. The resulting translation adjustments are accumulated as a separate component of stockholders' equity. Gains and losses resulting from foreign currency hedging transactions and translation adjustments relating to foreign entities deemed to be operating in U.S. dollar functional currency or in highly inflationary economies are included in the Consolidated Statements of Operations. DERIVATIVES The Company utilizes derivative financial instruments to hedge foreign currency and interest rate market exposures of underlying assets, liabilities and other obligations and not for speculative or trading purposes. Gains and losses on currency forward contracts, options and swaps that are designated as hedges of existing transactions are recognized in income in the same period as losses and gains on the underlying transactions are recognized and generally offset. Gains and losses on currency forward contracts and options that are designated as hedges of anticipated transactions for which a firm commitment has been attained are deferred and recognized in income in the same period that the underlying transactions are settled. Gains and losses on any instruments not meeting the above criteria would be recognized in income in the current period. Income or expense on interest rate swaps is accrued as an adjustment to the yield of the related debt that they hedge. STOCK-BASED COMPENSATION The Company implemented Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) in 1996. As permitted by SFAS 123, the Company continues to F-7 105 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) follow the guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Consequently, compensation related to stock options is the difference between the grant price and the fair market value of the underlying common shares at the grant date. Generally, the Company issues options to employees with a grant price equal to the fair value of the Company's common stock. Accordingly, no compensation expense has been recognized on the Company's stock option or stock purchase plans. The Company discloses in Note 10 "Employee Benefits" the effect on earnings if compensation costs were recorded at the estimated fair value of the stock options granted, as prescribed by SFAS 123. CASH AND EQUIVALENTS Cash and equivalents include cash in banks, time deposits and investments having maturities of three months or less from the date of acquisition. SHORT-TERM INVESTMENTS Short-term investments are principally comprised of investments with final maturities in excess of three months but less than one year from the date of acquisition. INVESTMENTS The Company periodically makes investments in unaffiliated companies through debt and equity securities. The Company's investments are considered available-for-sale and carried at current fair value with unrealized gains or losses reported as a separate component of stockholders' equity, if necessary. INVENTORIES Inventories are valued at the lower of cost or market using the first-in, first-out method. PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION Land, buildings and machinery and equipment are carried at cost. The cost of additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. Depreciation is computed generally on the straight-line basis over the estimated useful lives of the related assets. Buildings are depreciated over 20 to 40 years, machinery and equipment over 3 to 10 years and instruments subject to lease over the lease terms but not in excess of 7 years. Leasehold improvements are amortized over the lesser of the life of the asset or the term of the lease but not in excess of 20 years. GOODWILL AND OTHER INTANGIBLES Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. Goodwill is amortized on a straight line basis over 40 years. Other intangibles consist primarily of patents, trademarks and customer base arising from business combinations. Intangibles are amortized on a straight line basis over periods ranging from 15 to 30 years. ACCOUNTING FOR LONG-LIVED ASSETS The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121) in 1996. SFAS 121 establishes accounting standards for the impairment of long-lived assets to be reviewed whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In addition, SFAS 121 requires that certain long-lived assets be reported at the lower of carrying value or the fair F-8 106 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) value less costs to sell. Adopting SFAS 121 had no material impact on the Company's results of operations and financial position for 1997 and 1996. ENVIRONMENTAL EXPENDITURES The Company accrues for environmental expenses resulting from existing conditions that relate to operations when the costs are probable and reasonable to estimate. REVENUE RECOGNITION In general, revenue is recognized when a product is shipped. When a customer enters into an operating-type lease agreement, revenue is recognized over the life of the lease. Under a sales-type lease agreement, revenue is recognized at the time of shipment with interest income recognized over the life of the lease. Service revenues are recognized ratably over the life of the service agreement or as service is performed, if not under contract. RESEARCH AND DEVELOPMENT Research and development costs are charged to operations as incurred. In-process research and development is charged to operations in the period acquired. OTHER NONOPERATING INCOME AND EXPENSES Other nonoperating income and expenses for the Company are generally comprised of five primary items: (i) interest expense, (ii) interest income, (iii) foreign exchange gains or losses, (iv) investments that are non-core or are accounted for as a minority interest and (v) other nonoperating gains or losses. Interest income typically includes income form sales-type leases and interest on cash equivalents and other investments. Foreign exchange gains or losses are primarily the result of the Company's hedging activities (net of revaluation) and are recorded net of premiums paid. Other nonoperating gains and losses are most frequently the result of one-time items such as asset sales or other items. INCOME TAXES The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. EARNINGS (LOSS) PER SHARE The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128) in 1997. SFAS 128 simplifies the computation of earnings per share ("EPS") previously required in Accounting Principles Board (APB) Opinion No. 15, "Earnings Per Share," by replacing primary and fully diluted EPS with basic and diluted EPS. Under SFAS 128, basic EPS is calculated by dividing net earnings (loss) by the weighted-average common shares outstanding during the period. Diluted EPS reflects the potential dilution to basic EPS that could occur upon conversion or exercise of securities, options, or other such items, to common shares using the treasury stock method based upon the weighted-average fair value of the Company's common shares during the period. SFAS 128 was required to be adopted by the Company in its year-end 1997 Annual Report, and earnings per share for prior periods have been restated in accordance with SFAS 128. See Note 13 "Earnings Per Share" for computation of EPS. F-9 107 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) RECENT ACCOUNTING DEVELOPMENTS The Company intends to adopt Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), and Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information"(SFAS 131), in 1998. Both standards will require additional disclosure, but will not have a material effect on the Company's financial position or results of operations. SFAS 130 establishes standards for the reporting and display of comprehensive income and is expected to first be reflected in the Company's first quarter of 1998 interim financial statements. Components of comprehensive income include items such as net earnings, foreign currency translation adjustments and changes in value of available-for-sale securities. SFAS 131 changes the way companies report segment information and requires segments to be determined and reported based on how management measures performance and makes decisions about allocating resources. SFAS 131 will first be reflected in the Company's 1998 Annual Report. F-10 108 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) RECLASSIFICATIONS Certain reclassifications have been made to prior year amounts to conform with the current year presentation. 2. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
1997 1996 ------ ------ Trade receivables and other Trade receivables........................................ $488.5 $295.3 Other receivables........................................ 30.0 20.7 Current portion of lease receivables..................... 23.5 3.1 Less allowance for doubtful receivables.................. (17.4) (9.6) ------ ------ $524.6 $309.5 ====== ====== Inventories Finished products........................................ $206.5 $123.8 Raw materials, parts and assemblies...................... 99.1 53.0 Work in process.......................................... 26.7 13.6 ------ ------ $332.3 $190.4 ====== ====== Property, plant and equipment, net Land..................................................... $ 74.1 $ 9.1 Buildings................................................ 240.2 144.1 Machinery and equipment.................................. 382.9 239.1 Instruments subject to lease(a).......................... 205.6 281.6 ------ ------ 902.8 673.9 Less accumulated depreciation Building, machinery and equipment........................ (365.4) (236.4) Instruments subject to lease(a).......................... (126.5) (174.0) ------ ------ $410.9 $263.5 ====== ====== Other accrued expenses Accrued restructuring costs.............................. $ 47.2 $ 2.6 Unrealized service income................................ 63.8 36.9 Insurance................................................ 27.2 23.1 Accrued warranty and installation costs.................. 18.6 4.5 Severance and related costs.............................. 109.6 -- Closure of offices and manufacturing facilities.......... 23.0 -- Change in control payments............................... 36.0 -- Contractual obligations of Coulter to its employees...... 103.0 -- Other.................................................... 147.1 48.1 ------ ------ $575.5 $115.2 ====== ======
- --------------- (a) Includes instruments leased to customers under three to five year cancelable operating leases. F-11 109 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) 3. ACQUISITIONS During 1997, 1996 and 1995, the Company made the following acquisitions, all of which were accounted for using the purchase method of accounting. The operating results of these acquired businesses have been included in the Consolidated Statements of Operations from the dates of acquisition. On October 31, 1997, the Company acquired all of the outstanding capital stock of Coulter Corporation for $850.2, net of Coulter's cash on hand of $24.8 at the date of acquisition. Coulter is the leading manufacturer of in-vitro diagnostics systems for blood cell analysis. The purchase of Coulter was financed with the net proceeds from a new $1,300.0 credit facility (see Note 6 "Debt"). As a result of the acquisition, $374.4 in goodwill was recorded by the Company. Goodwill reflects the excess of the purchase price, purchase liabilities and liabilities assumed over the fair value of net identifiable assets and in-process research and development projects acquired. Acquired in-process research and development of $282.0 was charged to expense in the fourth quarter in accordance with generally accepted accounting principles. Purchase liabilities recorded included approximately $110.0 for severance and related costs and $23.0 for costs associated with the closure of certain offices and manufacturing facilities. The Company expects to complete its termination of certain employees and closure of certain facilities in fiscal 1998. Assumed liabilities recorded included approximately $103.0 of contractual obligations of Coulter to its employees, $36.0 of change in control payments and $31.0 of other assumed liabilities. The Company expects to pay for the above obligations throughout fiscal 1998. At December 31, 1997 substantially all of the purchase liabilities and $150.4 of the assumed liabilities remained on the balance sheet. The Company does not believe that the final purchase price allocation will differ significantly from the preliminary purchase price allocation recorded in the current fiscal year. The Company estimates, based upon current exchange rates, that its cash funding requirements for the previously mentioned costs associated with the Coulter acquisition will amount to approximately $180.0 from the consummation of the Coulter acquisition through the end of 1998, and approximately $50.0 to $65.0 in each of the following two years. This includes up to $103.0 of sharing bonus plan payments which will be made to Coulter's employees. As the Company's 1997 financial statements only include two months of operations of Coulter, the following selected unaudited pro forma information is being provided to present a summary of the combined results of Beckman and Coulter as if the acquisition had occurred as of January 1, 1997 and 1996, giving effect to purchase accounting adjustments. The pro forma data is for informational purposes only and may not necessarily reflect the results of operations of Beckman had Coulter operated as part of the Company for the years ended December 31, 1997 and 1996.
PRO FORMA YEARS ENDED ---------------------------------------- DECEMBER 31, 1997 DECEMBER 31, 1996 ------------------ ------------------ Sales...................................................... $1,790.1 $1,722.6 Net earnings............................................... $ 9.0 $ 28.9 Basic earnings per share................................... $ 0.33 $ 1.03 Diluted earnings per share................................. $ 0.31 $ 1.00
The pro forma amounts reflect the results of operations for Beckman, Coulter and the following purchase accounting adjustments for the periods presented: - Amortization of intangible assets and goodwill based on the purchase price allocation for each period presented. - Amortization of debt financing fees and expenses over the term of the new credit facility. F-12 110 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) - The addition of interest expense on debt incurred to finance the acquisition offset by a reduction of historical interest expense as a result of the elimination of Coulter's debt. - Additional cost of sales expense as a result of a step-up in the basis of inventory. - Estimated income tax effect on the pro forma adjustments. The pro forma statements do not include the $282.0 write-off of in-process research and development and the $59.4 accrued restructuring costs, as they are non-recurring charges. These charges are included in the Consolidated Statements of Operations of the Company for 1997. The pro forma diluted net earnings per share is based on the weighted average number of common shares and dilutive common share equivalents of Beckman during 1997 and 1996. In April 1997 the Company acquired the Access immunoassay product line and related manufacturing facility from Sanofi Diagnostics Pasteur, Inc. ("Sanofi"). The acquisition also established an ongoing alliance in immunochemistry between the Company and Sanofi. The Access product line, together with the earlier acquisition of Hybritech Incorporated ("Hybritech") and the Company's own immunochemistry/protein products, create a major presence for the Company in the field of immunochemistry. In December 1996 the Company acquired the assets and assumed the liabilities of the laboratory robotics division of Sagian Inc. of Indianapolis, Indiana. By combining Sagian's scheduling software and robotics with its own biorobotics systems, the Company enhanced its ability to serve the pharmaceutical industry's need for high-throughput screening (HTS) of candidate compounds for new drugs. In January 1996, the Company acquired the assets and assumed the liabilities of Hybritech, a San Diego-based life sciences and diagnostic company. The acquisition expanded the Company's ability to develop and manufacture high sensitivity immunoassays, including cancer tests. In May 1995, the Company agreed to acquire Genomyx Corporation of Foster City, California. Genomyx is a developer and manufacturer of advanced DNA sequencing products and complements the Company's biotechnology business. The acquisition was completed on October 21, 1996. With the exception of Coulter, the purchase prices of the acquisitions and the effects on consolidated results of operations were not material to the Company individually or in the aggregate. 4. PROVISION FOR RESTRUCTURING OPERATIONS 1997 RESTRUCTURING: The Company recorded a restructuring charge of $59.4, $36.4 after taxes or $1.32 per share, in the fourth quarter of 1997. The work force reductions anticipated under this plan, some of which occurred prior to year-end total approximately 500 employees in Europe, Asia and North America in sales, general, administrative and technical functions and approximately 100 employees in production related areas. The charge included $37.3 for severance related costs. The $22.1 provided for facility consolidation and asset related write-offs included $2.5 for lease termination payments, $12.2 for the write-off of machinery, equipment and tooling associated with those functions to be consolidated, and $7.4 for exiting non-core investment activities. These changes are scheduled to be substantially completed by December 1998. At December 31, 1997, the Company's remaining obligation related to the restructuring charges was $46.6, which is included in "Other Accrued Expenses." F-13 111 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) The following table details the major components of the 1997 restructuring provision:
FACILITY CONSOLIDATION AND ASSET RELATED PERSONNEL WRITE-OFFS TOTAL --------- ------------- ----- PROVISION Consolidation of sales, general, administrative and technical functions....................................... $34.3 $18.2 $52.5 Changes in manufacturing operations......................... 3.0 3.9 6.9 ----- ----- ----- Total provision............................................. 37.3 22.1 59.4 ----- ----- ----- FISCAL 1997 ACTIVITY Consolidation of sales, general, administrative and technical functions....................................... 7.8 5.0 12.8 Changes in manufacturing operations......................... -- -- -- ----- ----- ----- Total 1997 activity......................................... 7.8 5.0 12.8 ----- ----- ----- BALANCE AT DECEMBER 31, 1997 Consolidation of sales, general, administrative and technical functions....................................... 26.5 13.2 39.7 Changes in manufacturing operations......................... 3.0 3.9 6.9 ----- ----- ----- Balance at December 31, 1997................................ $29.5 $17.1 $46.6 ===== ===== =====
PRIOR YEARS RESTRUCTURING: The Company also recorded a restructuring charge of approximately $27.7 in 1995. This restructuring charge included costs for facility moves and transition costs which were anticipated and directly associated with the 1993 restructuring plan but could not be recognized in establishment of the original restructuring reserve under generally accepted accounting principles. At December 31, 1997 and 1996, the Company's remaining obligation relating to this restructuring charge was $0.4 and $2.6, respectively, and is included in "Other Accrued Expenses". 5. SALE OF ASSETS In December 1997, the Company sold $34.2 of Coulter's sales-type lease receivables, net of $2.6 of allowances, for cash proceeds of $35.7. Under the provisions of Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS 125), the transaction was accounted for as a sale and as a result the related receivables have been excluded from the accompanying Consolidated Balance Sheet. The sale is subject to certain recourse provisions and as such the Company established a $1.5 reserve for potential losses. Also in December 1997, the Company entered into an agreement for the sale and leaseback of certain instruments which are subject to various three to five year cancelable operating-type leases to customers. These instruments had a net book value of $37.0 and were sold for cash proceeds of $39.6. The gain is being deferred and credited to income, as a rent expense adjustment over the lease term. Obligations under the operating lease agreement are included in the lease commitments disclosure in Note 12 "Commitments and Contingencies". Proceeds from the above transactions were used to reduce outstanding borrowings under the new $1,300 credit facility (see Note 6 "Debt"). F-14 112 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) 6. DEBT Notes payable consist primarily of short-term bank borrowings by the Company's subsidiaries outside the U.S. under local lines of credit. The bank borrowings are at rates which approximate current market rates; therefore, the carrying value of the notes approximates the market value. At December 31, 1997 approximately $139.9 of unused short-term lines of credit were available to the Company's subsidiaries outside the U.S. at various interest rates. Within the U.S., the Company had available $18.0 in unused committed short-term lines of credit at market rates. Compensating balances and commitment fees on these lines of credit are not material and there are no withdrawal restrictions. Long-term debt consisted of the following at December 31:
AVERAGE RATE OF INTEREST 1997 1996 -------- -------- ------ Credit Agreement -- Term loan facility.......... 6.75% $ 400.0 $ -- Credit Agreement -- Revolving credit facility... 6.47 600.0 -- Debentures...................................... 7.05 100.0 100.0 Senior notes, unsecured......................... -- -- 50.0 Other long-term debt............................ 6.39 101.2 30.9 -------- ------ 1,201.2 180.9 Less current maturities......................... 19.9 4.3 -------- ------ Long-term debt, less current maturities......... $1,181.3 $176.6 ======== ======
In October 1997, in conjunction with the acquisition of Coulter, the Company cancelled its $150.0 credit agreement and entered into a new credit agreement (the "Credit Agreement") with a group of financial institutions. The Credit Agreement provides up to a maximum aggregate amount of $1,300.0 through a $500.0 senior unsecured term loan facility (the "Term Loan") and an $800.0 senior unsecured revolving credit facility (the "Credit Facility"). Borrowings under the Credit Agreement generally bear interest at current market rates plus a margin based upon the Company's senior unsecured debt rating or debt to earnings ratio, whichever is more favorable to the Company, except in the case of competitive bid advances (as defined in the Credit Agreement) which may bear interest at a fixed rate. The Company is accordingly subject to fluctuations in such interest rates, which could cause its interest expense to increase or decrease in the future. As a result of the substantial indebtedness incurred in connection with the Coulter acquisition, the Company's interest expense will be higher and will have a much greater proportionate impact on net earnings in comparison to preacquisition periods. The Company must also pay a quarterly facility fee on the average Credit Facility commitment. In addition, approximately $6.8 of fees paid to enter the Credit Agreement are being amortized to interest expense over the term of the Credit Agreement. The Credit Agreement provides for mandatory prepayment of the Term Loan and Credit Facility borrowings (and, to the extent provided, reductions in commitments) thereunder from excess cash flow (as defined in the Credit Agreement), and from proceeds of certain equity or debt offerings, asset sales and extraordinary receipts. The Credit Facility is not subject to any scheduled principal amortization. Beginning in March 2000, the Company will be required to make scheduled quarterly principal payments of $25.0 on the Term Loan borrowings with a final maturity in October 2002. The Credit Facility matures on the same date as the Term Loan. As of the date of this report, the Company's remaining borrowing availability under the Credit Facility is $200.0. Undrawn amounts under the Credit Facility will be available to meet future working capital and other business needs of the Company. In June 1996, the Company issued $100.0 of debentures bearing an interest rate of 7.05% per annum due June 1, 2026. Interest is payable semi-annually in June and December. The debentures were recorded net of discount and issuance costs of approximately $1.5 which are being amortized to interest expense over the term F-15 113 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) of the debentures. The debentures may be repaid on June 1, 2006 at the option of the holders of the debentures, at 100% of their principal amount, together with accrued interest to June 1, 2006, in accordance with the terms of the debenture agreement. The debentures may be redeemed, in whole or in part, at the option of the Company at any time after June 1, 2006 at a redemption price equal to the greater of the principal amount of the debentures or the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at a comparable treasury issue rate plus a margin. The Company had $50.0 senior notes, comprised of Series A $20.0 and Series B $30.0 notes, that were repaid with borrowings under the Credit Agreement in October 1997. In addition, the Company paid a premium of approximately $2.0 to redeem the notes. Other long-term debt at December 31, 1997 consists principally of $76.6 of notes used to fund the operations of the Company's international subsidiaries and notes given as partial consideration for an acquisition. Some of the notes issued by the Company's international subsidiaries are secured by their assets. Notes used to fund the Company's international subsidiaries amounted to $22.1 in 1996. Capitalized leases of $24.6 in 1997 and $8.8 in 1996 are also included in other long-term debt. Certain of the Company's borrowing agreements contain covenants that the Company must comply with, for example: minimum net worth, maximum capital expenditures, a debt to earnings ratio, a minimum interest coverage ratio and a maximum amount of debt incurrence. At December 31, 1997, the Company was in compliance with all such covenants. The aggregate maturities of long-term debt for the five years subsequent to December 31, 1997 are $19.9 in 1998, $24.6 in 1999, $110.7 in 2000, $107.4 in 2001, $814.6 in 2002 and $124.0 thereafter. 7. DERIVATIVES The Company manufactures its products principally in the United States, but generates approximately half of its revenues from sales made outside the U.S. by its international subsidiaries. Sales generated by the international subsidiaries generally utilize the subsidiary's local currency, thereby exposing the Company to the risk of foreign currency fluctuations. Also, as the Company is a net borrower, it is exposed to the risk of fluctuating interest rates. The Company utilizes derivative instruments in an effort to mitigate these risks. The Company's policy is not to speculate in derivative instruments to profit on the foreign currency exchange or interest rate price fluctuation, nor to enter trades for which there are no underlying exposures, nor enter into trades to intentionally increase the underlying exposure. Instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and are designated as a hedge at the inception of the contract. Accordingly, changes in market values of hedge instruments are highly correlated with changes in market values of underlying hedged items both at the inception of the hedge and over the life of the hedge contract. Various foreign currency contracts are used to hedge firm commitments denominated in foreign currencies and to mitigate the impact of changes in foreign currency exchange rates on the Company's operations. The Company uses forward contracts, purchased option contracts, and complex option contracts, consisting of purchased and sold options, to hedge transactions with its foreign customers. The hedge instruments mature at various dates with premiums and resulting gains or losses recognized at the maturity F-16 114 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) date, which approximates to the transaction date. The notional values of contracts afforded hedge accounting treatment are summarized as follows at December 31:
1997 1996 ----- ----- Forward Contracts........................................... $66.9 $63.6 Purchased Option Contracts.................................. 45.0 28.5 Complex Option Contracts.................................... 28.5 --
When the Company uses foreign currency contracts and the dollar strengthens against foreign currencies, the decline in the value of future foreign currency cash flows is partially offset by the recognition of gains in the value of the foreign currency contracts designated as hedges of the transactions. Conversely, when the dollar weakens, the increase in the value of future foreign currency cash flows is reduced by (i) the recognition of the net premium paid to acquire option contracts; (ii) the recognition of any loss in the value of the forward contracts designated as hedges of the transactions; and (iii) the recognition of any loss on sold options. Market value gains and losses and premiums on these contracts are recognized in "Other, net nonoperating expense" when the hedged transaction is recognized. The net premiums paid for purchased and complex options are reported in current assets. The Company held purchased foreign currency call option contracts totaling $20.4 and $45.9 at December 31, 1997 and 1996, respectively, which did not qualify for hedge accounting treatment. The call options were purchased to create synthetic puts when combined with forward and complex option contracts, thereby cost effectively reducing the Company's risk. The purchased call options mature at various dates throughout 1998 with resulting gains recognized at maturity. Premiums paid for these contracts are recognized immediately in "Other, net nonoperating expense". The Company also uses foreign currency swap contracts to hedge loans between subsidiaries. At December 31, 1997, the Company had foreign currency swap contracts totaling $103.7 expiring at various dates through February 1998. At December 31, 1996, the Company had foreign currency swap contracts totaling $89.8. As monetary assets and liabilities are marked to market and recorded in earnings, foreign currency swap contracts designated as hedges of the monetary assets and liabilities are also marked to market with the resulting gains and losses similarly recognized in earnings. Gains and losses on foreign currency swap contracts are included in "Other, net nonoperating expense" and offset losses and gains on the hedged monetary assets and liabilities. The carrying value of foreign currency swap contracts is reported in current assets and current liabilities. The Company occasionally uses purchased foreign currency option contracts to hedge the market risk of a subsidiary's net asset position. At December 31, 1997, the Company had no purchased foreign currency option contracts related to net asset positions. At December 31, 1996 the Company had $3.5 of purchased foreign currency option contracts related to net asset positions. Purchased foreign currency option contracts resulted in favorable foreign currency translation adjustments of $1.5 and $1.2 at December 31, 1997 and 1996, respectively. Purchased foreign currency option contracts to hedge the market risk of a subsidiary's net asset position are recognized in "Foreign currency translation adjustments" when the hedged transaction is recognized. The foreign currency translation adjustments are only recognized in "Other, net nonoperating expense" upon liquidation of the subsidiary. The Company uses interest rate contracts on certain borrowing transactions to hedge fluctuating interest rates. Interest rate contracts are intended to be an integral part of borrowing transactions and, therefore, are not recognized at fair value. Interest differentials paid or received under these contracts are recognized as adjustments to the effective yield of the underlying financial instruments hedged. Interest rate contracts would only be recognized at fair value if the hedged relationship is terminated. Gains or losses accumulated prior to termination of the hedged relationship would be amortized as a yield adjustment over the shorter of the F-17 115 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) remaining life of the contract or the remaining period to maturity of the underlying instrument hedged. If the contract remained outstanding after termination of the hedged relationship, subsequent changes in market value of the contract would be recognized in "Interest expense". In October 1997, the Company entered into interest rate contracts associated with its $1,100.0 in borrowing arising from the acquisition of Coulter. Specifically, the Company entered into $500.0 in interest rate swap agreements in which the Company receives an average floating interest rate equal to the three-month LIBOR (5.8% at December 31, 1997) and pays an average fixed interest rate of 6.2%. The Company also entered into $400.0 in treasury rate lock agreements to hedge the U.S. Treasury Note rate underlying an expected refinancing. The interest rate swaps and the U.S. Treasury rate locks are accounted for as hedges. The Company is exposed to credit risk in the event of non-performance of the counterparties to its foreign currency and interest rate contracts, which the Company believes is remote. Nevertheless, the Company monitors its counterparty credit risk and utilizes netting agreements and internal policies to mitigate its risk. The disclosed derivatives are indicative of the volume and types of instruments used throughout the year after giving consideration to the increase in volume arising from the acquisition of Coulter. The market value of all derivative instruments amounted to an unrecognized loss of $8.0 at December 31, 1997. 8. INCOME TAXES The components of (loss) earnings before income taxes were:
1997 1996 1995 ------- ------ ----- U.S.............................................. $(304.5) $ 42.5 $21.2 Non-U.S.......................................... 52.6 69.0 51.2 ------- ------ ----- $(251.9) $111.5 $72.4 ======= ====== =====
The provision (benefit) for income taxes consisted of the following:
1997 1996 1995 ------- ------ ----- Current U.S. federal................................... $ 5.2 $ 9.6 $ 5.1 Non-U.S........................................ 5.3 12.4 7.7 U.S. state and Puerto Rico..................... 3.5 4.0 (0.6) ------- ------ ----- Total current.................................... 14.0 26.0 12.2 Deferred U.S. federal................................... 0.7 9.0 4.3 Non-U.S........................................ (2.2) 1.8 7.0 ------- ------ ----- Total deferred, net......................... (1.5) 10.8 11.3 ------- ------ ----- Total............................................ $ 12.5 $ 36.8 $23.5 ======= ====== =====
F-18 116 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) The reconciliation of the U.S. federal statutory tax rate to the consolidated effective tax rate is as follows:
1997 1996 1995 ------- ------ ----- Statutory tax rate............................... (35.0)% 35.0% 35.0% In-process research and development.............. 39.2 -- -- State taxes, net of U.S. tax benefit............. 0.1 0.4 0.8 Ireland and Puerto Rico income................... (2.0) (6.8) (13.6) Non-U.S. taxes................................... 0.9 5.0 10.9 Foreign income taxed in the U.S., net of credits........................................ 1.4 (2.8) 0.4 Other............................................ 0.4 2.2 (1.0) ------- ------ ----- Effective tax rate............................... 5.0% 33.0% 32.5% ======= ====== =====
Certain income of subsidiaries operating in Puerto Rico and Ireland is taxed at substantially lower income tax rates than the U.S. federal statutory tax rate. The lower rates reduced expected income taxes by approximately $5.1 in 1997, $7.6 in 1996, and $9.8 in 1995. Since April 1990, earnings from manufacturing operations in Ireland are subject to a 10% tax. The lower Puerto Rico income tax rate expires in July 2003. The components of the (benefit) provision for deferred income taxes are:
1997 1996 1995 ------ ----- ----- Restructuring costs................................ $(15.7) $ 3.0 $13.2 Compensation....................................... 18.7 -- -- Inventory.......................................... (4.0) -- -- Net operating loss................................. (2.6) -- -- International transactions......................... 2.2 1.3 (4.7) Accelerated depreciation........................... (0.4) (0.5) 0.4 Accrued expenses................................... (4.2) 3.3 (0.6) Pension costs...................................... 8.9 6.9 1.7 Postretirement medical costs....................... (1.7) (1.7) (0.5) Other.............................................. (2.7) (1.5) 1.8 ------ ----- ----- Total......................................... $ (1.5) $10.8 $11.3 ====== ===== =====
F-19 117 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) The tax effect of temporary differences which give rise to significant portions of deferred tax assets and liabilities consists of the following at December 31:
1997 1996 ------ ----- Deferred tax assets Inventories............................................... $ 9.8 $ 2.9 Capitalized expenses...................................... 0.7 1.0 International............................................. 22.7 -- Tax credits............................................... 23.8 -- Purchase and assumed liabilities (see Note 3)............. 87.4 -- Pension costs............................................. -- 2.4 Accrued expenses.......................................... 43.9 19.9 Restructuring costs....................................... 16.3 0.6 Environmental costs....................................... 4.8 5.0 Postretirement benefits................................... 38.6 26.5 Other..................................................... 28.3 32.0 ------ ----- 276.3 90.3 Less: Valuation allowance................................... (42.4) (14.5) ------ ----- Total deferred tax assets................................... 233.9 75.8 Deferred tax liabilities Depreciation.............................................. 1.8 2.3 Pension costs............................................. 9.9 -- Intangible assets......................................... 140.4 -- Fixed assets.............................................. 17.5 -- Leases.................................................... 9.9 -- Deferred service contracts................................ 3.2 -- International transactions................................ 6.4 -- Other..................................................... 32.1 1.3 ------ ----- Total deferred tax liabilities.............................. 221.2 3.6 ------ ----- Net deferred tax asset...................................... $ 12.7 $72.2 ====== =====
Based upon the Company's historical pretax earnings, adjusted for significant items such as non-recurring charges, management believes it is more likely than not that the Company will realize the benefit of the existing net deferred tax asset at December 31, 1997. Management believes the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income. Certain tax planning or other strategies will be implemented, if necessary, to supplement income from operations to fully realize recorded tax benefits. At December 31, 1997 and 1996 the Company recorded a valuation allowance of $42.4 and $14.5 respectively, for certain deductible temporary differences for which it is more likely than not that the Company will not receive future benefits. The change in the valuation allowance was $27.9 and $0 for 1997 and 1996, respectively. The change in the valuation allowance was primarily due to the acquisition of Coulter. Non-U.S. withholding taxes and U.S. taxes have not been provided on approximately $111.4 of unremitted earnings of certain non-U.S. subsidiaries because such earnings are or will be reinvested in operations or will be offset by credits for foreign income taxes paid. F-20 118 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) All income tax liability issues between the Company and its former parent SmithKline Beckman have been resolved in accordance with a tax agreement between the two companies. Such resolution did not have a material effect on the Company's consolidated financial position or operating results. 9. STOCKHOLDERS' EQUITY The Company had been authorized, through 1998, to acquire its common stock to meet the needs of its existing stock-related employee benefit plans. Under this program, the Company repurchased 1.0 shares of its common stock during 1997 and 1.0 shares during 1996. The Company elected to discontinue this stock repurchase program in connection with the Coulter acquisition. The Credit Facility generaly prohibits market repurchase of the Company's stock. Treasury shares have been, and are expected to continue to be, reissued to satisfy the Company's obligations under existing stock-related employee benefit plans. In January 1993 the Company created the Benefit Equity Fund ("BEF"), a trust for prefunding future stock-related obligations of employee benefit plans. The BEF does not change these plans or the amounts of stock expected to be issued for these plans. The BEF is funded by existing shares in treasury as well as from additional shares the Company purchases on the open market over time. While shares in the BEF are not considered outstanding for the calculation of earnings per share, the shares within the BEF are voted by the participants of the Employee Stock Purchase Plan. At December 31, 1997, 1.4 shares remain in treasury of which 0.7 are held by the BEF. 10. EMPLOYEE BENEFITS INCENTIVE COMPENSATION PLANS In 1988, the Company adopted an Incentive Compensation Plan for its officers and key employees, which provided for stock-based incentive awards based upon several factors including Company performance. This plan expired on December 31, 1990, but options outstanding on that date were not affected by such termination. Pursuant to this plan, the Company granted options to purchase approximately 0.8 shares, with an expiration date of ten years from the date of grant. The Company has also adopted the Incentive Compensation Plan of 1990. This 1990 plan reserves shares of the Company's common stock for grants of options and restricted stock. Granted options typically vest over three years and expire ten years from the date of grant. Subsequent to stockholder approval in 1992, amendments were adopted to extend the expiration of the plan to 2001 and to increase each year, commencing January 1, 1993, the number of shares available under the plan by 1.5% of the number of shares of common stock issued and outstanding as of the prior December 31. As of January 1, 1998, 0.6 shares remain available for grant under this plan. The following is a summary of the Company's option activity, including weighted average option information (in thousands, except per option information):
1997 1996 1995 -------------------- -------------------- -------------------- EXERCISE EXERCISE EXERCISE PRICE PER PRICE PER PRICE PER OPTIONS OPTION OPTIONS OPTION OPTIONS OPTION ------- --------- ------- --------- ------- --------- Outstanding at beginning of year............................ 2,672 $26.03 2,634 $22.83 2,689 $21.39 Granted........................... 536 $40.49 447 $40.72 418 $29.33 Exercised......................... (302) $26.77 (372) $19.97 (424) $19.57 Canceled.......................... (11) $33.38 (37) $37.12 (49) $27.20 ----- ------ ----- ------ ----- ------ Outstanding at end of year........ 2,895 $28.60 2,672 $26.03 2,634 $22.83 ===== ===== =====
F-21 119 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
OUTSTANDING EXERCISE REMAINING EXERCISABLE EXERCISE RANGE OF EXERCISE AT DECEMBER 31, PRICE PER CONTRACTUAL LIFE AT DECEMBER 31, PRICE PER PRICES 1997 OPTION (YEARS) 1997(A) OPTION ----------------- ----------------- --------- ---------------- ----------------- --------- $16.50 to $22.50......... 1,049 $19.72 3.5 1,049 $19.72 $26.38 to $28.88......... 585 $26.43 6.2 585 $26.43 $29.25 to $35.13......... 369 $29.34 7.3 249 $29.34 $39.56 to $41.19......... 892 $40.16 8.7 151 $40.88 ----- ------ --- ----- ------ $16.50 to $41.19......... 2,895 $28.60 6.1 2,034 $24.40 ===== =====
- --------------- (a) Options exercisable at December 31, 1996 and 1995 (in thousands) were 1,911 and 1,705, respectively. The following represents pro forma information as if the Company recorded compensation cost using the fair value of the issued compensation instrument (the results may not be indicative of the actual effect on net income in future years):
1997 1996 ------- ----- Net (loss) earnings as reported.......................... $(264.4) $74.7 Assumed stock compensation cost.......................... 5.7 2.6 ------- ----- Pro forma net (loss) earnings............................ $(270.1) $72.1 ======= ===== Diluted (loss) earnings per share as reported............ $ (9.58) $2.58 Pro forma diluted (loss) earnings per share.............. $ (9.79) $2.49
The Company uses the Black-Scholes valuation model for estimating the fair value of its compensation instruments. The following represents the estimated fair value of options granted and the assumptions used for calculation:
1997 1996 ------ ------ Weighted average estimated fair value per option granted................................................ $15.73 $14.56 Average exercise price per option granted................ $40.49 $40.72 Stock volatility......................................... 22.0% 18.0% Risk-free interest rate.................................. 5.9% 6.7% Option term -- years..................................... 10.0 10.0 Stock dividend yield..................................... 1.4% 1.5%
STOCK PURCHASE PLAN The Company's stock purchase plan allows all U.S. employees and employees of certain subsidiaries outside of the U.S. to purchase the Company's common stock at favorable prices and upon favorable terms. Employee purchases are settled at six month intervals as of June 30 and December 31. The difference between the purchase price and fair value is not material. Employees purchased 0.2 shares during 1997 and 1.1 shares remain available for use in the plan at December 31, 1997. POSTEMPLOYMENT BENEFITS Effective January 1, 1994 the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS 112). This statement required the Company to recognize an obligation for postemployment benefits provided to former or inactive employees, their beneficiaries and covered dependents after employment but before retirement. Additional accruals for postemployment benefits, subsequent to adopting SFAS 112, were approximately $0.9 in 1997 and $0.8 in 1996 and 1995. F-22 120 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) 11. RETIREMENT BENEFITS PENSION PLANS Beckman provides pension benefits covering substantially all of its employees. Coulter provides similar benefits covering foreign employees. Consolidated pension expense was $8.6 in 1997, $18.3 in 1996, and $13.3 in 1995. Pension benefits for Beckman's domestic employees are based on age, years of service and compensation rates. Components of combined pension expense related to these plans were:
1997 1996 1995 ------ ------ ------ Service cost..................................... $ 10.0 $ 10.8 $ 7.1 Interest cost.................................... 26.6 25.7 24.0 Actual return on plan assets..................... (66.2) (23.2) (23.8) Net amortization and deferral.................... 35.9 1.0 1.2 ------ ------ ------ Total............................................ $ 6.3 $ 14.3 $ 8.5 ====== ====== ======
Beckman's funding policy is to provide currently for accumulated benefits, subject to federal regulations. Assets of the plans consist principally of government fixed income securities and corporate stocks and bonds. The funded status of the pension liabilities and assets and amounts recognized in the consolidated financial statements with respect to Beckman's domestic plan were:
1997 1996 ------- ------- Vested benefit obligation................................ $ 353.6 $ 312.2 Accumulated benefit obligation........................... 356.2 314.2 Projected compensation increases......................... 51.7 45.0 Projected benefit obligation............................. 407.9 359.2 Plan assets at fair market value......................... (408.9) (314.1) Projected benefit obligation (less than) in excess of plan assets............................................ (1.0) 45.1 Unrecognized net (obligations) at transition............. (1.4) (1.9) Unrecognized net (loss).................................. (15.2) (35.6) Unrecognized prior service cost.......................... (6.4) (7.3) (Prepaid) accrued pension cost........................... (24.0) 0.3 Assumptions used in calculations Expected long-term rate of return...................... 9.8% 9.8% Discount rate.......................................... 7.0% 7.8% Average rate of increase in compensation............... 4.3% 4.3%
Certain subsidiaries of Beckman and Coulter outside the U.S. have separate pension plan arrangements which include both funded and unfunded plans. Unfunded foreign pension obligations are recorded as a liability on the Company's consolidated balance sheets. Pension expense for Beckman plans outside of the U.S. was $4.5 in 1997, $4.0 in 1996, and $4.8 in 1995. Pension expenses for Coulter plans was $0.5 for the two month period ended December 31, 1997. Beckman and Coulter have separate defined contribution plans for their respective domestic employees. Under each plan, eligible employees may contribute a portion of their compensation. Employer contributions are primarily based on a percentage of employee contributions. Additional Coulter contributions to its plan are based on the age and salary levels of employees. Beckman contributed $4.8 in 1997, $4.5 in 1996 and $3.6 in 1995. Coulter contributed $2.0 for the two months ended December 31, 1997. Employees under both plans F-23 121 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) generally become fully vested with respect to employer contributions after three to five years of qualifying service as defined by each plan. HEALTH CARE AND LIFE INSURANCE BENEFITS The Company and its subsidiaries presently provide certain health care and life insurance benefits for retired U.S. employees and their dependents. Eligibility for the plan and participant cost sharing is dependent upon the participant's age at retirement, years of service and retirement date. The postretirement benefits for both active and retired employees of Coulter were continued after the acquisition. The amounts below reflect the assumption of these additional liabilities and costs from November 1, 1997. The net periodic cost for postretirement health care and life insurance benefits includes the following:
1997 1996 1995 ----- ----- ----- Service cost........................................ $ 1.2 $ 1.4 $ 1.0 Interest cost....................................... 3.3 3.3 3.7 Net amortization.................................... (1.2) (0.5) (0.7) ----- ----- ----- Total..................................... $ 3.3 $ 4.2 $ 4.0 ===== ===== =====
The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated balance sheet in "Other liabilities" at December 31:
1997 1996 ----- ----- Accumulated postretirement benefit obligations Retirees.................................................. $38.9 $27.2 Fully eligible active plan participants................... 7.1 2.2 Other active plan participants............................ 27.1 17.3 ----- ----- Total obligation.................................. 73.1 46.7 Plan assets................................................. -- -- Accumulated postretirement benefit obligation in excess of plan assets............................................... 73.1 46.7 Unrecognized prior service cost............................. 1.1 -- Unrecognized net gain....................................... 20.8 17.8 ----- ----- Accrued postretirement benefit liability.................... $95.0 $64.5 ===== =====
1997 1996 1995 ---- ---- ---- Assumptions used in calculations Weighted average discount rate.................. 7.2% 7.8% 7.0% Calculation of obligation, excluding Coulter: Healthcare cost trend rate...................... 8.0% 8.0% 8.0% Decreasing to ultimate rate by the year 2004.... 5.5% 5.5% 5.5% Calculation of Coulter obligation: Healthcare cost trend rate...................... 7.0% -- -- Decreasing to ultimate rate by year 2002........ 5.0% -- --
An assumed 1% increase in the healthcare cost trend rate for each year would have resulted in an increase in the net periodic pension cost by $0.7 in 1997, $0.9 in 1996 and $0.7 in 1995 and in the accumulated post retirement benefit obligation by $10.9 in 1997 and by $7.0 in 1996. F-24 122 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) Employees outside the U.S. generally receive similar benefits from government-sponsored plans. 12. COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL MATTERS The Company is subject to federal, state, local and foreign environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations which would have a material impact on the Company's operations or financial position. The Company believes that its operations comply in all material respects with applicable federal, state and local environmental laws and regulations. In 1983, the Company discovered organic chemicals in the groundwater near a waste storage pond at its manufacturing facility in Porterville, California. SmithKline Beckman, the Company's former controlling stockholder, agreed to indemnify the Company with respect to this matter for any costs incurred in excess of applicable insurance, eliminating any impact on the Company's earnings or financial position. SmithKline Beecham p.1.c., the surviving entity of the 1989 merger between SmithKline Beckman and Beecham, assumed the obligation of SmithKline Beckman in this respect. In 1987 soil and groundwater contamination was discovered on property in Irvine, California (the "property") formerly owned by the Company. In 1988 The Prudential Insurance Company of America ("Prudential"), which purchased the property from the Company, filed suit against the Company in U.S. District Court in California for recovery of costs and other alleged damages with respect to the soil and groundwater contamination. In 1990 the Company entered into an agreement with Prudential for settlement of the lawsuit and for sharing current and future costs of investigation, remediation and other claims. Soil and groundwater remediation of the property have been in process since 1988. During 1994 the County agency overseeing the site soil remediation formally acknowledged completion of remediation of a major portion of the soil, although there remain other areas of soil contamination that may require further remediation. In July 1997 the California Regional Water Quality Control Board, the agency overseeing the site groundwater remediation, issued a closure letter for the upper water bearing unit. The Company and Prudential continued to operate a groundwater treatment system throughout 1997 and expect to continue its operation in 1998. Investigations on the property are continuing and there can be no assurance that further investigation will not reveal additional contamination or result in additional costs. The Company believes that additional remediation costs, if any, beyond those already provided for the contamination discovered by the current investigation will not have a material adverse effect on the Company's operations or financial position. LITIGATION The Company is currently, and is from time to time, subject to claims and suits arising in the ordinary course of its business, including those relating to intellectual property, contractual obligations, competition and employment matters. In certain such actions, plaintiffs request punitive or other damages or nonmonetary relief, which may not be covered by insurance, and in the case of nonmonetary relief, could, if granted, materially affect the conduct of the Company's business. The Company accrues for potential liabilities involved in these matters as they become known and can be reasonably estimated. In the Company's opinion (taking third party indemnities into consideration), the various asserted claims and litigation in which the Company is currently involved are not reasonably likely to have a material adverse effect on the Company's operations or financial position. However, no assurance can be given as to the ultimate outcome with respect to such claims and litigation. The resolution of such claims and litigation could be material to the Company's operating results for any particular period, depending upon the level of income for such period. F-25 123 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) In January 1996, Coulter, then unrelated to Beckman, notified Hematronix, a competitive reagent manufacturer, that Hematronix was selling certain reagents and controls that infringed upon certain of Coulter's patents. In response, Hematronix filed a complaint against Coulter in April 1996, in the United States District Court of the Eastern District of California. The complaint seeks a declaratory judgment to invalidate the patents. The complaint also includes antitrust and related business tort claims directed at Coulter's business and leasing activities, and seeks actual, treble and punitive damages in an unspecified amount, as well as injunctive relief. Coulter answered the complaint by denying violations of the antitrust laws and business tort claims and counterclaimed that Hematronix willfully infringed the patents at issue. Discovery has been conducted by both sides and is continuing. The Company has filed a motion for summary judgment on the antitrust and other non-patent issues. The motion has been heard and a decision from the court is pending. The Company believes that the patents at issue are valid and have been infringed upon by Hematronix and that the antitrust claims are without merit. If the matter does proceed to trial, the trial is scheduled for October 1998. Although the plaintiff has claimed substantial damages, based on the Company's analysis of the present facts and the existence of certain indemnities by the former stockholders of Coulter, the Company believes that the ultimate outcome of this litigation is not reasonably likely to have a material adverse effect on the Company's operations or financial position. Local authorities in Palermo (Sicily), Italy are investigating the activities of officials at a local government hospital and laboratory as well as representatives of the principal worldwide companies marketing diagnostics equipment in Italy, including the Company's Italian subsidiary. The inquiry focuses on past leasing practices for placement of diagnostics equipment which were common industrywide practices throughout Italy, but now are alleged to be improper. The Company believes the evidence in the case is weak and insufficient to support a criminal conviction against certain identified employees (the subsidiary is not a defendant). The Court has appointed economic experts to evaluate and present a comprehensive economic report on the leasing practices of the industry. Although it is very difficult to evaluate the political climate in Italy and the activities of the Italian public prosecutors, the Company does not expect this matter to have a material adverse effect on its operations or financial position. Through its Hybritech acquisition (see Note 3 "Acquisitions"), the Company obtained a patent, referred to as the Tandem Patent, that generates royalty income. The Tandem Patent is involved in an interference action in the U.S. Patent and Trademark Office with a patent application owned by La Jolla Cancer Research Foundation (the "Foundation"). If the Foundation wins the interference, the Company would lose the Tandem Patent and the royalty income, and a new patent would be issued to the Foundation covering those products. The Company believes it has the stronger case and expects to prevail and does not expect this matter to have a material adverse effect on its operations or financial position. As previously reported, in 1991 Forest City properties Corporation and F.C. Irvine, Inc. (collectively, "Forest City"), former owners and developers of a portion of the same real property in Irvine referred to under the caption "Environmental Matters" herein, filed suit against Prudential in the California Superior Court for the County of Los Angeles, alleging breach of contract and damages caused by the pollution of the property. Forest City originally sought damages of more than $20 but subsequently increased its demand to $40. Forest City also sought additional remediation of the property. Although the Company is not a named defendant in the Forest City action, it is obligated to contribute to any resolution of that action pursuant to the Company's 1990 settlement agreement with Prudential. See discussion of "Environmental Matters" above. The trial of this matter was conducted in 1995, resulting in a jury verdict in favor of Prudential. The Court subsequently granted Forest City's motion for a new trial which Prudential appealed. Prior to the Court's consideration of the appeal, Prudential settled the lawsuit with Forest City and requested the Company to pay a portion of the settlement pursuant to the 1990 settlement agreement. The Company does not agree with Prudential's claims and believes it has significant defenses to them. Although the outcome of F-26 124 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) this dispute cannot be predicted with certainty, the Company believes that any additional liability beyond that provided for will not have a material adverse effect on the Company's operations or financial position. As previously reported, since 1992 six toxic tort lawsuits have been filed in Maricopa County Superior Court, Arizona by a number of residents of the Phoenix/Scottsdale area against the Company (relating to a former manufacturing site) and a number of other defendants, including Motorola, Inc., Siemens Corporation, the cities of Phoenix and Scottsdale, and others. The Company is indemnified by SmithKline Beecham p.l.c., the successor of its former controlling stockholder, for any costs incurred in these matters in excess of applicable insurance, and thus the outcome of these litigations, even if unfavorable to the Company, should have no material effect on the Company's operations or financial position. These suits are currently in the discovery phase, with the first of several anticipated trials in the actions scheduled for June 1998. In addition, the Company and its subsidiaries are involved in a number of lawsuits which the Company considers ordinary and routine in view of its size and the nature of its business. The Company does not believe that any ultimate liability resulting from any such lawsuits will have a material adverse effect on its operations or financial position. See Environmental Matters discussion above. LEASE COMMITMENTS The Company leases certain facilities, equipment and automobiles. Certain of the leases provide for payment of taxes, insurance and other charges by the lessee. Rent expense was $35.4 in 1997, $32.9 in 1996, and $32.4 in 1995. As of December 31, 1997, minimum annual rentals payable under non-cancelable operating leases aggregate $94.5, which is payable $30.1 in 1998, $22.0 in 1999, $17.6 in 2000, $13.7 in 2001, $3.0 in 2002 and $8.1 thereafter. OTHER Under the Company's dividend policy, the Company pays a regular quarterly dividend to its stockholders which amounted to $16.6 in 1997 and $14.7 in 1996. In February of 1998, the Board of Directors declared a quarterly dividend of $0.15 per share, which approximates $4.1 in total. This dividend is payable April 2, 1998 to stockholders of record on February 3, 1998. The Credit Facility restricts (but does not prohibit) the Company's ability to pay dividends. 13. EARNINGS (LOSS) PER SHARE In accordance with SFAS 128, the following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations.
1997 INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- Basic EPS Net (loss)......................... $(264.4) 27.6 $(9.58) Effect of dilutive stock options... -- -- -- ------- ---- ------ Diluted EPS(1) Net (loss)......................... $(264.4) 27.6 $(9.58) ======= ==== ======
- --------------- (1) Under generally accepted accounting principles, as the Company was in a net loss position in the current year, 1.0 million common share equivalents were not used to compute diluted loss per share, as the effect was antidilutive. F-27 125 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
1996 INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- Basic EPS Net earnings....................... $ 74.7 28.0 $ 2.66 Effect of dilutive stock options... -- 0.9 (0.08) ------- ---- ------ Diluted EPS Net earnings....................... $ 74.7 28.9 $ 2.58 ======= ==== ======
1995 INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- Basic EPS Net earnings....................... $ 48.9 28.1 $ 1.74 Effect of dilutive stock options... -- 0.7 (0.04) ------- ---- ------ Diluted EPS Net earnings....................... $ 48.9 28.8 $ 1.70 ======= ==== ======
14. BUSINESS SEGMENT INFORMATION INDUSTRY SEGMENT The Company is engaged primarily in the design, manufacture and sale of laboratory instrument systems and related products.
1997 1996 1995 -------- -------- ------- Geographic areas Sales United States -- domestic.................... $ 889.2 $ 738.5 $ 606.1 United States -- export...................... 60.8 36.0 28.9 Europe....................................... 342.4 318.6 312.9 Asia and other areas......................... 191.5 163.1 160.2 Transfers between areas...................... (285.9) (228.2) (178.0) -------- -------- ------- Total sales.......................... $1,198.0 $1,028.0 $ 930.1 ======== ======== ======= Operating (loss) income United States before research and development............................... $ 162.9 $ 180.1 $ 137.2 Research and development(a).................. (123.6) (108.4) (91.7) In-process research and development.......... (282.0) -- -- -------- -------- ------- United States................................ (242.7) 71.7 45.5 Europe....................................... 3.6 45.4 28.2 Asia and other areas......................... 2.1 5.4 9.4 -------- -------- ------- Total operating (loss) income(b)..... $ (237.0) $ 122.5 $ 83.1 ======== ======== ======= Identifiable assets(c) United States................................ $ 857.4 $ 503.3 $ 446.3 Europe....................................... 444.3 243.1 228.8 Asia and other areas......................... 218.5 94.0 89.4 Corporate.................................... 810.8 119.7 143.3 -------- -------- ------- Total assets......................... $2,331.0 $ 960.1 $ 907.8 ======== ======== =======
F-28 126 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) - --------------- (a) The Company's principal research and development efforts are performed in the United States. (b) Includes restructuring charges of $59.4 and $27.7 in 1997 and 1995 respectively. The Company did not incur restructuring charges in 1996. (c) Identifiable assets are those assets used by the operations in each geographic location. Corporate assets consist primarily of cash and equivalents, short-term investments, deferred tax assets, lease receivables, fixed assets of a corporate nature, intangible assets and goodwill. Asia and other areas include, primarily, operations in Japan, Canada and Latin America. Inter-area sales are made at terms that allow for a reasonable profit to the seller. At December 31, 1997 trade receivables and other by geographic area were United States $226.4, Europe $188.0 and Asia and other areas $110.2. At December 31, 1996 trade receivables and other by geographic area were United States $120.9, Europe $135.8 and Asia and other areas $52.8. 15. SUPPLEMENTARY INFORMATION Allowance for Doubtful Accounts
BALANCE AT BALANCE AT BEGINNING OF ADDITIONS CHARGED TO END OF PERIOD COST AND EXPENSES DEDUCTIONS OTHER PERIOD ------------ -------------------- ---------- ----- ---------- December 31, 1997.......... $ 9.6 $2.4(a) $ 3.5(b) $9.4(d) $17.4 0.5(c) December 31, 1996.......... 9.1 2.2(a) 1.1(b) -- 9.6 0.6(c) December 31, 1995.......... 10.4 0.7(a) 2.8(b) -- 9.1 (0.8)(c)
- --------------- (a) Provision charged to earnings. (b) Accounts written-off. (c) Adjustments from translating at current exchange rates. (d) Allowance acquired as part of the Coulter acquisition. F-29 127 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE) 16. SUBSEQUENT EVENT On March 4, 1998, the Company issued $160 of 7.10% Senior Notes due 2003 and $240 of 7.45% Senior Notes due 2008 (the "Offering"). The Company used the proceeds from the offering to pay down $300 of the Term Loan Facility and $80 of the Revolving Credit Facility under the Credit Agreement. In connection with the Offering, certain of the Company's wholly owned subsidiaries (collectively, "Guarantor Subsidiaries") jointly, fully, severally, and unconditionally guaranteed such notes. Supplemental condensed financial information of the Company, Guarantor Subsidiaries and Non-Guarantor Subsidiaries, each on a combined basis is presented below. This financial information is prepared using the equity method of accounting for the Company's and the Guarantor Subsidiaries' investments in subsidiaries. This supplemental financial information should be read in conjunction with the Consolidated Financial Statements.
GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1997 Assets: Cash and equivalents................ $ 13.9 $ 7.2 $ 12.4 $ 33.5 Trade receivables and other......... 131.7 95.4 297.5 524.6 Inventories......................... 127.8 98.7 136.5 $ (30.7) 332.3 Other current assets................ 163.9 165.1 94.4 (337.1) 86.3 -------- -------- -------- --------- -------- Total current assets........ 437.3 366.4 540.8 (367.8) 976.7 Property, plant and equipment, net.............................. 133.8 125.1 152.0 410.9 Intangibles, net.................... 28.5 401.5 14.9 444.9 Goodwill, net....................... 5.7 397.0 0.1 402.8 Other long-term assets.............. 1,120.6 208.1 294.1 (1,527.1) 95.7 -------- -------- -------- --------- -------- Total assets................ $1,725.9 $1,498.1 $1,001.9 $(1,894.9) $2,331.0 ======== ======== ======== ========= ======== Liabilities: Notes payable and current maturities of long-term debt................ $ 7.7 $ 7.3 $ 53.9 $ 68.9 Accounts payable and accrued expenses......................... 207.8 408.1 140.5 756.4 Other current liabilities........... 114.0 2.7 103.6 $ (150.7) 69.6 -------- -------- -------- --------- -------- Total current liabilities... 329.5 418.1 298.0 (150.7) 894.9 Long-term debt, less current maturities....................... 1,122.9 4.6 53.8 1,181.3 Other long-term liabilities......... 179.7 346.0 155.4 (508.1) 173.0 -------- -------- -------- --------- -------- Total liabilities........... 1,632.1 768.7 507.2 (658.8) 2,249.2 Stockholders' equity.................. 93.8 729.4 494.7 (1,236.1) 81.8 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity...... $1,725.9 $1,498.1 $1,001.9 $(1,894.9) $2,331.0 ======== ======== ======== ========= ========
F-30 128 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1996 Assets: Cash and equivalents................ $ 27.9 $ 10.3 $ 4.5 $ 42.7 Trade receivables and other......... 103.8 16.6 189.1 309.5 Inventories......................... 112.7 16.2 75.9 $ (14.4) 190.4 Other current assets................ 83.2 17.6 35.9 (99.9) 36.8 -------- -------- -------- --------- -------- Total current assets........ 327.6 60.7 305.4 (114.3) 579.4 Property, plant and equipment, net.............................. 165.0 13.3 85.2 263.5 Intangibles, net.................... 33.5 0.4 0.2 34.1 Goodwill, net....................... 1.9 11.8 13.7 Other long-term assets.............. 372.2 39.5 131.8 (474.1) 69.4 -------- -------- -------- --------- -------- Total assets................ $ 900.2 $ 125.7 $ 522.6 $ (588.4) $ 960.1 ======== ======== ======== ========= ======== Liabilities: Notes payable and current maturities of long-term debt................ $ 2.6 $ 0.2 $ 16.6 $ 19.4 Accounts payable and accrued expenses......................... 114.9 17.6 75.7 208.2 Other current liabilities........... 74.0 9.8 60.0 $ (92.1) 51.7 -------- -------- -------- --------- -------- Total current liabilities... 191.5 27.6 152.3 (92.1) 279.3 Long-term debt, less current maturities....................... 152.6 0.4 23.6 176.6 Other long-term liabilities......... 163.2 8.6 98.9 (165.4) 105.3 -------- -------- -------- --------- -------- Total liabilities........... 507.3 36.6 274.8 (257.5) 561.2 Stockholders' equity.................. 392.9 89.1 247.8 (330.9) 398.9 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity...... $ 900.2 $ 125.7 $ 522.6 $ (588.4) $ 960.1 ======== ======== ======== ========= ======== CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 Sales................................. $ 513.9 $ 150.9 $1,069.5 $ (536.3) $1,198.0 Operating costs and expenses Cost of sales....................... 214.2 106.3 798.5 (509.3) 609.7 Marketing, general, and administrative................... 154.5 39.0 166.8 360.3 Research and development............ 87.6 33.8 2.2 123.6 In-process research and development...................... 282.0 282.0 Restructuring charge................ 55.7 3.7 59.4 -------- -------- -------- --------- -------- Operating income (loss)............... 1.9 (310.2) 98.3 27.0 (237.0) Nonoperating expense (income)......... 233.2 (8.8) (0.7) (208.8) 14.9 -------- -------- -------- --------- -------- (Loss) earnings before income taxes... (231.3) (301.4) 99.0 181.8 (251.9) Income taxes.......................... 8.6 2.0 8.1 (6.2) 12.5 -------- -------- -------- --------- -------- Net (loss) earnings................... $ (239.9) $ (303.4) $ 90.9 $ 188.0 $ (264.4) ======== ======== ======== ========= ========
F-31 129 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 Sales................................. $ 457.4 $ 112.8 $ 772.7 $ (314.9) $1,028.0 Operating costs and expenses Cost of sales....................... 184.9 33.7 569.3 (310.1) 477.8 Marketing, general, and administrative................... 147.1 21.4 150.8 319.3 Research and development............ 91.1 17.1 0.2 108.4 Restructuring charge................ (1.7) (4.0) 5.7 -------- -------- -------- --------- -------- Operating income...................... 36.0 44.6 46.7 (4.8) 122.5 Nonoperating (income) expense......... (64.9) (1.8) 0.2 77.5 11.0 -------- -------- -------- --------- -------- Earnings before income taxes.......... 100.9 46.4 46.5 (82.3) 111.5 Income taxes.......................... 18.1 5.3 10.2 3.2 36.8 -------- -------- -------- --------- -------- Net earnings.......................... $ 82.8 $ 41.1 $ 36.3 $ (85.5) $ 74.7 ======== ======== ======== ========= ======== CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 Sales................................. $ 581.1 $ 64.4 $ 533.7 $ (249.1) $ 930.1 Operating costs and expenses Cost of sales....................... 316.8 18.3 339.0 (246.9) 427.2 Marketing, general, and administrative................... 149.2 8.2 143.0 300.4 Research and development............ 83.4 8.3 91.7 Restructuring charge................ 1.5 26.2 27.7 -------- -------- -------- --------- -------- Operating income...................... 30.2 29.6 25.5 (2.2) 83.1 Nonoperating (income) expense......... (26.1) (0.7) (9.9) 47.4 10.7 -------- -------- -------- --------- -------- Earnings before income taxes.......... 56.3 30.3 35.4 (49.6) 72.4 Income taxes.......................... 3.1 4.1 14.0 2.3 23.5 -------- -------- -------- --------- -------- Net earnings.......................... $ 53.2 $ 26.2 $ 21.4 $ (51.9) $ 48.9 ======== ======== ======== ========= ========
F-32 130 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED ------- ------------ ------------- ------------ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1997 Net cash provided (used) by operating activities..................................... $ (32.2) $ 42.4 $127.6 $ 137.8 Cash flows from investing activities Additions to property, plant and equipment..... (65.9) (11.6) (23.4) (100.9) Net disposals of property, plant and equipment................................... 12.0 5.4 1.0 18.4 Sales of short term investments................ 7.7 7.7 Proceeds from sale-leaseback transactions...... 39.6 39.6 Investments and acquisitions................... (897.3) 3.4 (893.9) ------- ------ ------ ------- Net cash (used) provided by investing activities..................................... (911.6) 1.5 (19.0) (929.1) Cash flows from financing activities Dividends to stockholders...................... (16.6) (16.6) Proceeds from issuance of stock................ 23.1 23.1 Purchases of treasury stock.................... (43.7) (43.7) Notes payable borrowings (reductions).......... (3.5) 15.2 11.7 Long-term debt borrowings (reductions)......... 970.5 (39.1) (115.3) 816.1 ------- ------ ------ ------- Net cash provided (used) by financing activities..................................... 929.8 (39.1) (100.1) 790.6 Effect of exchange rates on cash and equivalents.................................... (0.8) (0.8) (Decrease) increase in cash and equivalents...... (14.0) 4.8 7.7 (1.5) Cash and equivalents -- beginning of year........ 27.9 2.6 4.1 34.6 ------- ------ ------ ------- Cash and equivalents -- end of year.............. $ 13.9 $ 7.4 $ 11.8 $ 33.1 ======= ====== ====== =======
F-33 131 BECKMAN COULTER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED ------- ------------ ------------- ------------ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 Net cash provided (used) by operating activities..................................... $ 124.7 $ (7.3) $ 21.7 $ 139.1 Cash flows from investing activities Additions to property, plant and equipment..... (44.1) (9.7) (56.7) (110.5) Net disposals of property, plant and equipment................................... 11.8 0.4 6.5 18.7 Sales of short term investments................ 0.1 0.1 0.2 Investments and acquisitions................... (38.0) 15.0 (23.0) ------- ------ ------ ------- Net cash used by investing activities............ (70.2) (9.3) (35.1) (114.6) Cash flows from financing activities Dividends to stockholders...................... (14.7) (14.7) Proceeds from issuance of stock................ 21.5 21.5 Purchases of treasury stock.................... (35.9) (35.9) Notes payable borrowings (reductions).......... (5.9) 3.5 (2.4) Long-term debt borrowings (reductions)......... 8.0 0.3 7.0 15.3 ------- ------ ------ ------- Net cash provided (used) by financing activities..................................... (27.0) 0.3 10.5 (16.2) Effect of exchange rates on cash and equivalents.................................... 0.1 0.1 (Decrease) increase in cash and equivalents...... 27.5 (16.3) (2.8) 8.4 Cash and equivalents -- beginning of year........ 0.4 18.9 6.9 26.2 ------- ------ ------ ------- Cash and equivalents -- end of year.............. $ 27.9 $ 2.6 $ 4.1 $ 34.6 ======= ====== ====== ======= CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1995 Net cash provided (used) by operating activities..................................... $ 66.8 $ 22.9 $(29.5) $ 60.2 Cash flows from investing activities Additions to property, plant and equipment..... (65.5) (0.5) (37.2) (103.2) Net disposals of property, plant and equipment................................... 7.3 5.9 13.2 Sales (purchases) of short term investments.... (0.1) (7.9) 0.5 (7.5) Investments and acquisitions................... (38.1) 22.6 (15.5) ------- ------ ------ ------- Net cash used by investing activities............ (96.4) (8.4) (8.2) (113.0) Cash flows from financing activities Dividends to stockholders...................... (12.3) (12.3) Proceeds from issuance of stock................ 17.6 17.6 Purchases of treasury stock.................... (13.3) (13.3) Notes payable borrowings (reductions).......... (4.2) 7.1 2.9 Long-term debt borrowings (reductions)......... 42.0 (2.1) 39.9 ------- ------ ------ ------- Net cash provided by financing activities........ 29.8 5.0 34.8 Effect of exchange rates on cash and equivalents.................................... 0.2 (0.2) (Decrease) increase in cash and equivalents...... 0.4 14.5 (32.9) (18.0) Cash and equivalents -- beginning of year........ 4.4 39.8 44.2 ------- ------ ------ ------- Cash and equivalents -- end of year.............. $ 0.4 $ 18.9 $ 6.9 $ 26.2 ======= ====== ====== =======
F-34 132 QUARTERLY INFORMATION (UNAUDITED) (IN MILLIONS, EXCEPT AMOUNTS PER SHARE)
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ----------------- ------------------ ------------------ ------------------ 1997 1996 1997 1996 1997 1996 1997 1996 ------ ------ ------ ------ ------ ------ ------- ------ Sales................................ $231.9 $224.8 $270.6 $265.2 $271.6 $252.8 $ 423.9 $285.2 Cost of sales........................ 109.6 104.9 130.7 123.6 132.1 117.8 237.3 131.5 Marketing, general and administrative..................... 74.8 73.7 79.7 83.3 82.9 77.7 122.9 84.6 Research and development............. 24.0 24.7 28.6 27.3 27.7 26.1 43.3 30.3 In-process research and development........................ -- -- -- -- -- -- 282.0 -- Restructuring Charge................. -- -- -- -- -- -- 59.4 -- Operating income (loss).............. 23.5 21.5 31.6 31.0 28.9 31.2 (321.0) 38.8 Earnings (loss) before income taxes.............................. 22.3 20.5 29.7 28.3 27.7 27.9 (331.6) 34.8 Net earnings (loss).................. $ 15.6 $ 13.7 $ 20.8 $ 19.0 $ 19.4 $ 18.7 $(320.2) $ 23.3 Basic earnings (loss) per share...... $ 0.56 $ 0.48 $ 0.75 $ 0.68 $ 0.71 $ 0.67 $(11.63) $ 0.83 Diluted earnings (loss) per share.... $ 0.54 $ 0.47 $ 0.72 $ 0.65 $ 0.68 $ 0.65 $(11.63) $ 0.81 Dividends per share.................. $ 0.15 $ 0.13 $ 0.15 $ 0.13 $ 0.15 $ 0.13 $ 0.15 $ 0.13 Stock price -- High.................. $ 44 3/8 $ 39 1/8 $ 49 3/16 $ 41 1/8 $ 52 5/16 $ 39 7/8 $ 44 1/2 $ 39 1/4 Stock price -- Low................... $ 37 7/8 $ 33 1/2 $ 40 3/8 $ 35 1/8 $ 39 3/4 $ 32 $ 37 3/8 $ 35 FOR THE YEAR ---------------------- 1997 1996 -------- -------- Sales................................ $1,198.0 $1,028.0 Cost of sales........................ 609.7 477.8 Marketing, general and administrative..................... 360.3 319.3 Research and development............. 123.6 108.4 In-process research and development........................ 282.0 -- Restructuring Charge................. 59.4 -- Operating income (loss).............. (237.0) 122.5 Earnings (loss) before income taxes.............................. (251.9) 111.5 Net earnings (loss).................. $ (264.4) $ 74.7 Basic earnings (loss) per share...... $ (9.58) $ 2.66 Diluted earnings (loss) per share.... $ (9.58) $ 2.58 Dividends per share.................. $ 0.60 $ 0.52 Stock price -- High.................. $ 52 5/16 $ 41 1/8 Stock price -- Low................... $ 37 3/8 $ 32
F-35 133 INDEPENDENT AUDITORS' REPORT To the Stockholders of Coulter Corporation: We have audited the accompanying consolidated statements of operations, stockholders' equity and cash flows of Coulter Corporation and subsidiaries (the Company) for the seven months ended October 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations of Coulter Corporation and subsidiaries and their cash flows for the seven months ended October 31, 1997 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Miami, Florida December 12, 1997, except as to note R, which is as of March 4, 1998 F-36 134 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders of Coulter Corporation: We have audited the accompanying consolidated balance sheets of Coulter Corporation (a Delaware corporation) and subsidiaries as of March 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Coulter Corporation and subsidiaries as of March 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997 in conformity with generally accepted accounting principles. Arthur Andersen LLP Miami, Florida, May 27, 1997 (except with respect to the matters discussed in Note O and Note R, as to which the dates are August 29, 1997 and March 4, 1998, respectively). F-37 135 COULTER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
1997 1996 -------- -------- CURRENT ASSETS: Cash and cash equivalents................................. $ 28,782 $ 41,286 Accounts receivable, net of allowance for doubtful accounts of $7,070 in 1997 and $6,543 in 1996.......... 189,484 173,507 Current portion of finance receivables, net............... 20,064 21,270 Inventories............................................... 117,502 103,866 Refundable income taxes................................... 1,527 2,885 Prepaid expenses and other current assets................. 23,607 17,179 -------- -------- Total current assets.............................. 380,966 359,993 -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization of $114,219 in 1997 and $102,028 in 1996.......................................... 131,059 105,915 -------- -------- LONG-TERM PORTION OF FINANCE RECEIVABLES, NET............... 32,255 37,197 -------- -------- OTHER ASSETS................................................ 54,768 56,939 -------- -------- $599,048 $560,044 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Foreign bank overdraft facilities......................... $ 852 $ 403 Current maturities of long-term debt...................... 35,700 47,829 Note payable due to stockholder........................... 4,000 -- Notes payable............................................. 16,310 15,327 Accounts payable.......................................... 38,829 41,450 Accrued liabilities....................................... 93,351 107,015 Income taxes payable...................................... 6,552 9,953 Estimated warranty costs.................................. 15,578 13,870 Unearned service contract revenue......................... 33,975 35,636 -------- -------- Total current liabilities......................... 245,147 271,483 -------- -------- LONG-TERM DEBT, less current maturities..................... 135,468 71,895 -------- -------- NOTE PAYABLE DUE TO STOCKHOLDER............................. 14,550 21,550 -------- -------- ACCRUED PENSION COSTS (NOTE M).............................. 6,731 6,524 -------- -------- ACCRUED POSTRETIREMENT BENEFIT COSTS (NOTE M)............... 28,562 26,296 -------- -------- LONG-TERM UNEARNED SERVICE CONTRACT REVENUE................. 12,487 12,150 -------- -------- DEFERRED INCOME TAXES....................................... 4,114 3,188 -------- -------- MINORITY INTERESTS (NOTES H AND I).......................... 2,892 1,875 -------- -------- COMMITMENTS AND CONTINGENCIES (NOTES G, O AND P) STOCKHOLDERS' EQUITY: Common stock: Class A -- voting -- authorized and outstanding, 9,677 shares in 1997 and 10,000 shares in 1996 of $1 par value........................................... 10 10 Class B non-voting -- authorized 9,692 shares in 1997 and 10,000 shares in 1996; outstanding 1,060 shares in 1997 and 1,368 shares in 1996 of $1 par value.... 1 1 Additional contributed capital............................ 47,955 55,702 Retained earnings......................................... 107,795 93,187 Cumulative translation adjustment......................... (6,664) (3,817) -------- -------- Total stockholders' equity.................................. 149,097 145,083 -------- -------- $599,048 $560,044 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-38 136 COULTER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997 AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995 (IN THOUSANDS)
SEVEN MONTHS ENDED YEARS ENDED MARCH 31, OCTOBER 31, -------------------------------- 1997 1997 1996 1995 ----------- -------- -------- -------- NET SALES.................................................. $387,488 $700,887 $685,320 $654,257 COST OF SALES.............................................. 203,974 373,424 349,192 340,494 -------- -------- -------- -------- Gross profit..................................... 183,514 327,463 336,128 313,763 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............... 132,761 217,890 216,920 204,825 RESEARCH AND DEVELOPMENT EXPENSES.......................... 40,419 85,787 87,352 73,454 RESTRUCTURING CHARGES (Note K)............................. -- 5,947 -- -- -------- -------- -------- -------- Operating income................................. 10,334 17,839 31,856 35,484 -------- -------- -------- -------- OTHER EXPENSE (INCOME): Interest expense......................................... 7,223 13,572 11,223 13,969 Interest income.......................................... (4,770) (9,048) (10,295) (11,618) Foreign exchange (gain) loss (Note G).................... (963) (2,081) (2,940) 9,703 Other, net (Note H)...................................... 808 (4,745) (3,799) (1,400) -------- -------- -------- -------- 2,298 (2,302) (5,811) 10,654 -------- -------- -------- -------- Income before provision for income taxes......... 8,036 20,141 37,667 24,830 PROVISION FOR INCOME TAXES................................. 9,058 5,533 4,628 7,507 -------- -------- -------- -------- Net (loss) income................................ $ (1,022) $ 14,608 $ 33,039 $ 17,323 ======== ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-39 137 COULTER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997 AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS)
COMMON STOCK ---------------------------------- CLASS A CLASS B ADDITIONAL CUMULATIVE ---------------- --------------- CONTRIBUTED RETAINED TRANSLATION SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL ------ ------- ------ ------ ----------- -------- ----------- -------- Balance at March 31, 1994................. 10,000 $10 1,368 $ 1 $ 55,702 $ 42,825 $(6,718) $ 91,820 Net income.............................. -- -- -- -- -- 17,323 -- 17,323 Translation adjustment.................. -- -- -- -- -- -- 8,992 8,992 ------ --- ------ ----- -------- -------- ------- -------- Balance at March 31, 1995................. 10,000 10 1,368 1 55,702 60,148 2,274 118,135 Net income.............................. -- -- -- -- -- 33,039 -- 33,039 Translation adjustment.................. -- -- -- -- -- -- (6,091) (6,091) ------ --- ------ ----- -------- -------- ------- -------- Balance at March 31, 1996................. 10,000 10 1,368 1 55,702 93,187 (3,817) 145,083 Purchase of treasury stock (Note L)..... (323) -- (308) -- (7,747) -- -- (7,747) Net income.............................. -- -- -- -- -- 14,608 -- 14,608 Translation adjustment.................. -- -- -- -- -- -- (2,847) (2,847) ------ --- ------ ----- -------- -------- ------- -------- Balance at March 31, 1997................. 9,677 10 1,060 1 47,955 107,795 (6,664) 149,097 Sale of common stock (Note L)........... 216 -- -- -- 2,640 -- -- 2,640 Net loss................................ -- -- -- -- -- (1,022) -- (1,022) Dividend distribution (Note H).......... -- -- -- -- -- (5,833) -- (5,833) Translation adjustment.................. -- -- -- -- -- -- (1,474) (1,474) ------ --- ------ ----- -------- -------- ------- -------- Balance at October 31, 1997............... 9,893 $10 1,060 $ 1 $ 50,595 $100,940 $(8,138) $143,408 ====== === ====== ===== ======== ======== ======= ========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-40 138 COULTER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997 AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995 (IN THOUSANDS)
SEVEN MONTHS ENDED YEARS ENDED MARCH 31, OCTOBER 31, ----------------------------------- 1997 1997 1996 1995 ------------ --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income......................................... $ (1,022) $ 14,608 $ 33,039 $ 17,323 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization........................... 15,647 25,141 23,682 18,764 Provision for doubtful accounts......................... 1,483 2,609 2,222 3,031 Provision for inventory obsolescence.................... 7,955 12,370 7,777 7,594 Provision for postretirement benefit costs.............. 1,414 3,218 2,850 2,757 Gain on termination of pension plan..................... -- -- (3,776) -- Deferred income tax (benefit) expense................... (3,572) (4,570) (4,722) 285 Loss (gain) on disposal of property, plant and equipment............................................. 476 327 (1,063) 146 Unrealized foreign exchange loss (gain) on forward contracts............................................. 2,496 (703) (10,132) 6,476 CHANGE IN ASSETS AND LIABILITIES: (Increase) decrease Temporary investments................................... -- -- 3,758 4,638 Trade receivable........................................ 28,989 (16,944) 12,496 (8,562) Inventories............................................. (13,505) (26,006) (20,401) (6,003) Refundable income taxes................................. (1,158) 1,358 181 (1,742) Prepaid expenses and other current assets............... (4,937) (3,474) 1,531 453 Other assets............................................ 1,223 3,751 4,015 (3,225) Increase (decrease) Accounts payable........................................ (5,236) (2,621) (1,834) 2,801 Accrued liabilities..................................... 2,274 (13,664) 13,015 (3,865) Income taxes payable.................................... 10,245 (3,401) 3,469 (60) Estimated warranty costs................................ (1,812) 1,708 (3,807) 890 Unearned service contract revenue....................... (2,397) (1,661) (201) 2,861 Accrued pension costs................................... (487) 207 (13,847) 5,035 Accrued postretirement benefit costs.................... (312) (952) (1,181) (678) Long-term unearned service contract revenue............. (992) 337 1,103 2,482 --------- --------- --------- --------- Net cash provided by (used in) operating activities..... 36,772 (8,362) 48,174 51,401 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment....... 1,983 3,582 4,114 4,542 Capital expenditures...................................... (17,976) (58,017) (31,067) (31,086) Finance lease receivables originated...................... (19,582) (10,833) (17,685) (22,098) Principal payments received from finance lease receivables............................................. 15,292 15,339 29,677 27,772 Payment for business acquisition, net of cash acquired.... -- -- (22,198) -- (Decrease) increase in minority interests................. (1,531) 1,017 317 762 --------- --------- --------- --------- Net cash used in investing activities................... (21,814) (48,912) (36,842) (20,108) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt.............................. 47,839 238,158 142,069 74,446 Principal payments of long-term debt...................... (178,257) (182,274) (134,619) (108,552) Principal payments of note payable due to stockholder..... -- (3,000) -- -- Proceeds from Beckman Instruments, Inc.................... 109,674 -- -- -- Purchase of treasury stock................................ -- (7,747) -- -- Proceeds from sale of stock............................... 2,640 -- -- -- Net (payments) proceeds from notes payable and foreign bank overdraft facilities............................... (299) 2,030 (2,890) 4,623 --------- --------- --------- --------- Net cash (used in) provided by financing activities..... (18,403) 47,167 4,560 (29,483) --------- --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS............................................... (586) (2,397) (9,564) 11,921 --------- --------- --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (4,031) (12,504) 6,328 13,731 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD........ 28,782 41,286 34,958 21,227 --------- --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.............. $ 24,751 $ 28,782 $ 41,286 $ 34,958 ========= ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Non cash dividend to stockholders......................... $ 5,833 $ -- $ -- $ -- Cash paid during the period for: Interest................................................ $ 10,603 $ 13,406 $ 11,982 $ 13,740 ========= ========= ========= ========= Income taxes............................................ $ 4,433 $ 12,742 $ 6,589 $ 7,422 ========= ========= ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-41 139 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- NATURE OF OPERATIONS Coulter Corporation and subsidiaries (the "Company") is engaged in the business of developing, manufacturing, distributing, financing and servicing certain medical equipment (predominantly hematology instruments) and related consumable products used in the healthcare industry, research centers and universities. The Company's principal markets are North America, Europe and the Far East. The Company's future sales and profitability are largely dependent upon its ability to continue to develop, manufacture, market, finance and service certain medical equipment and related consumable products as described above. Sales can be significantly affected by a variety of factors, including, among other things, the timing of new product development, the availability of competing products, and competitor strategies to expand market share. Certain raw materials and components used in the manufacture of the Company's products are available from limited sources. Changes in raw material suppliers could result in delays in production and higher raw material costs. NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Coulter Corporation and all domestic and foreign subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain 1996 balances have been reclassified to conform to the 1997 presentation. Revenue Recognition In general, revenue is recognized when a product is shipped. When a customer enters into an operating-type lease agreement, revenue is recognized over the life of the lease. Under a sales-type lease agreement, revenue is recognized at the time of shipment with interest income recognized over the life of the lease. Service revenues are recognized ratably over the life of the service agreement or as service is performed, if not under contract. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents Cash equivalents are short-term, highly liquid investments that have an original maturity of three months or less. Inventories Inventories are stated at the lower-of-cost or market (principally using the first-in, first-out method). Components of inventory cost include materials, labor and manufacturing overhead. In evaluating whether inventory is stated at the lower of cost or market, management considers such factors as inventory on hand, F-42 140 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) estimated time to sell such inventory, and current market conditions. Reserves are provided as appropriate. Inventory consists of the following:
MARCH 31, MARCH 31, 1997 1996 --------- --------- (IN THOUSANDS) Finished goods................................. $ 79,094 $ 72,011 Work in process................................ 14,732 12,595 Raw materials.................................. 23,676 19,260 -------- -------- $117,502 $103,866 ======== ========
Finance Receivables For leases that qualify as capital leases under Statement of Financial Accounting Standards No. 13, the Company records in its consolidated balance sheets the gross lease receivable and estimated residual value of the leased equipment reduced by the unearned lease income and allowance for doubtful accounts. The unearned lease income is ratably recognized as revenue so as to reflect a constant periodic rate of return on the net investment over the term of the leases, usually five years. Fees and costs related to the establishment of a lease are recognized as an adjustment to the yield of the related lease ratably over the life of the lease. Most equipment leases include service contracts and agreements to provide a specified quantity of consumable products at a fixed price (payable monthly) over the term of the lease. All income from these contracts is recognized as the services are rendered and the consumable products are provided. The portfolio of lease receivables is reviewed by the Company to determine an appropriate allowance for doubtful accounts balance. The allowance for doubtful accounts includes management's estimate of the amounts expected to be lost on specific leases and for losses on other as of yet unidentified leases included in direct finance lease receivable at March 31, 1997 and 1996. In estimating the potential losses on leases, management relies on historical experience by lease type and current industry trends. The amounts that the Company will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the allowance for doubtful accounts reported in the consolidated financial statements at March 31, 1997 and 1996. Property, Plant and Equipment Property, plant and equipment are summarized as follows:
MARCH 31, MARCH 31, 1997 1996 --------- --------- (IN THOUSANDS) Equipment...................................... $149,562 $127,998 Buildings...................................... 68,106 62,979 Equipment leased to others..................... 5,204 3,812 Leaseholds and leasehold improvements.......... 6,978 6,268 -------- -------- 229,850 201,057 Less -- Accumulated depreciation and amortization................................. $114,219 $102,028 -------- -------- 115,631 99,029 Land........................................... 15,428 6,886 -------- -------- $131,059 $105,915 ======== ========
F-43 141 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Depreciation is provided in amounts sufficient to allocate the cost of depreciable assets to operations over their estimated service lives principally using the straight-line method. The estimated service lives are as follows: Buildings 15 - 50 years Equipment 3 - 10 years
Leaseholds and leasehold improvements are amortized on a straight-line basis over the shorter of the lives of the leases or the improvements (generally five years). Equipment is leased to others under operating lease terms ranging from one to five years which include cancellation provisions. Such equipment is recorded at cost and is generally depreciated over five years, using the straight-line method of depreciation. Accrued Liabilities Accrued liabilities consist of obligations that are recorded when expenses are incurred. As of March 31, 1997 and 1996, such liabilities are as follows (In thousands):
MARCH 31, MARCH 31, 1997 1996 --------- --------- Payroll........................................ $14,375 $ 16,247 Pension........................................ 1,887 13,951 Vacation....................................... 11,852 10,819 Bonuses........................................ 4,149 12,279 Restructuring.................................. 5,947 -- Taxes, other than income....................... 10,227 11,958 Other.......................................... 44,914 41,761 ------- -------- $93,351 $107,015 ======= ========
Recently Issued Accounting Standards The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of" ("SFAS 121") in fiscal year 1997. SFAS 121 establishes accounting standards for recording the impairment of long-lived assets, certain identifiable intangibles and excess of cost over fair value of net assets acquired (goodwill). The adoption of SFAS 121 had no impact on the Company's financial position or the results of its operations. Excess of Cost Over Fair Value of Net Assets Acquired Excess of cost over fair value of net assets acquired (goodwill) is stated on the basis of cost and is amortized, principally on a straight-line basis, over the estimated future periods not exceeding twenty years. Such cost is reviewed for impairment based on an assessment of future operations to ensure that it is appropriately valued. Estimated Warranty Costs The Company's warranty policy provides for repairs or replacements due to defects in materials and workmanship in instrument products it manufactures for a period of up to one year from the date of sale. Accordingly, a provision is made for the cost of such anticipated warranty expense by a charge to operations in the period of sale. F-44 142 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Unearned Service Contract Revenue The Company sells contracts to provide repair service on its equipment for specified terms. The customer pays for the contract prior to the service being rendered. The contract amount is recorded as unearned service contract revenue and the deferred income is amortized to operations on a straight-line basis over the term of the contract, which is generally one to five years. Research and Development Costs Research and development costs are charged to operations as incurred. Disclosures about Fair Value of Financial Instruments The Company's financial instruments include cash, cash equivalents, notes payable, foreign bank overdraft facilities, long-term debt and forward contracts. Each of the financial instrument's carrying value approximates fair value mainly due to their short-term nature, except for long-term debt (See Note F). NOTE C -- INTERNATIONAL OPERATIONS The following summarizes the combined financial data of consolidated foreign subsidiaries (after elimination of intercompany transactions):
SEVEN MONTHS YEAR ENDED MARCH 31, ENDED OCTOBER 31, -------------------------------- 1997 1997 1996 1995 ----------------- -------- -------- -------- (IN THOUSANDS) Net assets................... $119,522 $113,602 $115,945 $ 95,912 ======== ======== ======== ======== Net sales.................... $187,639 $346,644 $355,394 $320,430 ======== ======== ======== ======== Net income................... $ 12,371 $ 16,787 $ 18,269 $ 13,614 ======== ======== ======== ========
NOTE D -- LEASING ACTIVITIES A summary of financial information regarding the Company's direct financing lease activities is as follows:
MARCH 31, 1997 MARCH 31, 1996 --------------------- --------------------- CURRENT LONG-TERM CURRENT LONG-TERM PORTION PORTION PORTION PORTION -------- --------- -------- --------- (IN THOUSANDS) Future minimum lease payments............. $27,664 $39,819 $29,624 $45,858 Unearned lease income..................... (4,956) (6,307) (5,771) (7,345) Allowance for doubtful accounts........... (2,644) (1,257) (2,583) (1,316) ------- ------- ------- ------- $20,064 $32,255 $21,270 $37,197 ======= ======= ======= =======
F-45 143 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE D -- LEASING ACTIVITIES (CONTINUED) Future minimum lease payments receivable for direct financing leases consist of the following at March 31, 1997 (In thousands):
FISCAL YEAR ----------- 1998.............................................. $27,664 1999.............................................. 19,183 2000.............................................. 11,543 2001.............................................. 5,929 2002.............................................. 2,499 Thereafter........................................ 665 ------- $67,483 =======
NOTE E -- NOTES PAYABLE, FOREIGN BANK OVERDRAFT FACILITIES AND NOTE PAYABLE DUE TO STOCKHOLDER Notes payable consist primarily of amounts due to banks at varying interest rates ranging from 1.55% to 12.50% and are to be paid within twelve months. Certain notes payable are secured by assets of foreign subsidiaries. Additionally, certain foreign subsidiaries have unsecured overdraft facilities with banks bearing interest up to 20.25%. Additionally, the Company maintains a note payable due to a stockholder. The note is unsecured and bears interest at a rate of 12% per annum. Principal payments range from $1,000,000 to $1,550,000 due quarterly through March 2001. Interest payments are due monthly. F-46 144 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE F -- LONG-TERM DEBT Long-term debt at March 31, 1997 and 1996, is summarized as follows:
1997 1996 -------- -------- (IN THOUSANDS) Notes payable to banks at rates ranging from 7% to 12%, secured by finance receivables and related leased equipment. Notes mature as the related finance receivables are paid.................................................. $ 60,113 $ 61,239 Bankers acceptances and notes payable to bank at rates of 6.4% to 8.5% under an agreement which expires in August 1998...................................................... 50,054 9,700 Lease loans and revolving term loan at rates ranging from 5% to 10.25%, secured by assets of a foreign subsidiary, payable in monthly installments through fiscal year 2002...................................................... 4,323 3,296 Notes payable to various banks at rates ranging from 5.8% to 8.75%, due in quarterly and annual installments. This debt was incurred for and secured by new building and improvements.............................................. 3,079 3,960 Notes payable to bank at various interest rates ranging from 7.4% to 9.8% under the terms of a revolving credit agreement. Secured by equipment leased to third parties and building. Payable in monthly installments matching the life of applicable lease contracts, but not exceeding 60 months.................................................... 3,742 6,184 Payable for settlement of patent and royalties infringement (See Note J).............................................. 2,000 4,000 Mortgage notes secured by land and building at rates ranging from 9.6% to 9.7%, payable in quarterly installments through 2014.............................................. 7,710 8,969 Notes payable secured by land, building and trade receivables with interest rates ranging from 1.55% to 4.25%. Principal and interest payments are due on a quarterly and semi-annual basis through fiscal year 2000...................................................... 8,234 9,368 Mortgage note secured by land and building at a fixed rate of 4.86%, payable in equal monthly payments through May 2016...................................................... 14,180 -- Unsecured revolving line of credit, interest payments are due quarterly based on LIBOR rate plus 1.5%, principal payment due August 1998................................... 3,924 -- Other....................................................... 13,809 13,008 -------- -------- 171,168 119,724 Less -- current maturities of long-term debt........... 35,700 47,829 -------- -------- $135,468 $ 71,895 ======== ========
Future maturities of long-term debt are as follows (In thousands):
FISCAL YEAR ----------- 1998............................................ $ 35,700 1999............................................ 83,194 2000............................................ 15,832 2001............................................ 10,007 2002............................................ 5,071 Thereafter...................................... 21,364 -------- $171,168 ========
The Company maintains bankers acceptances and a note payable revolving credit agreement (the "Credit Agreement") up to a maximum of $60,000,000 principal amount of domestic and Eurodollar loan borrowings. This facility also allows the Company to enter into forward contracts for the sale of foreign currency (See Note G). The maximum borrowing amount is the lesser of $60,000,000 or the borrowing base, as defined, provided that the aggregate amount of issued and unexpired letters of credit and drafts do not exceed F-47 145 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE F -- LONG-TERM DEBT (CONTINUED) $10,000,000. The Credit Agreement expires in August 1998. At March 31, 1997, borrowings under the Credit Agreement of $50,054,000 were classified as long-term debt. At March 31, 1996, borrowings of $9,700,000 were outstanding and classified as current maturities of long-term debt. Under the Credit Agreement, interest payable on the domestic note payable is at the prime rate in effect for each interest period. Interest payable on the Eurodollar and bankers acceptances is variable based on the LIBOR rate plus up to 1.00% per annum. The Credit Agreement is secured by certain domestic assets of the Company and a licensing agreement relating to the use and benefit of certain intangibles of the Company. The Credit Agreement is also guaranteed by the stockholders of the Company. The Credit Agreement contains certain covenants related to minimum requirements for the maintenance of tangible net worth plus subordinated indebtedness, maximum inventory to sales ratio, leverage ratio, consolidated earnings before interest and taxes to net interest expense, intercompany indebtedness and limitations on capital expenditures, investments and other domestic indebtedness. The Company is also restricted from making any distributions to the stockholders. At March 31, 1997, the Company is in compliance with all required covenants. Based on the borrowing rates currently available to the Company for notes payable and debt with similar terms and average maturities, management has estimated the fair value of long-term debt to be $192,330,000 at March 31, 1997 and $140,745,000 at March 31, 1996. NOTE G -- DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS At March 31, 1997, 1996 and 1995, the Company had outstanding foreign currency forward contracts which typically mature within one year. The purpose of these contracts is to hedge the Company's foreign exchange exposure with respect to foreign currency cash flows received from foreign subsidiaries. The Company does not speculate in the foreign exchange market. The forward contracts require the Company to sell foreign currencies at a contracted exchange rate. As provided by the Credit Agreement, the Company is committed to sell such foreign currencies to the bank. At March 31, 1997, 1996 and 1995 these sale commitments were $64,552,000, $74,523,000, and $86,865,000 respectively. Additionally, the Company is committed to sell $9,490,000, $12,801,000 and $16,708,000 in foreign currencies to another bank as of March 31, 1997, 1996 and 1995, respectively. Foreign exchange contracts are valued at the spot rate on March 31, 1997, 1996 and 1995, which approximates the quoted market rate. The difference between the spot rate at inception of the foreign currency forward contract and the spot rate at the consolidated balance sheets date results in an unrealized gain or loss. The premium or discount represents the difference between the contracted rate and the spot rate at the date of inception, and is amortized over the life of the contract on a F-48 146 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE G -- DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) straight-line basis. The following summarizes the notional amount of contracts, unrealized gains and losses and amortized premiums at March 31, 1997, 1996 and 1995: (In thousands)
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995 --------------------- ---------------------- ---------------------- U.S. UNREALIZED U.S. UNREALIZED U.S. UNREALIZED DOLLARS GAIN DOLLARS GAIN DOLLARS GAIN CURRENCY EQUIV. (LOSS) EQUIV. (LOSS) EQUIV. (LOSS) -------- ------- ---------- ------- ----------- -------- ---------- British pound............. $22,053 $ (746) $19,990 $ 281 $ 28,664 $(1,218) Japanese yen.............. 15,034 1,490 23,278 2,035 26,131 (3,383) German mark............... 15,459 1,274 16,702 272 20,206 (1,632) French franc.............. 13,279 979 17,206 38 18,012 (1,095) Canadian dollar........... 6,054 95 7,692 (45) 8,013 79 Australian dollar......... 2,163 10 2,456 (133) 2,547 10 ------- ------ ------- ------ -------- ------- $74,042 3,102 $87,324 2,448 $103,573 (7,239) ======= ======= ======== Premium amortization...... 578 529 84 ------ ------ ------- $3,680 $2,977 $(7,155) ====== ====== =======
The unrealized gains or losses and amortized premiums will be offset by any foreign currency exchange gains or losses realized upon the settlement of the cash flows received from the foreign subsidiaries or through the translation of the foreign subsidiaries' financial statements, which are denominated in the various foreign currencies noted above. The unrealized gains or losses and amortized premiums are included in foreign exchange gain in the accompanying consolidated statements of income. The counterparties to these foreign currency transactions are major financial institutions and accordingly, the Company does not anticipate nonperformance by such counterparties. Additionally, the Company does not enter into leveraged derivative transactions. NOTE H -- INVESTMENT IN JOINT VENTURES In February 1995, Coulter Pharmaceutical, Inc. ("CPI"), was organized and established for the purpose of researching, developing and marketing certain potential cancer-curing products. As of March 31, 1997, a joint-venture partner and other investors have contributed $63,624,000 in cash for an 84% ownership interest. The Company contributed certain technology (with no net book value) in exchange for a 16% and 51% ownership interest in CPI as of March 31, 1997 and 1996, respectively. As a result of cash contributions from certain outside investors, the Company recorded $3,306,000, $7,203,000, $1,384,000 and $1,667,000 as other income in the consolidated statements of income for the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995, respectively. CPI incurred losses of $14,219,000, $17,203,000, $4,718,000 and $216,000 for the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995, respectively. The Company's proportionate share of such losses were $2,209,000, $3,998,000, $2,540,000 and $145,000 and have been recorded as other expense in the consolidated statements of operations for the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995, respectively. Management believes that the Company has the ability to significantly influence the operating and financial policies of CPI. CPI executed a public offering of its stock during 1997. At March 31, 1997, the market value of the Company's investment in CPI totalled $15,203,000. This amount exceeds the carrying value of the Company's investment by $11,649,000. In February 1997, Coulter Cellular Therapies, Inc. ("CCTI") was organized and established for the purpose of researching, developing and marketing medical technologies to treat cancer using cellular F-49 147 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE H -- INVESTMENT IN JOINT VENTURES (CONTINUED) therapeutic monoclonal antibodies. The Company contributed certain technology (with no net book value) in exchange for a 68% ownership interest in CCTI. A joint-venture partner contributed cash of $4,675,000 in exchange for the remaining 32%. As a result of the joint-venture partner's contribution, the Company recorded $3,179,000 as other income in the consolidated statements of operations at March 31, 1997. The remaining contribution of $1,496,000 was recorded as minority interest. From February 1997 to September 1997, CCTI was consolidated with the Company; however, at October 31, 1997, CCTI was accounted for using the equity method of accounting. CCTI incurred losses of $1,935,000 and $246,000 for the seven months ended October 31, 1997 and for the two months ended March 31, 1997, respectively, whereby the Company's proportionate share of $1,316,000 and $167,000, respectively, were charged to the consolidated statements of operations for the seven months ended October 31, 1997 and for the year ended March 31, 1997, respectively. At March 31, 1997, CCTI had a cash balance of $4,358,000; other assets of $221,000; and accrued liabilities of $150,000 which are included in the consolidated balance sheets at March 31, 1997. In October 1997, the Board of Directors declared a dividend-in-kind to the stockholders consisting of the common stock of both CPI and CCTI, 1,666,666 and 4,900,000 shares, respectively. Such stock had a book value of $5,833,000 at October 31, 1997. NOTE I -- BUSINESS ACQUISITION On June 30, 1995, the Company acquired Immunotech, S.A. and subsidiaries ("IOT") which is engaged in the research, development, manufacturing and distribution of monoclonal antibodies. The principal office of IOT is located in Marseille, France. This business acquisition was accounted for under the purchase method of accounting. The total cost of this acquisition was $25,444,000 which exceeded the fair value of net assets acquired of IOT by $13,195,000. The excess of cost over fair value of net assets acquired (goodwill) is recorded in other assets in the consolidated balance sheets and is being amortized on a straight-line basis over twenty years. The Company acquired 97% of the common stock and 100% of the outstanding warrants of IOT. The purchase price was paid in cash, except for $2,000,000 which will be paid in two equal interest-free installments in fiscal years 1998 and 1999. The unpaid purchase price is included in current and long-term debt in the consolidated balance sheets. The following summarizes the results of operations of the Company on a proforma basis (unaudited) with the assumption that IOT was acquired on April 1, 1994 (In thousands):
FOR THE YEAR ENDED ---------------------- MARCH 31, MARCH 31, 1996 1995 --------- --------- Net sales...................................... $702,803 $692,199 ======== ======== Net income..................................... $ 33,681 $ 18,265 ======== ========
NOTE J -- SETTLEMENT OF PATENT INFRINGEMENT In November 1993, the Company agreed to pay a plaintiff $8,000,000 as consideration to release and discharge the Company from any claims, liabilities and damage caused by the infringement of certain patents. This amount was recorded as a settlement of such infringement in the year ended March 31, 1994. Payments of $8,000,000 have been remitted through March 31, 1997. F-50 148 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE J -- SETTLEMENT OF PATENT INFRINGEMENT (CONTINUED) Under the terms of the settlement, the Company is also obligated to pay royalties on the net sales of certain equipment and related products at a minimum of $1,000,000 per year through August 1998. For the seven month period ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995 royalty expense of $1,012,000, $1,722,000, $1,895,000 and $1,848,000, respectively, was recorded in the consolidated statements of income. NOTE K -- RESTRUCTURING CHARGES For the year ended March 31, 1997, the Company recorded estimated domestic and foreign restructuring charges of $5,947,000. The objective of restructuring is to reduce future costs and improve operating results. Restructuring included the termination of certain employees and the discontinuance of certain research and development activities. The charges consisted primarily of severance and retirement incentive pay; the cost of extended employees' benefits; and consulting fees. The Company believes that the accrued restructuring charge is adequate to cover associated costs. These restructuring charges were included in accrued liabilities in the consolidated balance sheets at March 31, 1997. The function and number of employees terminated were as follows:
FUNCTION NUMBER OF EMPLOYEES -------- ------------------- Administration.................................... 33 Research & Development............................ 46 Sales & Marketing................................. 25 Manufacturing..................................... 46 --- 150 ===
NOTE L -- CHANGE IN STOCKHOLDERS' EQUITY In August and September 1996, the Company purchased 323 shares of its Class A and 308 shares of Class B common stock from the estate of a stockholder. The purchase price per share was $12,222 and $12,338, respectively, resulting in a total purchase price of $7,747,000 paid in cash. The shares were subsequently retired and cancelled. In October 1997, the Company sold 216 shares of its Class A common stock to the estate of a stockholder. The price per share was $12,222 and resulted in a total sale price of approximately $2,640,000 in cash. NOTE M -- BENEFIT PLANS Postretirement Benefits for Domestic Employees The Company provides a Healthcare Benefits and Life Insurance Plan (the "Plan") for retired domestic employees. Substantially all of the Company's employees become eligible for benefits when they reach the age of 55 and meet certain service requirements while working for the Company. Generally, healthcare benefits are provided to individuals when they or their spouse become eligible for Medicare benefits. Prior to eligibility for Medicare, retirees may elect coverage if they pay the required participants' contribution. The domestic accumulated postretirement benefit obligation represents the present value of the estimated future benefits payable to current retirees and a pro rata portion of estimated benefits payable to active employees after retirement. The domestic postretirement benefit cost recorded in the consolidated statements F-51 149 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M -- BENEFIT PLANS (CONTINUED) of income for the years ended March 31, 1997, 1996 and 1995 includes the following components (In thousands):
FOR THE SEVEN FOR THE YEAR ENDED MARCH 31, MONTHS ENDED ----------------------------- OCTOBER 31, 1997 1997 1996 1995 ---------------- ------- ------- ------- Service cost...................................... $ 468 $ 997 $ 810 $ 733 Interest cost..................................... 946 2,221 2,040 2,024 ------ ------ ------ ------ $1,414 $3,218 $2,850 $2,757 ====== ====== ====== ======
The Company funds the postretirement benefit costs each year through the payment of medical claims and insurance premiums. The following table sets forth the amounts recognized in the Company's consolidated balance sheets at March 31, 1997 and 1996 (In thousands):
1997 1996 ------- ------- Accumulated postretirement benefit obligation: Retirees............................................... $13,815 $16,643 Fully eligible active participants..................... 5,194 4,133 Other active participants.............................. 11,151 7,445 ------- ------- 30,160 28,221 Unrecognized loss...................................... (1,598) (1,925) ------- ------- Accrued postretirement benefit costs................... $28,562 $26,296 ======= =======
Annual net periodic postretirement benefit costs were calculated using the assumed discount rate of 7.50% for the seven months ended October 31, 1997, 7.75% for fiscal 1997, 8.50% for fiscal 1996 and 8.25% for fiscal 1995. The accumulated postretirement benefit obligation was determined by using a discount rate of 7.75% at March 31, 1997 and 1996. If the healthcare cost trend rate increased by an additional 1.0%, the accumulated postretirement benefit obligation would have increased by $5,662,000 (or 19%) as of March 31, 1997 and $4,571,000 (or 16%) as of March 31, 1996. The aggregate of the service and interest cost would have increased by $334,000 (or 24%) for the seven months ended October 31, 1997, $826,000 (or 26%) for fiscal 1997, $707,000 (or 25%) for fiscal 1996 and $427,000 (or 16%) for fiscal 1995. Savings Incentive and Retirement Plus Plan for Domestic Employees The Coulter Corporation Savings Incentive and Retirement Plus Plan ("The Plan") was established on March 31, 1996 by the Company as an amendment and restatement of the Coulter Corporation Savings Incentive Plan established on July 1, 1984. The Plan was created to provide various benefits through savings and retirement contributions. The Plan meets the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal Revenue Code Sections 401(a), 401(k) and 501(a). The Plan is exempt from federal income taxation and has received a favorable tax determination letter from the Internal Revenue Service. The Savings Incentive Segment ("SI Segment") of The Plan seeks to provide retirement and other benefits for the employees, systematic savings, to accumulate funds on a tax advantageous basis and to meet some of the larger expenses incurred during their careers. The Company makes a matching contribution equal to 100% of the first 1% of the savings contributions made by the participant and 50% of the savings contribution from 2% to 6%. Savings contributions in excess of 6% of annual compensation are not matched by the Company. Participants' savings contributions and the Company's matching contribution are paid to the SI F-52 150 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M -- BENEFIT PLANS (CONTINUED) Segment on a monthly basis. For the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995, the Company's contributions to the SI Segment of the Plan were $2,750,000, $4,801,000, $4,553,000 and $4,511,000, respectively. The Retirement Plus Segment ("RP Segment") of the Plan is a defined contribution plan designed to provide retirement, disability and death benefits to employees. Participants may retire at normal retirement age (65) to receive benefits and those who terminate after completing five years of employment are fully vested in such benefits. Retirement benefits can be received at an earlier age. The employer's contributions are based on the age and salary levels of employees as defined in The Plan and are paid on a quarterly basis. Employees do not contribute to the RP Segment of The Plan. For the seven months ended October 31, 1997 and for the year ended March 31, 1997, the Company contributed $3,680,000 and $7,290,000, respectively, to the RP Segment of The Plan. Defined Benefit Plan for Domestic Employees On December 31, 1995 and March 31, 1996, the Company curtailed and terminated, respectively, its defined benefit plan (Coulter Corporation Pension Plan) for domestic employees. On January 1, 1996, the Coulter Corporation Retirement Plus Plan ("Plus Plan") was established as a defined contribution plan. The Plus Plan was funded by employees' rollover contributions from the terminated plan as well as quarterly contributions paid by the Company. For the three months ended March 31, 1996, the Company's contributions were $1,681,000. Effective March 31, 1996, the investment activity, administrative functions and governmental reporting of the Plus Plan was combined with the Savings Incentive Plan for improved effectiveness and efficiency. The termination of the defined benefit plan resulted in a gain of $3,776,000 which was recorded as other income in the consolidated statement of operations for the year ended March 31, 1996. At March 31, 1996, the unfunded defined benefit obligation of $12,270,000 was included in accrued liabilities in the consolidated balance sheets. Full and final payment of such obligation occurred in June 1996. Domestic defined benefit pension costs recorded in the consolidated statements of operations for the years ended March 31, 1996 and 1995 included the following components:
U.S. PLAN 1996 1995 ------- ------- (IN THOUSANDS) Service cost during the year................................ $ 2,914 $ 3,538 Interest on projected benefit obligation and service cost... 4,889 5,675 Expected return on Plan assets.............................. (3,039) (2,968) Amortization of unrecognized net assets at transition....... (237) (315) Loss on net assets during the year deferred for future recognition............................................... -- (713) Amortization of unrecognized prior service cost and losses.................................................... 157 259 ------- ------- $ 4,684 $ 5,476 ======= =======
F-53 151 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M -- BENEFIT PLANS (CONTINUED) The following sets forth the unfunded status of the domestic plan at March 31, 1996:
U.S. PLAN 1996 -------------- (IN THOUSANDS) Actuarial present value of benefit obligation: Vested benefits........................................... $16,059 Nonvested benefits........................................ 566 ------- Accumulated benefit obligation.............................. 16,625 Fair value of assets held in the Plan....................... (4,355) ------- Unfunded defined benefit obligation included in accrued liabilities............................................... $12,270 =======
The above amounts of the defined benefit obligation were measured based on the following assumptions:
U.S. PLAN 1996 --------- Discount rate: Pre-retirement............................................ 7.4% Post-retirement........................................... 7.4%
Defined Benefit Plans for Foreign Employees The Company also sponsors noncontributory and contributory defined benefit plans (the "Plans") covering certain foreign employees. The Plans call for benefits to be paid to eligible employees at retirement based primarily upon age, years of service and compensation rate. Disability and death benefits are also available. The Company's funding policy is to contribute as required by income tax laws. Contributions to the Plans reflect benefits attributed to employees' services to date, as well as services expected to be earned in the future. Assets of the Plans consist primarily of common and preferred stocks, investment grade corporate bonds, government obligations and short-term money market instruments. Net foreign pension costs recorded in the Company's consolidated statements of income included the following components for the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995:
FOREIGN PLANS -------------------------------------------------- FOR THE SEVEN MONTHS FOR THE YEAR ENDED MARCH 31, ENDED OCTOBER 31, ----------------------------- 1997 1997 1996 1995 ----------------- ------- ------- ------- (IN THOUSANDS) Service cost during the year........................ $ 1,313 $ 2,299 $ 2,221 $ 2,065 Interest on projected benefit obligation and service cost........................ 1,728 2,805 2,795 2,317 Expected return on Plans assets...................... (2,089) (4,387) (5,701) (2,612) Amortization of unrecognized net assets at transition.... (97) (143) (115) (119) (Loss) gain on net assets during the year deferred for future recognition.......... (265) 818 2,875 305 ------- ------- ------- ------- $ 590 $ 1,392 $ 2,075 $ 1,956 ======= ======= ======= =======
F-54 152 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M -- BENEFIT PLANS (CONTINUED) The following sets forth the funded status of the Plans and the amounts shown in the Company's consolidated balance sheets at March 31, 1997 and 1996:
FOREIGN PLANS ----------------- 1997 1996 ------- ------- (IN THOUSANDS) Actuarial present value of benefit obligation: Vested benefits............................................ $28,824 $25,305 Nonvested benefits......................................... 2,415 2,322 ------- ------- Accumulated benefit obligation............................. 31,239 27,627 Effect of anticipated future compensation levels........... 9,617 8,981 ------- ------- Projected benefit obligation............................... 40,856 36,608 Fair value of assets held in the Plans..................... 45,006 39,563 ------- ------- Funded excess of projected benefit obligation over fair value of assets held in the Plans........................ (4,150) (2,955) Net unrecognized gain from past experience different from that assumed and effects of changes in assumptions....... 10,076 8,889 Unrecognized prior service cost............................ (918) (667) Unrecognized net assets at transition...................... 1,874 1,652 Pension costs included in accrued liabilities.............. (151) (395) ------- ------- Accrued pension costs...................................... $ 6,731 $ 6,524 ======= =======
The above amounts of the projected benefit obligation are measured based on the following assumptions:
FOR THE SEVEN MONTHS FOR THE YEAR ENDED MARCH 31, ENDED OCTOBER 31, ----------------------------- 1997 1997 1996 -------------------- ------------- ------------- Discount rate: Pre-retirement.................................... 4.0 - 7.0% 4.0 - 8.0% 5.5 - 8.5% Post-retirement................................... 4.0 - 7.0% 4.0 - 8.0% 5.5 - 8.5% Weighted-average rate of compensation increase...... 3.0 - 5.0% 3.0 - 6.0% 3.0 - 6.5% Weighted-average of expected long-term rate of return on Plans assets............................ 3.0 - 8.0% 3.0 - 8.5% 3.0 - 8.5% Straight-line amortization of unrecognized net assets at transition.............................. 16 - 20 yrs. 16 - 20 yrs. 16 - 20 yrs.
NOTE N -- SIGNIFICANT CUSTOMER During the seven months ended October 31, 1997 and the years ended March 31, 1997, 1996 and 1995, a customer accounted for approximately 17%, 17%, 16%, and 14%, respectively, of total Company revenues. At March 31, 1997 and 1996 amounts due from this customer aggregated $22,726,000 and $19,766,000 and are included in accounts receivable in the accompanying consolidated balance sheets. F-55 153 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE O -- SALE OF THE COMPANY Effective November 1, 1997, the Company was acquired by Beckman Instruments, Inc. (Beckman) who purchased 100% of the outstanding shares of the Company's common stock pursuant to a Stock Purchase Agreement, dated August 29, 1997. The purchase price was $875,000,000 in cash, the assumption of approximately $180,000,000 of indebtedness and $100,000,000 of other obligations. As of October 31, 1997, the Company recorded a payable due to Beckman for $109,674,000 since certain of the Company's indebtedness had been extinguished by Beckman. No repayment terms have been determined, however interest of 7% per annum is being charged to the Company. NOTE P -- INCOME TAXES The provision for income taxes for the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995, includes the following components:
FOR THE SEVEN MONTHS FOR THE YEAR ENDED MARCH 31, ENDED OCTOBER 31, ---------------------------- 1997 1997 1996 1995 -------------------- ------- ------- ------ (IN THOUSANDS) Current income tax expense U.S. Federal................................ $ 4,989 $ 1,230 $ 143 $1,932 U.S. state and local........................ 1,766 383 200 499 Foreign..................................... 5,875 8,490 9,007 4,791 ------- ------- ------- ------ 12,630 10,103 9,350 7,222 ------- ------- ------- ------ Deferred income tax (benefit) expense U.S. Federal................................ (3,882) (4,000) (4,200) -- U.S. state and local........................ (405) (500) (600) -- Foreign..................................... 715 (70) 78 285 ------- ------- ------- ------ (3,572) (4,570) (4,722) 285 ------- ------- ------- ------ Provision for income taxes.................... $ 9,058 $ 5,533 $ 4,628 $7,507 ======= ======= ======= ======
F-56 154 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE P -- INCOME TAXES (CONTINUED) The following is a summary of the Company's deferred tax asset (liability) positions at March 31, 1997 and 1996 (In thousands):
1997 1996 ---------------------- ---------------------- CURRENT NON-CURRENT CURRENT NON-CURRENT ------- ----------- ------- ----------- Nondeductible reserves: Postretirement benefits...................... $ -- $ 10,853 $ -- $ 9,992 Warranty and installation.................... 4,921 -- 4,112 -- Inventories.................................. 5,407 -- 4,860 -- Vacation..................................... 4,093 -- 3,911 -- Unrealized foreign exchange gain............. (750) -- (1,014) -- Other........................................ 5,463 5,094 2,977 2,662 Excess of book over tax basis of net assets used in leasing operations................... -- (11,669) -- (13,016) Excess of book over tax basis of investments in joint-ventures............................... -- (3,563) -- -- U.S. tax credit carryforwards.................. 900 19,900 -- 25,000 ------- -------- ------- -------- 20,034 20,615 14,846 24,638 Valuation allowance............................ (6,392) (21,205) (4,923) (25,457) ------- -------- ------- -------- $13,642 $ (590) $ 9,923 $ (819) ======= ======== ======= ========
The current portion of deferred tax assets is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. At March 31, 1997, it includes $10,700,000 related to domestic operations and $2,942,000 related to foreign operations (primarily operations in Japan). At March 31, 1997, the non-current portion consists of a deferred tax asset of $3,524,000, relating to operations in France and the U.S., which is included in other assets, and a deferred tax liability of $4,114,000, which is reported as a separate line item on the accompanying consolidated balance sheets. The Company has recognized its domestic current and non-current deferred tax assets derived from temporary books/tax differences as it expects to generate sufficient taxable income in the future to realize these benefits. Such deferred tax assets have been calculated using regular tax rates with a corresponding reduction, through the valuation allowance, to reflect the deferred tax assets at the lower alternative minimum tax rate. Domestic deferred tax assets derived from tax credit carryforwards in the amount of $900,000 are included in prepaid expenses, as such credits are projected to be utilized next year. Other Domestic deferred tax assets derived from tax credit carryforwards have been fully reserved, however, through the valuation allowance, due to uncertainties regarding the Company's ability to generate sufficient taxable income in the U.S. and limitations on the recognition of certain credit carryforwards under U.S. tax laws. The deferred tax assets relating to operations in France and Japan have been recognized, as in the opinion of management it is more likely than not that the foreign subsidiaries to which the deferred assets relate will generate sufficient taxable income to realize such deferred tax assets. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of the future taxable income necessary to realize such assets are reduced. F-57 155 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE P -- INCOME TAXES (CONTINUED) Below is a summary showing the amounts and expiration dates of the tax credit carryforwards available on a tax basis to reduce future U.S. consolidated federal income tax liabilities (In thousands):
YEAR OF FOREIGN TAX INVESTMENT TAX R & D TAX EXPIRATION CREDIT CREDIT CREDIT - ---------- ----------- -------------- --------- 1999 $1,158 $ -- $ -- 2000 -- 1 1,400 2001 1,655 173 100 2002 -- -- 500 2003 -- -- 300 2004 -- -- 1,000 2005 -- -- 1,100 2006 -- -- 600 2007 -- -- 900 2008 -- -- 1,200 2009 -- -- 1,500 2010 -- -- 2,100 2011 -- -- 600 2012 -- -- 1,600 ------ ---- ------- $2,813 $174 $12,900 ====== ==== =======
On an Alternative Minimum Tax ("AMT") basis, the carryforwards are the same as above, except for the foreign tax credit. The AMT foreign tax credit carryforward is $2,300,000 expiring in 1998, $2,200,000 expiring in 1999, $700,000 expiring in 2000, $2,400,000 expiring in 2001 and $1,463,000 expiring in 2002. The minimum tax credit carryforward is $4,900,000 and may be carried forward indefinitely. The difference between the reported tax provision and the provision computed by applying the statutory U.S. federal income tax rate currently in effect to income before income taxes for the seven months ended October 31, 1997 and for each of the three years ended March 31, 1997, is primarily due to the effect of AMT, state and foreign income tax rates and the tax impact of the gain on distribution of stock to shareholders of $5,332,000 for the seven months ended October 31, 1997. Additionally, the Company recognized deferred tax benefits related to changes in the valuation allowance of $2,300,000, $4,500,000, $4,800,000 and $1,800,000 for the seven months ended October 31, 1997 and for the years ended March 31, 1997, 1996 and 1995, respectively. A provision has not been made for U.S. income taxes, or additional foreign income taxes, on undistributed earnings of foreign subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings, however, the Company believes that U.S. foreign tax credits would largely eliminate any U.S. tax and offset any foreign tax on such earnings. The Company's U.S. federal income tax returns for the years 1991 through 1993 are currently under review by the Internal Revenue Service ("IRS"). In the opinion of management, the final result of the IRS's audit will not have a material adverse effect on the Company's financial position or results of operations. The Company's subsidiary in Brazil is contesting a tax assessment issued several years ago, covering 1989 through 1991. At this time, it is not possible to estimate the amount of any additional tax liability. However, in the opinion of management, the ultimate liability will be substantially offset by available net operating loss carryforwards and will not have a material impact on the Company's financial position and results of operations. F-58 156 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE Q -- COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases a substantial portion of its warehouse, office space, production and office equipment under long-term, noncancellable operating leases. Rental expense was approximately $10,111,000 in the seven months ended October 1997, $11,350,000 in fiscal 1997, $11,744,000 in fiscal 1996 and $11,722,000 in fiscal 1995. As of March 31, 1997, commitments for base rentals for operating leases and future payments for computer services rendered by an independent management information systems company, excluding taxes and insurance, are as follows (In thousands): 1998.............................................. $ 6,232 1999.............................................. 4,065 2000.............................................. 1,136 2001.............................................. 847 2002.............................................. 646 Thereafter........................................ 1,407 ------- $14,333 =======
Legal Matters In January, 1996, the Company notified Hematronix, Inc. ("Hematronix"), a competitive reagent manufacturer, that it believed Hematronix was selling certain reagents and controls that infringed certain Company owned patents. In response to these claims by the Company, Hematronix filed a complaint on April 15, 1996 in the United States District Court for the Eastern District of California against the Company. The complaint seeks a declaratory judgment that certain patents of the Company are invalid and thus not infringed. The complaint also includes antitrust and related business tort claims regarding the Company's sales and leasing activities. Currently at issue are four (4) United States patents and the various antitrust claims raised by Hematronix. The Company has counterclaimed that Hematronix has willfully infringed each of the patents at issue. In addition, the Company has answered Hematronix's antitrust complaint and denied violation of any of the antitrust laws or business tort claims set forth by Hematronix in the complaint. A trial is set for 1998. The patent infringement matter will be tried first and the antitrust issues will be tried in a separate trial. The Company's management believes that it will prevail with regard to the infringement matters in the patent actions, and that as a result of such finding the antitrust case will not go forward. The Company is seeking a permanent injunction with regard to the patents claimed to be infringed and reasonable royalties resulting from such infringement. Certain other claims, suits and complaints in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, all such matters are without merit or are of such kind and involve such amounts that their resolution, net of related insurance coverage, would not have a material effect on the consolidated financial position or results of operations of the Company. Long Term Incentive Plan Effective April 1, 1995, the Company established a Long Term Performance Plan (the "LTPP") to inspire and reinforce outstanding performance in selected key employees whose efforts contribute substantially to the achievement of the Company's long term goals and objectives. The LTPP provides for financial awards to certain employees based on the Company's achievement of certain financial objectives during the cumulative period from April 1, 1995 to March 31, 1998. The Company has accrued $3,800,000 and $1,500,000 related to the LTPP as of March 31, 1997 and 1996, respectively. These amounts are included in accrued liabilities in the accompanying consolidated balance sheets. F-59 157 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT On March 4, 1998, Beckman Instruments, Inc (the Company's parent subsequent to the acquisition discussed in note O to the financial statements) issued $160 million of 7.10% Senior Notes due 2003 and $240 million of 7.45% Senior Notes due 2008 (the "Offering"). In connection with the Offering, certain subsidiaries of Coulter Corporation jointly, fully, severally, and unconditionally guaranteed the Senior notes. Supplemental condensed financial information of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries, each on a combined basis is presented below. These financial statements are prepared using the equity method of accounting for the Guarantor Subsidiaries' investments in subsidiaries. This supplemental financial information should be read in conjunction with the Consolidated Financial Statements.
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 1997 Assets: Cash and cash equivalents.................... $ 9,576 $ 19,206 $ 28,782 Accounts receivable, net..................... 71,168 118,316 189,484 Inventories.................................. 82,459 43,494 $ (8,451) 117,502 Other assets................................. 52,248 26,249 (33,299) 45,198 -------- -------- --------- -------- Total current assets................. 215,451 207,265 (41,750) 380,966 Property, plant, and equipment, net.......... 74,789 56,270 131,059 Other assets................................. 143,932 70,970 (127,879) 87,023 -------- -------- --------- -------- Total assets......................... $434,172 $334,505 $(169,629) $599,048 ======== ======== ========= ======== Liabilities: Notes payable and current maturities of long-term debt............................ 36,743 20,119 56,862 Accounts payable and accrued liabilities..... 82,293 49,887 132,180 Other liabilities............................ 28,053 61,351 (33,299) 56,105 -------- -------- --------- -------- Total current liabilities............ 147,089 131,357 (33,299) 245,147 Long-term debt, less current maturities...... 103,076 46,942 150,018 Other liabilities............................ 33,493 24,359 (5,958) 51,894 -------- -------- --------- -------- Total liabilities.................... 283,658 202,658 (39,257) 447,059 Minority interests............................. 1,417 1,475 2,892 Stockholders' equity........................... 149,097 130,372 (130,372) 149,097 -------- -------- --------- -------- Total liabilities and stockholders' equity............................. $434,172 $334,505 $(169,629) $599,048 ======== ======== ========= ========
F-60 158 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT (CONTINUED)
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 1996 Assets: Cash and cash equivalents.................... $ 9,109 $ 32,177 $ 41,286 Accounts receivable, net..................... 59,880 113,627 173,507 Inventories.................................. 69,158 43,039 $ (8,331) 103,866 Other assets................................. 49,788 19,267 (27,721) 41,334 -------- -------- --------- -------- Total current assets................. 187,935 208,110 (36,052) 359,993 Property, plant, and equipment, net.......... 64,654 41,261 105,915 Other assets................................. 149,929 86,807 (142,600) 94,136 -------- -------- --------- -------- Total assets......................... $402,518 $336,178 $(178,652) $560,044 ======== ======== ========= ======== Liabilities: Notes payable and current maturities of long-term debt............................ 39,549 24,010 63,559 Accounts payable and accrued expenses........ 96,837 51,628 148,465 Other liabilities............................ 26,938 68,164 (35,643) 59,459 -------- -------- --------- -------- Total current liabilities............ 163,324 143,802 (35,643) 271,483 Note payable and long-term debt, less current maturities................................ 62,159 31,286 93,445 Other liabilities............................ 31,249 18,777 (1,868) 48,158 -------- -------- --------- -------- Total liabilities.................... 256,732 193,865 (37,511) 413,086 Minority interests............................. 703 1,172 1,875 Stockholders' equity........................... 145,083 141,141 (141,141) 145,083 -------- -------- --------- -------- Total liabilities and stockholders' equity............................. $402,518 $336,178 $(178,652) $560,044 ======== ======== ========= ========
F-61 159 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT (CONTINUED)
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997 Net sales...................................... $259,443 $212,473 $ (84,428) $387,488 Operating costs and expenses Cost of sales................................ 150,642 139,619 (86,287) 203,974 Selling, general, and administrative expenses.................................. 78,567 54,194 132,761 Research and development charges............. 40,016 403 40,419 -------- -------- --------- -------- Operating (loss) income................. (9,782) 18,257 1,859 10,334 Non operating (income) expenses................ (11,397) (62) 13,757 2,298 -------- -------- --------- -------- Income before provision for income taxes....... 1,615 18,319 (11,898) 8,036 Provision for income taxes................... 2,637 6,420 1 9,058 -------- -------- --------- -------- Net (loss) income.............................. $ (1,022) $ 11,899 $ (11,899) $ (1,022) ======== ======== ========= ======== CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1997 Net sales...................................... $464,020 $392,310 $(155,443) $700,887 Operating costs and expenses Cost of sales................................ 272,631 262,183 (161,390) 373,424 Selling, general, and administrative expenses.................................. 118,545 99,345 217,890 Research and development charges............. 80,276 5,511 85,787 Restructuring charges........................ 5,002 945 5,947 -------- -------- --------- -------- Operating (loss) income................. (12,434) 24,326 5,947 17,839 Nonoperating (income) expenses................. (24,141) 2,116 19,723 (2,302) -------- -------- --------- -------- Income before provision for income taxes....... 11,707 22,210 (13,776) 20,141 Provision for income taxes................... (2,901) 8,668 (234) 5,533 -------- -------- --------- -------- Net income..................................... $ 14,608 $ 13,542 $ (13,542) $ 14,608 ======== ======== ========= ========
F-62 160 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT (CONTINUED)
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------- ------------ ------------ CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996 Net sales...................................... $434,989 $396,092 $(145,761) $685,320 Operating costs and expenses Cost of sales................................ 240,735 259,733 (151,276) 349,192 Selling, general, and administrative expenses.................................. 116,381 100,539 216,920 Research and development charges............. 83,748 3,604 87,352 -------- -------- --------- -------- Operating (loss) income................. (5,875) 32,216 5,515 31,856 Nonoperating (income) expenses................. (34,693) 3,714 25,168 (5,811) -------- -------- --------- -------- Income before provision for income taxes....... 28,818 28,502 (19,653) 37,667 Provision for income taxes................... (4,221) 9,340 (491) 4,628 -------- -------- --------- -------- Net income..................................... $ 33,039 $ 19,162 $ (19,162) $ 33,039 ======== ======== ========= ======== CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995 Net sales...................................... $444,369 $354,539 $(144,651) $654,257 Operating costs and expenses Cost of sales................................ 244,969 245,324 (149,799) 340,494 Selling, general, and administrative expenses.................................. 114,329 90,496 204,825 Research and development charges............. 73,382 72 73,454 -------- -------- --------- -------- Operating income........................ 11,689 18,647 5,148 35,484 Nonoperating (income) expenses................. (8,337) 901 18,090 10,654 -------- -------- --------- -------- Income before provision for income taxes....... 20,026 17,746 (12,942) 24,830 Provision for income taxes................... 2,703 5,002 (198) 7,507 -------- -------- --------- -------- Net (loss) income.............................. $ 17,323 $ 12,744 $ (12,744) $ 17,323 ======== ======== ========= ========
F-63 161 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT (CONTINUED)
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES CONSOLIDATED ------------ ------------- ------------ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SEVEN MONTHS ENDED OCTOBER 31, 1997 Net cash provided by operating activities................. $ 5,095 $ 31,677 $ 36,772 -------- --------- --------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment..... 894 1,089 1,983 Capital expenditures.................................... (12,734) (5,242) (17,976) Finance lease receivables originated.................... (19,839) 257 (19,582) Principal payments received from finance lease receivables.......................................... 19,225 (3,933) 15,292 Dividends (paid) received............................... 7,768 (7,768) -- Investments and acquisitions............................ 646 (646) -- Decrease in minority interests.......................... (1,417) (114) (1,531) -------- --------- --------- Net cash used by investing activities..................... (5,457) (16,357) (21,814) -------- --------- --------- Cash flows from financing activities: Proceeds from long-term debt............................ 7,879 39,960 47,839 Principal payments of long-term debt.................... (59,291) (118,966) (178,257) Principal payments of note payable due to stockholder... (18,550) 18,550 -- Proceeds from Beckman Instruments, Inc.................. 109,674 109,674 Proceeds from sale of stock............................. 2,640 2,640 Net (payments) proceeds from notes payable and foreign bank overdraft facilities............................ (57,603) 57,304 (299) Capitalization of intercompany debt..................... 6,037 (6,037) -- -------- --------- --------- Net cash used in financing activities..................... (9,214) (9,189) (18,403) -------- --------- --------- Effect of exchange rate changes on cash and cash equivalents............................................. -- (586) (586) -------- --------- --------- Net (decrease) increase in cash and cash equivalents...... (9,576) 5,545 (4,031) Cash and cash equivalents at beginning of year............ 9,576 19,206 28,782 -------- --------- --------- Cash and cash equivalents at end of year.................. $ -- $ 24,751 $ 24,751 ======== ========= =========
F-64 162 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT (CONTINUED)
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES CONSOLIDATED ------------ ------------- ------------ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 1997 Net cash provided by (used in) operating activities....... $(22,524) $ 14,162 $ (8,362) -------- --------- --------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment..... 1,348 2,234 3,582 Capital expenditures.................................... (26,731) (31,286) (58,017) Finance lease receivables originated.................... (10,833) (10,833) Principal payments received from finance lease receivables.......................................... 15,339 15,339 Dividends (paid) received............................... 14,628 (14,628) -- Investments and acquisitions............................ (724) 724 -- Increase in minority interests.......................... 714 303 1,017 -------- --------- --------- Net cash used in investing activities..................... (6,259) (42,653) (48,912) -------- --------- --------- Cash flows from financing activities: Proceeds from long-term debt............................ 212,001 26,157 238,158 Principal payments of long-term debt.................... (170,890) (11,384) (182,274) Principal payments of note payable due to stockholder... (3,000) (3,000) Purchase of treasury stock.............................. (7,747) (7,747) Bank overdraft facilities............................... 2,030 2,030 Capitalization of intercompany debt..................... (1,114) 1,114 -- -------- --------- --------- Net cash provided by financing activities................. 29,250 17,917 47,167 -------- --------- --------- Effect of exchange rate changes on cash and cash equivalents............................................. -- (2,397) (2,397) -------- --------- --------- Net (decrease) increase in cash and cash equivalents...... 467 (12,971) (12,504) Cash and cash equivalents at beginning of year............ 9,109 32,177 41,286 -------- --------- --------- Cash and cash equivalents at end of year.................. $ 9,576 $ 19,206 $ 28,782 ======== ========= =========
F-65 163 COULTER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE R -- SUBSEQUENT EVENT (CONTINUED)
GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES CONSOLIDATED ------------ ------------- ------------ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 1996 Net cash provided by operating activities................. $ 5,659 $ 42,515 $ 48,174 -------- --------- --------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment..... 1,569 2,545 4,114 Capital expenditures.................................... (18,693) (12,374) (31,067) Finance lease receivables originated.................... (17,685) (17,685) Principal payments received from finance lease receivables.......................................... 29,677 29,677 Dividends (paid) received............................... 9,595 (9,595) -- Payment for business acquisition, net of cash acquired............................................. (5,950) (16,248) (22,198) (Decrease) increase in minority interests............... (59) 376 317 -------- --------- --------- Net cash used in investing activities..................... (1,546) (35,296) (36,842) -------- --------- --------- Cash flows from financing activities: Proceeds from long-term debt............................ 124,575 17,494 142,069 Principal payments of long-term debt.................... (120,357) (14,262) (134,619) Bank overdraft facilities............................... (2,890) (2,890) Capitalization of intercompany debt..................... (6,990) 6,990 -- -------- --------- --------- Net cash (used in) provided by financing activities....... (2,772) 7,332 4,560 -------- --------- --------- Effect of exchange rate changes on cash and cash equivalents............................................. 41 (9,605) (9,564) -------- --------- --------- Increase in cash and cash equivalents..................... 1,382 4,946 6,328 Cash and cash equivalents at beginning of year............ 7,727 27,231 34,958 -------- --------- --------- Cash and cash equivalents at end of year.................. $ 9,109 $ 32,177 $ 41,286 ======== ========= ========= CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 1995 Net cash provided by operating activities................. $ 44,156 $ 7,245 $ 51,401 -------- --------- --------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment..... 4,224 318 4,542 Capital expenditures.................................... (26,655) (4,431) (31,086) Finance lease receivables originated.................... (22,098) (22,098) Principal payments received from finance lease receivables.......................................... 27,772 27,772 Dividends (paid) received............................... 5,943 (5,943) -- Increase in minority interests.......................... 762 762 -------- --------- --------- Net cash used in investing activities..................... (10,052) (10,056) (20,108) -------- --------- --------- Cash flows from financing activities: Proceeds from long-term debt............................ 64,610 9,836 74,446 Principal payments of long-term debt.................... (96,549) (12,003) (108,552) Bank overdraft facilities............................... 4,623 4,623 -------- --------- --------- Net cash (used in) provided by financing activities....... (31,939) 2,456 (29,483) -------- --------- --------- Effect of exchange rate changes on cash and cash equivalents............................................. 274 11,647 11,921 -------- --------- --------- Net increase in cash and cash equivalents................. 2,439 11,292 13,731 Cash and cash equivalents at beginning of year............ 5,288 15,939 21,227 -------- --------- --------- Cash and cash equivalents at end of year.................. $ 7,727 $ 27,231 $ 34,958 ======== ========= =========
F-66 164 COULTER CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (IN THOUSANDS)
1997 1996 -------- -------- NET SALES................................................... $330,279 $316,749 COST OF SALES............................................... 172,651 163,431 -------- -------- Gross profit...................................... 157,628 153,318 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 108,262 108,890 RESEARCH AND DEVELOPMENT EXPENSES........................... 36,873 43,010 -------- -------- Operating income.................................. 12,493 1,418 -------- -------- OTHER EXPENSE (INCOME): Interest expense.......................................... 6,541 6,030 Interest income........................................... (4,204) (4,053) Foreign exchange gain..................................... (2,092) (72) Other, net................................................ 3,460 (848) -------- -------- 3,705 1,057 -------- -------- Income before provision for income taxes.......... 8,788 361 PROVISION FOR INCOME TAXES.................................. 2,374 95 -------- -------- Net income........................................ $ 6,414 $ 266 ======== ========
The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements. F-67 165 COULTER CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (IN THOUSANDS)
1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $ 6,414 $ 266 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization........................... 12,478 11,828 Provision for doubtful accounts......................... 1,526 1,140 Provision for inventory obsolescence.................... 7,146 6,451 Provision for postretirement benefit costs.............. 1,541 1,622 Deferred income tax benefit............................. (3,474) (5,240) Loss on disposal of property, plant and equipment....... 335 146 Unrealized foreign exchange loss on forward contracts... 1,459 983 CHANGE IN ASSETS AND LIABILITIES: (Increase) decrease in -- Accounts receivable..................................... 28,867 16,642 Inventories............................................. (10,270) (27,933) Refundable income taxes................................. (894) (46) Prepaid expenses and other current assets............... (1,780) (2,316) Other assets............................................ (3,018) (823) Increase (decrease) in -- Accounts payable........................................ (7,136) (10,876) Accrued liabilities..................................... (493) (26,552) Income taxes payable.................................... 1,789 926 Estimated warranty costs................................ (1,833) (2,497) Unearned service contract revenue....................... (1,438) (407) Accrued pension costs................................... 345 14 Accrued postretirement benefit costs.................... (238) (326) Long-term unearned service contract revenue............. (1,565) (967) -------- -------- Net cash provided by (used in) operating activities..... 29,761 (37,965) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment....... 2,549 4,076 Capital expenditures...................................... (14,367) (36,899) Finance receivables originated............................ (14,126) (4,730) Principal payments received from finance receivables...... 13,318 10,129 Decrease in minority interests............................ (777) (508) -------- -------- Net cash used in investing activities............... (13,403) (27,932) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt.............................. 32,498 86,461 Principal payments of long-term debt...................... (47,812) (30,167) Principal payments of notes payable due to stockholder.... (1,000) (1,000) Purchase of treasury stock................................ -- (7,747) Net proceeds from notes payable and foreign bank overdraft facilities.............................................. 85 390 -------- -------- Net cash (used in) provided by financing activities..... (16,229) 47,937 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS............................................... (1,823) (1,834) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS................... (1,694) (19,794) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD........ 28,782 41,286 -------- -------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.............. $ 27,088 $ 21,492 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period: Interest................................................ $ 6,681 $ 7,043 ======== ======== Income taxes............................................ $ 2,910 $ 6,727 ======== ========
The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements. F-68 166 COULTER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. REPORT BY MANAGEMENT The accompanying unaudited condensed financial statements of Coulter Corporation and subsidiaries (the "Company") have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information related to the Company's organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These unaudited condensed financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and the results of operations for the periods presented and the disclosures herein are adequate to make the information presented not misleading. Operating results for the interim periods presented are not indicative of the results that can be expected for a full year. The Company's latest fiscal year ended on March 31, 1997. The accompanying unaudited condensed financial statements have been prepared in connection with a proposed business combination with Beckman Instruments, Inc. ("Beckman") (see Note 5) and reflect results for the six months ended September 30, 1997 and 1996. 2. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. 3. RESTRUCTURING CHARGES During the year ended March 31, 1997 the Company recorded restructuring charges of $5,947,000. The objective of the charges was to reduce future costs and improve operating results. The charge consisted primarily of severance and retirement incentive pay; the cost of extended employees' benefits; and consulting fees. The restructuring costs remaining to be paid at March 31, 1997 were $5,713,000 and are included in accrued liabilities in the March 31, 1997 condensed consolidated balance sheet. For the six-month period ended September 30, 1997, $4,853,000 was charged against this accrual. 4. COMMITMENTS AND CONTINGENCIES Legal Matters In January, 1996, the Company notified Hematronix, Inc. ("Hematronix"), a competitive reagent manufacturer, that it believed Hematronix was selling certain reagents and controls that infringe certain Coulter owned patents. In response to these claims by the Company, Hematronix filed a complaint on April 15, 1996 in the United States District Court for the Eastern District of California against the Company. The complaint seeks a declaratory judgment that certain patents of the Company are invalid and thus not infringed. The complaint also includes antitrust and related business tort claims regarding the Company's sales and leasing activities. Currently at issue are four (4) United States patents and the various antitrust claims raised by Hematronix. The Company has counterclaimed that Hematronix has willfully infringed each of the patents at issue. In addition, the Company has answered Hematronix's antitrust complaint and denied violation of any of the antitrust laws or business tort claims set forth by Hematronix in the complaint. A trial is set for 1998. The patent infringement matter will be tried first and the antitrust issues will be tried in a separate trial. The Company's management believes that it will prevail with regard to the infringement matters in the patent actions, and that as a result of such finding the antitrust case will not go F-69 167 COULTER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) forward. The Company is seeking a permanent injunction with regard to the patents claimed to be infringed and reasonable royalties resulting from such infringement. Certain other claims, suits and complaints in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, all such matters are without merit or are of such kind and involve such amounts that their resolution, net of related insurance coverage, would not have a material effect on the consolidated financial position or results of operations of the Company. Taxes A provision has not been made for U.S. income taxes, or additional foreign income taxes, on undistributed earnings of foreign subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings, however, the Company believes that U.S. foreign tax credits would largely eliminate any U.S. tax and offset any foreign tax on such earnings. The Company's subsidiary in Brazil is contesting a tax assessment issued several years ago, covering 1989 through 1991. At this time, it is not possible to estimate the amount of any additional tax liability. However, in the opinion of management, the ultimate liability will be substantially offset by available net operating loss carryforwards and will not have a material impact on the Company's financial position and results of operations. The Company's U.S. federal income tax returns for the years 1991 through 1993 are currently under review by the Internal Revenue Service ("IRS"). In the opinion of management, the final result of the IRS's audit will not have a material adverse effect on the Company's financial position or results of operations. Employment Agreements The Company maintains employment agreements (the "Employment Agreements") with certain executives. These Employment Agreements provide for severance payments in the event these executives are involuntarily terminated following a change of control of the Company (as defined). The Employment Agreements have terms which range from one to three years. 5. PURCHASE AGREEMENT On August 29, 1997, the Company and its stockholders entered into a Stock Purchase Agreement (the "Agreement") with Beckman Instruments, Inc. ("Beckman"). In connection with the Agreement, Beckman will acquire all of the Company's shares in exchange for $875 million in cash and the assumption of liabilities. Beckman, a Delaware corporation, provides systems, chemistries, software and supplies, which automate and simplify biological analysis for use in life science and clinical diagnostics laboratories. The merger is intended to be accounted for under the purchase accounting method. Completion of the transaction is subject to, among other things, regulatory approvals. In the event the Agreement receives all required approvals, the Company anticipates incurring liabilities related to the accelerated achievement of certain incentive plans and the granting of other discretionary bonus awards for its U.S. and foreign employees. The Company estimates that it will incur a total liability of approximately $100 million related to these programs. 6. SUBSEQUENT EVENTS On October 20, 1997, the Board of Directors agreed to distribute as a dividend all of the Company's shares of Coulter Pharmaceuticals, Inc. and 4.9 million shares of Coulter Cellular Therapies, Inc. to the respective shareholders of record as of October 30, 1997. This distribution was completed on November 14, 1997. In connection with this transaction, the Company expects to incur a tax liability of $5 million. F-70 168 ============================================================ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE LETTER OF TRANSMITTAL IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary......................... 1 Risk Factors............................... 13 The Exchange Offer......................... 19 Use of Proceeds............................ 26 The Acquisition............................ 27 Capitalization............................. 28 Pro Forma Financial Statements............. 29 Selected Historical Financial Information of Beckman............................... 34 Selected Historical Financial Information of Coulter............................... 35 Management's Discussion and Analysis of Financial Conditions and Results of Operations............................... 36 Business................................... 48 Management................................. 60 Description of Credit Facility............. 62 Description of Notes....................... 64 Certain United States Federal Tax Considerations........................... 90 Plan of Distribution....................... 90 Available Information...................... 91 Incorporation of Certain Documents by Reference................................ 91 Legal Matters.............................. 91 Independent Public Accountants............. 92 Index to Financial Statements.............. F-1 =================================================
============================================================ BECKMAN COULTER, INC. OFFER TO EXCHANGE 7.10% SENIOR NOTES DUE 2003 FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003 AND 7.45% SENIOR NOTES DUE 2008 FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008 ---------------- PROSPECTUS ---------------- , 1998 ============================================================ 169 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Registrant's Third Restated Certificate of Incorporation provides that a director of the Registrant shall not be personally liable to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director's duty of loyalty to the registrant or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (the "DGCL"), or (iv) for any transaction from which the director derived an improper personal benefit. The Registrant's Third Restated Certificate of Incorporation and Bylaws provide generally that each person who is or was a director or officer of the registrant shall be indemnified and held harmless by the registrant to the fullest extent authorized by the DGCL. Section 145 of the DGCL permits a corporation, subject to certain limitations, to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or was serving in any of such capacities for another entity at the request of the corporation, against expenses (including attorneys' fees), judgments, fines and certain settlements actually and reasonably incurred by such person. The Registrant maintains directors' and officers' liability insurance which covers certain liabilities and expenses of directors and officers of the Registrant and covers the Registrant for reimbursement of payments to directors and officers in respect of such liabilities and expenses. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits 2.1 Stock Purchase Agreement among Coulter Corporation, the Stockholders of Coulter Corporation and the Company, dated as of August 29, 1997 (incorporated by reference to Exhibit 2.1 of the Company's Report on Form 8-K dated November 13, 1997, File No. 001-10109). [Note: Confidential treatment has been requested for portions of this document.] 3.1 Third Restated Certificate of Incorporation of the Company, June 5, 1992 (incorporated by reference to Exhibit 3.1 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109). 3.2 Amended and Restated By-Laws of the Company, as of November 30, 1994 (incorporated by reference to Exhibit 3.2 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1994, File No. 001-10109). 4.1 Indenture dated as of March 4, 1998 by and between the Company, The First National Bank of Chicago, as trustee, and Beckman Instruments (Naguabo) Inc., SmithKline Diagnostics, Inc., Hybritech Incorporated, Coulter Leasing Corporation and Coulter Corporation. 4.2 Registration Rights Agreement dated March 4, 1998 by and between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated, BancAmerica Roberston Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. 4.3 Specimen Certificate of 7.10% Debentures Due March 4, 2003 (the "Initial 2003 Notes") (included in Exhibit 4.1 hereto). 4.4 Specimen Certificate of 7.10% Debentures Due March 4, 2003 (the "Exchange 2003 Notes") (included in Exhibit 4.1 hereto).
II-1 170 4.5 Specimen Certificate of 7.45% Debentures Due March 4, 2008 (the "Initial 2008 Notes") (included in Exhibit 4.1 hereto). 4.6 Specimen Certificate of 7.45% Debentures Due March 4, 2008 (the "Exchange 2008 Notes") (included in Exhibit 4.1 hereto). 5.1 Opinion of Latham & Watkins regarding the validity of the Exchange Notes. 8.1 Opinion of Latham & Watkins regarding certain federal income tax matters. 10.1 Credit Agreement dated as of October 31, 1997 by and among the Company, as Borrower, the Initial Lenders and the Initial Issuing Banks named therein, and Citicorp USA, Inc. as Agent (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109). 10.2 Guaranty dated as of October 31, 1997 made by each Guarantor Subsidiary (as defined in the Credit Agreement, Exhibit 10.1 herein) of the Company, in favor of the Lender Parties (as defined in the Credit Agreement) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109). 10.3 Line of Credit Promissory Note in favor of Mellon Bank, N.A., dated as of October 6, 1993 (incorporated by reference to Exhibit 10.21 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109). 10.4 Loan Agreement (Multiple Advance), dated September 30, 1993, between Beckman Instruments (Japan) Limited and the Industrial Bank of Japan, Limited (English translation, including certification as to accuracy; original document executed in Japanese) (incorporated by reference to Exhibit 10.21 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.5 Term Loan Agreement, dated as of September 30, 1993, between Beckman Instruments (Japan) Limited and Citibank, N.A., Tokyo Branch (incorporated by reference to Exhibit 10.22 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.6 Term Loan Agreement, dated as of December 9, 1993, between Beckman Instruments (Japan) Limited and The Dai-Ichi Kangyo Bank Limited (English translation, including certification as to accuracy; original document executed in Japanese) (incorporated by reference to Exhibit 10.23 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.7 Benefit Equity Amended and Restated Trust Agreement between the Company and Mellon Bank, N.A., as Trustee, for assistance in meeting stock-based obligations of the Company, dated as of February 10, 1997 (incorporated by reference to Exhibit 10.7 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 10.8 The Company's Executive Incentive Plan, adopted by the Company in 1996 (incorporated by reference to Exhibit 10 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended March 31, 1996, File No. 001-10109). 10.9 Amendment No. 1 to the Company's Executive Incentive Plan, adopted in 1996 (incorporated by reference to Exhibit 10.9 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1996, File No. 001-10109).
II-2 171 10.10 The Company's Annual Incentive Plan for 1997, adopted by the Company in 1997 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1997, File No. 001-10109). 10.11 The Company's Incentive Compensation Plan of 1990, amended and restated April 4, 1997, with amendments approved by stockholders April 3, 1997 and effective January 1, 1997 (incorporated by reference to Exhibit 10 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended March 31, 1997, File No. 001-10109). 10.12 Amendment to the Company's Incentive Compensation Plan of 1990 adopted December 5, 1997 (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 1 to the Form S-8 Registration Statement filed January 13, 1998, Registration No. 333-24851). 10.13 The Company's Incentive Compensation Plan, as amended by the Company's Board of Directors on October 26, 1988 and as amended and restated by the Company's Board of Directors on March 28, 1989 (incorporated by reference to Exhibit 10.16 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1989, File No. 001-10109). 10.14 Amendment to the Company's Incentive Compensation Plan, adopted December 5, 1997 (incorporated by reference to Exhibit 4.2 to Post Effective Amendment No. 1 to the Form S-8 Registration statement, filed January 13, 1998, Registration No. 33-31573). 10.15 Restricted Stock Agreement and Election (Cycle Two -- Economic Value Added Incentive Plan), adopted by the Company in 1995 (incorporated by reference to Exhibit 10 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1995, File No. 001-10109). 10.16 Restricted Stock Agreement and Election (Cycle Three -- Economic Value Added Incentive Plan), adopted by the Company in 1996 (incorporated by reference to Exhibit 10.15 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year period ended December 31, 1996, File No. 001-10109). 10.17 Form of Restricted Stock Agreement, dated as of January 3, 1997, between the Company and certain of its Executive Officers and certain other key employees (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1997, File No. 001-10109). 10.18 Beckman Instruments, Inc. Supplemental Pension Plan, adopted by the Company October 24, 1990 (incorporated by reference to Exhibit 10.4 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1990, File No. 001-10109). 10.19 Amendment 1995-1 to the Company's Supplemental Pension Plan, adopted by the Company in 1995, effective as of October 1, 1993 (incorporated by reference to Exhibit 10.17 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1996, File No. 001-10109). 10.20 Amendment 1996-1 to the Company's Supplemental Pension Plan, dated as of December 9, 1996 (incorporated by reference to Exhibit 10.18 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1996, File No. 001-10109). 10.21 Stock Option Plan for Non-Employee Directors (Amended and Restated effective as of August 7, 1997), (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on October 8, 1997, Registration No. 333-37429).
II-3 172 10.22 Form of Change in Control Agreement, dated as of May 1, 1989, between the Company, certain of its Executive Officers and certain other key employees (incorporated by reference to Exhibit 10.34 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1989, File No. 001-10109). 10.23 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, adopted December 1, 1993 and dated December 20, 1993, between the Company and Arthur A. Torrellas (incorporated by reference to Exhibit 10.24 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-10109). 10.24 Amendment to the December 1, 1993 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated as of May 30, 1995, between the Company and Arthur A. Torrellas (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1995, File No. 001-10109). 10.25 Second Amendment to the December 1, 1993 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated as of December 16, 1996, between the Company and Arthur A. Torrellas (incorporated by reference to Exhibit 10.24 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1996, File No. 001-10109). 10.26 Third Amendment to the December 1, 1993 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated as of July 18, 1997, between the Company and Arthur A. Torrellas (incorporated by reference to Exhibit 10.26 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 10.27 Agreement Regarding Retirement Benefits of Albert Ziegler, dated June 16, 1995, between the Company and Albert Ziegler (incorporated by reference to exhibit 10.22 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K/A for the fiscal year ended December 31, 1995, File No. 001-10109). 10.28 Agreement Regarding Retirement Benefits of Fidencio M. Mares, adopted and dated April 30, 1996, between the Company and Fidencio M. Mares (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1996, File No. 001-10109). 10.29 Amendment 1997-1 to the Company's Employees' Stock Purchase Plan, adopted effective January 1, 1998 and dated October 20, 1997 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109). 10.30 The Company's Executive Deferred Compensation Plan, effective January 1, 1998, dated November 5, 1997 (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109). 10.31 The Company's Executive Restoration Plan, effective January 1, 1998, dated November 5, 1997 (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109). 10.32 The Company's Amended and Restated Deferred Directors' Fee Program, amended as of June 5, 1997 (incorporated by reference to Exhibit 10.6 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109).
II-4 173 10.33 Amendment 1997-2 to the Company's Supplemental Pension Plan, adopted as of October 31, 1997 (incorporated by reference to Exhibit 10.7 of the Company's Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 1997, File No. 001-10109). 10.34 Form of Restricted Stock Award Agreement between the Company and its non-employee Directors, effective as of October 3, 1997 (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on October 8, 1997, Registration No. 333-37429). 10.35 Form of Stock Option Grant for non-employee Directors (incorporated by reference to Exhibit 4.3 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on October 8, 1997, Registration No. 333-37429). 10.36 The Company's Employees' Stock Purchase Plan, amended and restated as of November 1, 1996, filed in connection with the Form S-8 Registration Statement filed with the Securities and Exchange Commission on December 19, 1995, File No. 33-65155 (incorporated by reference to Exhibit 10.29 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 10.37 The Company's Option Gain Deferral Program, dated January 14, 1998 (incorporated by reference to Exhibit 4.2 of Post-Effective Amendment No. 1 to the Form S-8 Registration Statement filed with the Securities and Exchange Commission on January 13, 1998, Registration No. 333-24851). 10.38 Form of Coulter's Special Incentive Plan and Sharing Bonus Plan, assumed by the Company October 31, 1997 (incorporated by reference to Exhibit 10.38 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 10.39 Distribution Agreement, dated as of April 11, 1989, among SmithKline Beckman Corporation the Company and Allergan, Inc. (incorporated by reference to Exhibit 3 to SmithKline Beckman Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 14, 1989, File No. 1-4077). 10.40 Amendment to the Distribution Agreement effective as of June 1, 1989 between SmithKline Beckman Corporation, the Company and Allergan, Inc. (incorporated by reference to Exhibit 10.26 of Amendment No. 2 to the Company's Form S-1 registration statement, File No. 33-28853). 10.41 Cross-Indemnification Agreement between the Company and SmithKline Beckman Corporation (incorporated by reference to Exhibit 10.1 of Amendment No. 1 to the Company's Form S-1 registration statement, File No. 33-24572). 11.1 Statement regarding computation of per share earnings (incorporated by reference to Note 1 Summary of Significant Accounting Policies and Note 13 Earnings Per Share of the Consolidated Financial Statements of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries (incorporated by reference to Exhibit 21 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 23.1 Consent of KPMG Peat Marwick LLP, dated April 17, 1998. 23.2 Consent of Arthur Andersen LLP, dated April 14, 1998. 23.3 Consent of KPMG Peat Marwick LLP, dated April 17, 1998. 24.1 Power of Attorney of Beckman Instruments, Inc. (included on signature page to this Registration Statement on Form S-4).
II-5 174 25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of The First National Bank of Chicago. 27.1 Financial Data Schedule (incorporated by reference to Exhibit 27 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-10109). 99.1 Letter of Transmittal dated , 1998 and certain other ancillary documents.
(b) Financial Statement Schedules: None. SCHEDULES OMITTED Schedules not listed above are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. ITEM 22. UNDERTAKINGS. (a) The undersigned registrants hereby undertake that insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim of indemnification against such liabilities (other than the payment by the registrant of expenses incurred or the registrant in the successful defense of any action, suit paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into this prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-6 175 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fullerton, State of California, on the 2nd day of April, 1998. BECKMAN INSTRUMENTS, INC. By: /s/ WILLIAM H. MAY ------------------------------------ Name: William H. May Title: Vice President, General Counsel and Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fullerton, State of California, on the 2nd day of April, 1998. BECKMAN INSTRUMENTS (NAGUABO) INC. By: /s/ WILLIAM H. MAY ------------------------------------ Name: William H. May Title: Vice President and Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fullerton, State of California, on the 2nd day of April, 1998. HYBRITECH INCORPORATED By: /s/ WILLIAM H. MAY ------------------------------------ Name: William H. May Title: Vice President and Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fullerton, State of California, on the 2nd day of April, 1998. SMITHKLINE DIAGNOSTICS, INC. By: /s/ D. K. WILSON ------------------------------------ Name: Dennis K. Wilson Title: Vice President, Finance II-7 176 Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fullerton, State of California, on the 2nd day of April, 1998. COULTER CORPORATION By: /s/ WILLIAM H. MAY ------------------------------------ Name: William H. May ------------------------------------ Title: Vice President and Assistant Secretary ------------------------------------ POWER OF ATTORNEY Each person whose signature appears below appoints Louis T. Rosso, John P. Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and each of them, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement or any subsequent registration statements pursuant to Rule 462 (including any amendments thereto), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ LOUIS T. ROSSO Chairman of the Board, Chief April 2, 1998 - ----------------------------------------------------- Executive Officer and Louis T. Rosso Director (Principal Executive Officer) /s/ JOHN P. WAREHAM President, Chief Operating April 2, 1998 - ----------------------------------------------------- Officer and Director John P. Wareham /s/ D. K. WILSON Vice President, Finance and April 2, 1998 - ----------------------------------------------------- Chief Financial Officer Dennis K. Wilson (Principal Financial Officer) /s/ JAMES T. GLOVER Vice President and April 2, 1998 - ----------------------------------------------------- Controller (Principal James T. Glover Accounting Officer) /s/ HUGH K. COBLE Director April 2, 1998 - ----------------------------------------------------- Hugh K. Coble /s/ CAROLYN K. DAVIS Director April 2, 1998 - ----------------------------------------------------- Carolyn K. Davis, Ph.D. /s/ Director - ----------------------------------------------------- Peter B. Dervan /s/ DENNIS C. FILL Director April 2, 1998 - ----------------------------------------------------- Dennis C. Fill
II-8 177
SIGNATURES TITLE DATE ---------- ----- ---- /s/ CHARLES A. HAGGERTY Director April 2, 1998 - ----------------------------------------------------- Charles A. Haggerty /s/ GAVIN S. HERBERT Director April 2, 1998 - ----------------------------------------------------- Gavin S. Herbert /s/ WILLIAM N. KELLEY Director April 2, 1998 - ----------------------------------------------------- William N. Kelley, M.D. /s/ FRANCIS P. LUCIER Director April 2, 1998 - ----------------------------------------------------- Francis P. Lucier /s/ C. RODERICK O'NEIL Director April 2, 1998 - ----------------------------------------------------- C. Roderick O'Neil /s/ BETTY WOODS Director April 2, 1998 - ----------------------------------------------------- Betty Woods
II-9 178 BECKMAN INSTRUMENTS (NAGUABO) INC. POWER OF ATTORNEY Each person whose signature appears below appoints Louis T. Rosso, John P. Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and each of them, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement or any subsequent registration statements pursuant to Rule 462 (including any amendments thereto), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ JOHN P. WAREHAM President (Principal April 2, 1998 - ----------------------------------------------------- Executive Officer) John P. Wareham /s/ PAUL GLYER Treasurer (Principal April 2, 1998 - ----------------------------------------------------- Financial Officer) Paul Glyer /s/ JAMES T. GLOVER Vice President and April 2, 1998 - ----------------------------------------------------- Controller (Principal James T. Glover Accounting Officer) /s/ WILLIAM H. MAY Director April 2, 1998 - ----------------------------------------------------- William H. May /s/ DENNIS K. WILSON Director April 2, 1998 Dennis K. Wilson - ----------------------------------------------------- /s/ GERALD KIRSCHNER Director April 3, 1998 - ----------------------------------------------------- Gerald Kirschner
II-10 179 HYBRITECH INCORPORATED POWER OF ATTORNEY Each person whose signature appears below appoints Louis T. Rosso, John P. Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and each of them, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement or any subsequent registration statements pursuant to Rule 462 (including any amendments thereto), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ JOHN P. WAREHAM President and Director April 2, 1998 - ----------------------------------------------------- (Principal Executive John P. Wareham Officer) /s/ D. K. WILSON Vice President, Finance and April 2, 1998 - ----------------------------------------------------- Chief Financial Officer Dennis K. Wilson (Principal Financial Officer) /s/ JAMES T. GLOVER Vice President, Controller April 2, 1998 - ----------------------------------------------------- and Director (Principal James T. Glover Accounting Officer) /s/ WILLIAM H. MAY Director April 2, 1998 - ----------------------------------------------------- William H. May
II-11 180 SMITHKLINE DIAGNOSTICS, INC. POWER OF ATTORNEY Each person whose signature appears below appoints Louis T. Rosso, John P. Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and each of them, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement or any subsequent registration statements pursuant to Rule 462 (including any amendments thereto), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ ALBERT ZIEGLER President (Principal April 2, 1998 - ----------------------------------------------------- Executive Officer) Albert Ziegler /s/ D. K. WILSON Vice President, Finance April 2, 1998 - ----------------------------------------------------- (Principal Financial Dennis K. Wilson Officer) /s/ PAUL GLYER Treasurer (Principal April 2, 1998 - ----------------------------------------------------- Accounting Officer) Paul Glyer /s/ JOHN P. WAREHAM Director April 2, 1998 - ----------------------------------------------------- John P. Wareham /s/ JAMES T. GLOVER Director April 2, 1998 - ----------------------------------------------------- James T. Glover /s/ WILLIAM H. MAY Director April 2, 1998 - ----------------------------------------------------- William H. May
II-12 181 COULTER CORPORATION POWER OF ATTORNEY Each person whose signature appears below appoints Louis T. Rosso, John P. Wareham, Dennis K. Wilson, William H. May, Paul Glyer and James T. Glover, and each of them, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement or any subsequent registration statements pursuant to Rule 462 (including any amendments thereto), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ EDGAR VIVANCO President (Principal April 9, 1998 - ----------------------------------------------------- Executive Officer) Edgar Vivanco /s/ GENE BABCOCK Vice President, Finance April 8, 1998 - ----------------------------------------------------- (Principal Financial Gene Babcock Officer) /s/ PAUL GLYER Treasurer (Principal April 2, 1998 - ----------------------------------------------------- Accounting Officer) Paul Glyer /s/ JOHN P. WAREHAM Director April 2, 1998 - ----------------------------------------------------- John P. Wareham /s/ JAMES T. GLOVER Director April 2, 1998 - ----------------------------------------------------- James T. Glover /s/ WILLIAM H. MAY Director April 2, 1998 - ----------------------------------------------------- William H. May
II-13 EX-4.1 2 INDENTURE DATED MARCH 4, 1998 1 EXHIBIT 4.1 ================================================================================ BECKMAN INSTRUMENTS, INC., as Issuer, THE NOTE GUARANTORS named herein, as Note Guarantors, and THE FIRST NATIONAL BANK OF CHICAGO, as Trustee -------------- Senior Indenture Dated as of March 4, 1998 -------------- ============================================================================== 2 Certain Sections of this Indenture relating to Sections 310 through 318, inclusive, of the Trust Indenture Act of 1939:
Trust Indenture Act Section Indenture Section - --------------- ----------------- Section 310(a)(1)..........................................................609 (a)(2)..................................................................609 (a)(3).......................................................Not Applicable (a)(4).......................................................Not Applicable (b).....................................................................608 610 Section 311(a).............................................................613 (b).....................................................................613 Section 312(a).............................................................701 702 (b).....................................................................702 (c).....................................................................702 Section 313(a).............................................................703 (b).....................................................................703 (c).....................................................................703 (d).....................................................................703 Section 314(a).............................................................704 (a)(4)..................................................................102 1004 (b)..........................................................Not Applicable (c)(1)..................................................................102 (c)(2)..................................................................102 (c)(3).......................................................Not Applicable (d)..........................................................Not Applicable (e).....................................................................102 Section 315(a).............................................................601 (b).....................................................................602 (c).....................................................................601 (d).....................................................................601 (e).....................................................................514 Section 316(a).............................................................512 (a)(1)(A)...............................................................502 512 (a)(1)(B)...............................................................513
3 (a)(2).......................................................Not Applicable (b).....................................................................508 (c).....................................................................104
4 Certain Sections of this Indenture relating to Sections 310 through 318, inclusive, of the Trust Indenture Act of 1939:
Trust Indenture Act Section Indenture Section - --------------- ----------------- Section 310(a)(1)..........................................................609 (a)(2)..................................................................609 (a)(3).......................................................Not Applicable (a)(4).......................................................Not Applicable (b).....................................................................608 610 Section 311(a).............................................................613 (b).....................................................................613 Section 312(a).............................................................701 702 (b).....................................................................702 (c).....................................................................702 Section 313(a).............................................................703 (b).....................................................................703 (c).....................................................................703 (d).....................................................................703 Section 314(a).............................................................704 (a)(4)..................................................................102 1004 (b)..........................................................Not Applicable (c)(1)..................................................................102 (c)(2)..................................................................102 (c)(3).......................................................Not Applicable (d)..........................................................Not Applicable (e).....................................................................102 Section 315(a).............................................................601 (b).....................................................................602 (c).....................................................................601 (d).....................................................................601 (e).....................................................................514 Section 316(a).............................................................512 (a)(1)(A)...............................................................502 512 (a)(1)(B)...............................................................513
5 (a)(2).......................................................Not Applicable (b).....................................................................508 (c).....................................................................104
6
Trust Indenture Act Section Indenture Section - --------------- ----------------- Section 317(a)(1)..........................................................503 (a)(2)..................................................................504 (b)....................................................................1003 Section 318(a).............................................................107
- ------------------- NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 7 TABLE OF CONTENTS
Page ---- RECITALS ....................................................................... 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions............................................................ 1 SECTION 102. Compliance Certificates and Opinions................................... 24 SECTION 103. Form of Documents Delivered to Trustee................................. 25 SECTION 104. Acts of Holders; Record Dates.......................................... 25 SECTION 105. Notices, Etc., to Trustee, Company and Note Guarantor.................. 27 SECTION 106. Notice to Holders; Waiver.............................................. 28 SECTION 107. Conflict with Trust Indenture Act...................................... 28 SECTION 108. Effect of Headings and Table of Contents............................... 28 SECTION 109. Successors and Assigns................................................. 28 SECTION 110. Separability Clause.................................................... 28 SECTION 111. Benefits of Indenture.................................................. 28 SECTION 112. Governing Law.......................................................... 28 SECTION 113. Legal Holidays......................................................... 29 ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally........................................................ 29 SECTION 202. Form of Trustee's Certificate of Authentication........................ 30 SECTION 203. Restrictive and Global Security Legends................................ 30
i 8 ARTICLE THREE THE SECURITIES SECTION 301. Amount; Series; Terms.................................................. 32 SECTION 302. Denominations.......................................................... 33 SECTION 303. Execution, Authentication, Delivery and Dating......................... 33 SECTION 304. Temporary Securities................................................... 34 SECTION 305. Registration, Registration of Transfer and Exchange.................... 34 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....................... 35 SECTION 307. Payment of Interest; Interest Rights Preserved......................... 36 SECTION 308. Persons Deemed Owners.................................................. 37 SECTION 309. Cancellation........................................................... 37 SECTION 310. Computation of Interest................................................ 37 SECTION 311. Book-Entry Provisions for Global Securities............................ 37 SECTION 312. Transfer Provisions.................................................... 38 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture................................ 45 SECTION 402. Application of Trust Money............................................. 46 ARTICLE FIVE REMEDIES SECTION 501. Events of Default...................................................... 47 SECTION 502. Acceleration of Maturity; Rescission and Annulment..................... 48 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee................................................................ 49 SECTION 504. Trustee May File Proofs of Claim....................................... 50 SECTION 505. Trustee May Enforce Claims Without Possession of Securities................................................. 50 SECTION 506. Application of Money Collected......................................... 50 SECTION 507. Limitation on Suits.................................................... 51 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest........................................................... 51 SECTION 509. Restoration of Rights and Remedies..................................... 52
ii 9 SECTION 510. Rights and Remedies Cumulative......................................... 52 SECTION 511. Delay or Omission Not Waiver........................................... 52 SECTION 512. Control by Holders..................................................... 52 SECTION 513. Waiver of Past Defaults................................................ 52 SECTION 514. Undertaking for Costs.................................................. 53 SECTION 515. Waiver of Usury, Stay or Extension Laws................................ 53 ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities.................................... 53 SECTION 602. Notice of Defaults..................................................... 53 SECTION 603. Certain Rights of Trustee.............................................. 53 SECTION 604. Not Responsible for Recitals or Issuance of Securities................. 54 SECTION 605. May Hold Securities.................................................... 55 SECTION 606. Money Held in Trust.................................................... 55 SECTION 607. Compensation and Reimbursement......................................... 55 SECTION 608. Conflicting Interests.................................................. 55 SECTION 609. Corporate Trustee Required; Eligibility................................ 55 SECTION 610. Resignation and Removal; Appointment of Successor...................... 56 SECTION 611. Acceptance of Appointment by Successor................................. 57 SECTION 612. Merger, Conversion, Consolidation or Succession to Business................................................... 58 SECTION 613. Preferential Collection of Claims Against Company...................... 58 SECTION 614. Appointment of Authenticating Agent.................................... 58 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.............. 60 SECTION 702. Preservation of Information; Communications to Holders................. 60 SECTION 703. Reports by Trustee..................................................... 60 SECTION 704. Reports by Company..................................................... 61
iii 10 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................... 61 SECTION 802. Successor Substituted.................................................. 62 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders..................... 62 SECTION 902. Supplemental Indentures With Consent of Holders........................ 63 SECTION 903. Execution of Supplemental Indentures................................... 64 SECTION 904. Effect of Supplemental Indentures...................................... 64 SECTION 905. Conformity with Trust Indenture Act.................................... 64 SECTION 906. Reference in Securities to Supplemental Indentures..................... 64 SECTION 907. Revocation and Effect of Consents...................................... 64 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest............................. 65 SECTION 1002. Maintenance of Office or Agency........................................ 65 SECTION 1003. Money for Securities Payments to Be Held in Trust...................... 66 SECTION 1004. Statement by Officers as to Default.................................... 67 SECTION 1005. Existence.............................................................. 67 SECTION 1006. Maintenance of Properties.............................................. 67 SECTION 1007. Payment of Taxes and Other Claims...................................... 67 SECTION 1008. Limitation on Liens.................................................... 67 SECTION 1009. Limitation on Sale and Leaseback Transactions.......................... 69 SECTION 1010. Limitation on Incurrence of Indebtedness............................... 69 SECTION 1011. Limitation on Restricted Payments...................................... 69 SECTION 1012. Change of Control...................................................... 71 SECTION 1013. Future Note Guarantors................................................. 71 SECTION 1014. Provision of Financial Statements and Reports.......................... 72 SECTION 1015. Waiver of Certain Covenants............................................ 72
iv 11 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Optional Redemption.................................................... 72 SECTION 1102. Election to Redeem; Notice to Trustee.................................. 73 SECTION 1103. Selection by Trustee of Securities to Be Redeemed...................... 73 SECTION 1104. Notice of Redemption................................................... 73 SECTION 1105. Deposit of Redemption Price............................................ 74 SECTION 1106. Securities Payable on Redemption Date.................................. 74 SECTION 1107. Securities Redeemed in Part............................................ 74 ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance.................................................... 75 SECTION 1202. Defeasance and Discharge............................................... 75 SECTION 1203. Covenant Defeasance.................................................... 75 SECTION 1204. Conditions to Defeasance or Covenant Defeasance........................ 76 SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions................. 77 SECTION 1206. Reinstatement.......................................................... 78 ARTICLE THIRTEEN GUARANTEE OF SECURITIES SECTION 1301. Unconditional Guarantee................................................ 78 SECTION 1302. Additional Note Guarantors............................................. 80 SECTION 1303. Release of a Note Guarantee............................................ 80 SECTION 1304. Waiver of Subrogation.................................................. 81 SECTION 1305. Reliance on Judicial Order or Certificate of Liquidating Agent Regarding Dissolution, etc.............................. 81 SECTION 1306. Article Thirteen Applicable to Paying Agents........................... 81 SECTION 1307. No Suspension of Remedies.............................................. 82
v 12 INDENTURE, dated as of March 4, 1998, among Beckman Instruments, Inc., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 2500 Harbor Boulevard, Fullerton, California 92834, as issuer, the Note Guarantors named herein (the "Note Guarantors"), as guarantors, and The First National Bank of Chicago, a national banking association duly organized and existing under the laws of the United States, as Trustee (herein called the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of (i) its 7.10% Senior Notes due 2003 (the "Initial 2003 Notes") and 7.45% Senior Notes due 2008 (the "Initial 2008 Notes" and, together with the Initial 2003 Notes, the "Initial Securities") and (ii) its 7.10% Senior Notes due 2003, Series B and 7.45% Senior Notes due 2008, Series B to be issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement (the "Exchange 2003 Notes" and the "Exchange 2008 Notes", respectively, and, together, the "Exchange Securities"), in each case to be issued as in this Indenture provided. The Initial 2003 Notes and the Exchange 2003 Notes are hereinafter collectively called the "2003 Notes", and the Initial 2008 Notes and the Exchange 2008 Notes are hereinafter collectively called the "2008 Notes". The Initial Securities and the Exchange Securities are hereinafter collectively called the "Securities". Each Note Guarantor has duly authorized the execution and delivery of this Indenture to provide for its senior Note Guarantee of the Securities, as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company and each Note Guarantor, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities of each series, as follows: 13 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (4) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and (5) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Acquired Debt" means (x) Indebtedness of any Person (the "Acquired Person") existing at the time the Acquired Person merges or consolidates with or into, or becomes a Restricted Subsidiary of, the Company or any Restricted Subsidiary, or (y) Indebtedness of any Person assumed by the Company or any Restricted Subsidiary in connection with its acquisition of assets from such Person, in each case excluding Indebtedness incurred in connection with, or in contemplation of, the Acquired Person merging or consolidating with or into, or becoming a Restricted Subsidiary of, the Company or any Restricted Subsidiary, or such acquisition of assets. "Acquisition" means the acquisition by the Company of all of the capital stock of Coulter on October 31, 1997. "Act," when used with respect to any Holder, has the meaning specified in Section 104. 2 14 "Adjusted Treasury Rate" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 0.25% in the case of the 2003 Notes, and 0.375%, in the case of the 2008 Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 311. "Asset Sale" means (i) any sale, lease, conveyance or other disposition by the Company or any Restricted Subsidiary of any assets (including by way of a sale-and-leaseback) other than (a) in the ordinary course of business, (b) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company, which shall not be an "Asset Sale" but instead shall be governed by the provisions of Section 801 and (c) any "fee in lieu of" or other disposition of assets to any governmental authority or agency that continue in use by the Company or any Restricted Subsidiary, so long as the Company or any Restricted Subsidiary may obtain title to such assets at any time upon reasonable notice by paying a nominal fee, or (ii) the issuance or sale of Capital Stock of any Restricted Subsidiary, in the case of each of clauses (i) and (ii), whether in a single transaction or a series of related transactions, to any Person (other than the Company or a Restricted Subsidiary) for Net Proceeds in excess of $1.0 million. "Attributable Value," when used with respect to any sale and leaseback transaction means, as of the time of determination, the total obligation (discounted to present value at the interest rate assumed in making calculations in accordance with FAS 13) of the lessee for rental payments (other than amounts required to be paid on account of property taxes as well as maintenance, repairs, insurance, water rates and other items which do not constitute payments for property rights) during the remaining portion of the base term of the lease included in such sale and leaseback transaction. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. 3 15 "Bank Indebtedness" means any and all Indebtedness or other amounts, whether outstanding on the Issue Date or thereafter incurred, payable under or in respect of the Credit Facility or any refinancing in respect thereof, and any Refinancing Indebtedness in respect thereof, including in each case (without limitation) principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees, other monetary obligations of any nature and all other amounts payable under or in respect of any of the foregoing (and, without limitation, whether incurred in accordance with any clause of the definition of "Permitted Indebtedness" or the first sentence of Section 1010, or otherwise). "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or any Note Guarantor, as the case may be, to have been duly adopted by the Board of Directors or the board of directors (or designated committee thereof) of the relevant Note Guarantor and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "Capital Lease Obligation" of any Person means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease for property leased by such Person that would at such time be required to be capitalized on the balance sheet of such Person in accordance with GAAP. "Capital Stock" of any Person means (i) in the case of a corporation, corporate stock, (ii) in the case of an association, limited liability company or business entity, any and all Equity Interests, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, including any Preferred Stock. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any instrumentality or agency thereof and backed by the full faith and credit of the United States, in each case 4 16 maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality or agency thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Services or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's Ratings Services or at least P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit, time deposits or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by (x) any lender under the Credit Agreement or (y) a commercial banking institution that is a member of the Federal Reserve System or a commercial banking institution organized and located in a country recognized by the United States of America, in each case, having combined capital and surplus and undivided profits in excess of $500,000,000 (or the foreign currency equivalent thereof); (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above; and (vii) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management not exceeding $20 million in aggregate principal amount outstanding at any time. "Cedel" means Cedel Bank, societe anonyme. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or con solidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, or (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the voting stock of the Company. "Change of Control Downgrade" means, with respect to any Change of Control, a downgrade in the rating assigned to any Securities arising out of or otherwise attributable to such Change of Control (whether or not such Change of Control has occurred at the time of such downgrade), which downgrade (i) if prior to an Investment Grade Rating Date, is by any Rating Agency and (ii) if on or after an Investment Grade Rating Date, is by any two Rating 5 17 Agencies unless, after giving effect to such downgrade, the rating assigned to such Securities by either of such two Rating Agencies is Investment Grade. For purposes of the foregoing, and without limiting the generality thereof, a Change of Control Downgrade with respect to any Change of Control shall be deemed to have occurred if such Change of Control Downgrade occurs during any 90-day period beginning prior to and ending after the occurrence of such Change of Control. "Change of Control Triggering Event" means the later to occur of (i) any Change of Control and (ii) a Change of Control Downgrade with respect to such Change of Control. Both a Change of Control and a Change of Control Downgrade shall be required for a Change of Control Triggering Event to occur. "Commission" means the Securities and Exchange Commission, from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Commodity Price Protection Agreement" means any forward contract, commodity swap, commodity option or other similar financial agreement or arrangement relating to, or the value which is dependent upon, fluctuations in commodity prices. "Company" means Beckman Instruments, Inc. (which is expected to be renamed, subject to stockholder approval, Beckman Coulter, Inc.), a Delaware corporation, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate securities of comparable maturity to the remaining term of such Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. 6 18 "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Treasury Reference Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Consolidated Cash Flow" means, with respect to any period, the Consolidated Net Income for such period, plus without duplication (i) Consolidated Interest Expense for such period, plus (ii) provision for taxes based on income, profits or capital, to the extent such provision for taxes was included in computing such Consolidated Net Income, plus (iii) depreciation, amortization (including, without limitation, amortization of goodwill and other intangibles) and all other non-cash charges (excluding any non-cash charge which requires an accrual or reserve for cash charges for any future period), to the extent such depreciation, amortization and other non-cash charges were deducted in computing such Consolidated Net Income. "Consolidated Coverage Ratio" means, with respect to any date of determination, the ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of the most recent four consecutive fiscal quarters ended prior to such date for which consolidated financial statements of the Company are available, to (ii) Consolidated Interest Expense for such four fiscal quarters, provided that: (1) if since the beginning of such period the Company or any Restricted Subsidiary has incurred any Indebtedness that remains outstanding on such date of determination, or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves an incurrence of Indebtedness (including without limitation any Acquired Debt), Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness and the application of the proceeds thereof (and, in the case of any Ac- 7 19 quired Debt, the related acquisition) as if such Indebtedness had been incurred (and any such acquisition had occurred) on the first day of such period; (2) if since the beginning of such period the Company or any Restricted Subsidiary has repaid, repurchased, defeased, retired or otherwise discharged (a "Discharge") any Indebtedness that is no longer outstanding on such date of determination, or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a Discharge of Indebtedness, Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving effect to such Discharge of such Indebtedness, including with the proceeds of any such new Indebtedness, as if such Discharge had occurred on the first day of such period; (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have disposed of any company, any business, any group of assets constituting an operating unit, or any other assets out of the ordinary course of business (a "Sale"), (x) Consolidated Cash Flow for such period shall be reduced by an amount equal to the Consolidated Cash Flow (if positive) directly attributable to the assets that are the subject of such Sale for such period or increased by an amount equal to the Consolidated Cash Flow (if negative) directly attributable thereto for such period and (y) Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Sale for such period (and, if the Capital Stock of any Restricted Subsidiary is sold, transferred or otherwise disposed of, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale, transfer or disposition); (4) if since the beginning of such period the Company or any Restricted Subsidiary shall have acquired (by merger or otherwise, and whether accounted for as a purchase, a pooling of interests or otherwise) any company, any business, any group of assets constituting an operating unit, or any other assets out of the ordinary course of business (a "Purchase"), Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the incurrence of any related Indebtedness) as if such Purchase had occurred on the first day of such period; and (5) if since the beginning of such period any Person became a Restricted Subsidiary or was merged or consolidated with or into the Company or any Restricted 8 20 Subsidiary, in each case in a Purchase, and since the beginning of such period such Person shall have Discharged any Indebtedness or made any Sale or Purchase that would have required an adjustment pursuant to clause (2), (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, Consolidated Cash Flow and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Discharge, Sale or Purchase occurred on the first day of such period. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company, either a fixed or floating rate. If any Indebtedness that is being given pro forma effect was incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period (being the relevant four-quarter period, or, if shorter, the portion thereof beginning on the date such facility was first drawn upon). In making any calculation of the Consolidated Coverage Ratio for any period prior to the date of the closing of the Acquisition, the Acquisition shall be deemed to have taken place on the first day of such period. "Consolidated Interest Expense" means, with respect to any period, the sum (without duplication) of (i) the interest expense of the Company and its Restricted Subsidiaries for such period, plus (ii) all cash dividends paid during such period by the Company and its Restricted Subsidiaries with respect to any Disqualified Stock (other than to the Company or a Restricted Subsidiary), and minus (iii) to the extent otherwise included in Consolidated Interest Expense, amortization or write-off of financing costs, in each case under clauses (i) through (iii) as determined on a consolidated basis in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any period, the net income (or loss) of the Company and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied, adjusted by excluding, to the extent included in calculating such net income (or loss), without duplication, (i) any extraordinary gain or loss as recorded on the statement of operations in accordance with GAAP, (ii) the portion of net income (or loss) of the Company and its Restricted Subsidiaries allocable to the Company's equity in the net income (or loss) of any unconsolidated Person or Unrestricted Subsidiary, except (in the case of such net income) to the extent of the amount of 9 21 dividends or distributions actually paid or made to the Company or any of its Restricted Subsidiaries by such other Person during such period, (iii) net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss realized upon any Asset Sale (other than sales of leases of customer-leased equipment) and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, (v) the net income of any Restricted Subsidiary if the declaration of dividends or similar distributions by that Restricted Subsidiary of that net income to the Company is at the time restricted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation (other than pursuant to any statute, rule or governmental regulation that permits such dividends or similar distributions payments after the passage of time, not to exceed 120 days, or after the filing or providing of notice with respect to such dividends or similar distributions) applicable to that Restricted Subsidiary or its stockholders (other than pursuant to the Securities or the Indenture), except to the extent that any dividend or distribution was or could have been made by the Restricted Subsidiary to the Company or another Restricted Subsidiary during such period in compliance with such restrictions, (vi) non-cash, nonrecurring charges (excluding any non-cash charge which requires an accrual or reserve for cash charges for any future period), (vii) any nonrecurring charges related to the Acquisition or any acquisition by the Company or any Restricted Subsidiary after the Issue Date and (viii) all deferred financing costs written off and premium paid in connection to any early extinguishment of Indebtedness. "Consolidated Net Tangible Assets" of the Company means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Company but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with GAAP. "Corporate Trust Office" means the office of the Trustee in the Borough of Manhattan, The City of New York at which at any particular time its corporate trust business shall be administered, which office on the Issue Date is located at 14 Wall Street, 8th Floor, NY, NY 10005. "corporation" means a corporation, association, company, joint-stock company or business trust. "Coulter" means Coulter Corporation, a Delaware corporation. 10 22 "Covenant Defeasance" has the meaning specified in Section 1203. "Credit Agreement" means the credit agreement dated as of October 31, 1997, among the Company, the banks and other financial institutions party thereto from time to time, and Citicorp USA, Inc., as agent, Citicorp Securities, Inc. as arranger, and Merrill Lynch & Co., as syndication agent, as such agreement may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original agents and lenders or other agents and lenders or otherwise, and whether provided under the original Credit Agreement or otherwise). "Credit Facility" means the collective reference to the Credit Agreement, any notes and letters of credit issued pursuant thereto and any guarantees, security agreements, pledges, mortgages, letter of credit applications and other collateral documents, and other instruments and documents, executed and delivered pursuant to or in connection with any of the foregoing, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original agent and lenders or other agents and lenders or otherwise, and whether provided under the original Credit Agreement or otherwise). "Currency Hedging Arrangements" means one or more of the following agreements which shall be entered into by one or more financial institutions: foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values. "Default" means any event that is, or after the giving of notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1202. "Depositary" means The Depository Trust Company, its nominees and successors. "Disqualified Stock" means (i) any Preferred Stock of any Restricted Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable 11 23 at the option of the holder thereof (other than upon a change of control of the Company in circumstances where the holders of the Securities would have similar rights), in whole or in part on or prior to the stated maturity of any Securities. "Dollars" and "$" means lawful money of the United States of America. "Equipment Held for Resale" means instrument systems and related accessories and components manufactured or assembled by the Company that are owned and held for placement in facilities of the Company's customers. "Equity Interest" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including limited liability company interests, in such Person. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 104. "Exchange Offer" means the offer by the Company to the Holders of the Initial Securities to exchange all of the Initial Securities for Exchange Securities, as provided for in the Registration Rights Agreement. "Exchange Offer Registration Statement" means the Exchange Offer Registration Statement as defined in the Registration Rights Agreement. "Exchange Securities" has the meaning stated in first recital of this Indenture and refers to any Exchange Securities containing terms substantially identical to the Initial Securities (except that (i) such Exchange Securities shall not contain terms with respect to transfer restrictions and shall be registered under the Securities Act, and (ii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) that are issued and exchanged for the Initial Securities in accordance with the Exchange Offer, as provided for in the Registration Rights Agreement and this Indenture. 12 24 "Exchange 2003 Notes" and "Exchange 2008 Notes" have the respective meanings specified in the first recital to this Indenture. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is (i) not organized under the laws of the United States of America or any state thereof or the District of Columbia and (ii) conducts its principal operations outside the United States. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statement by such other entity as approved by a significant segment of the United States accounting profession. "Global Securities" has the meaning set forth in Section 201. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" means a Person in whose name a Security is registered in the Security Register. "incur" has the meaning specified in Section 1010. 13 25 "Indebtedness" means, with respect to any Person, without duplication, and whether or not contingent, (i) all indebtedness of such Person for borrowed money or which is evidenced by a note, bond, debenture or similar instrument, (ii) all obligations of such Person to pay the deferred or unpaid purchase price of property or services, which purchase price is due more than one year after the date of placing such property in service or taking delivery and title thereto or the completion of such service, (iii) all Capital Lease Obligations of such Person, (iv) all obligations of such Person in respect of letters of credit or bankers' acceptances issued or created for the account of such Person, (v) to the extent not otherwise included in this definition, all net obligations of such Person under all Interest Rate Agreements, Currency Agreement Obligations or Commodity Price Protection Agreements of such Person, (vi) all liabilities of others of the kind described in the preceding clause (i), (ii) or (iii) secured by any Lien on any property owned by such Person even if such Person has not assumed or otherwise become liable for the payment thereof, to the extent of the value of the property subject to such Lien, (vii) all Disqualified Stock issued by such Person, and (viii) to the extent not otherwise included, any Guarantee by such Person of any other Person's indebtedness or other obligations described in clauses (i) through (vii) above. "Indebtedness" of the Company and its Restricted Subsidiaries shall not include (i) current trade payables incurred in the ordinary course of business and payable in accordance with customary practices and (ii) non-interest bearing installment obligations and accrued liabilities incurred in the ordinary course of business which are not more than 90 days past due. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of each series of the Securities. "Indenture Obligations" means the obligations of the Company and any other obligor under this Indenture or under the Securities, to pay principal of, premium, if any, and interest on the Securities when due and payable, whether at maturity, by acceleration, call for redemption or repurchase or otherwise, and all other amounts due or to become due under or in connection with this Indenture, the Securities or the Note Guarantees and the performance of all other obligations to the Trustee (including, but not limited to, payment of all amounts due the Trustee under Section 607 hereof) and the Holders of the Securities of either series under this Indenture, the Securities and the Note Guarantees, according to the terms thereof. "Initial Securities" has the meaning specified in the recitals to this Indenture. 14 26 "Initial 2003 Notes" and "Initial 2008 Notes" have the respective meanings specified in the first recital to this Indenture. "Interest Payment Date," when used with respect to any Security, means the date specified in such Security as the fixed date on which any installment of interest is due and payable. "Interest Rate Agreements" means one or more of the following agreements which shall be entered into by one or more financial institutions: interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements from time to time. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar arrangement, but excluding advances, loans and other extension of credit to customers, directors, officers and employees in the ordinary course of business) to, capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to, or any purchase or acquisition of Capital Stock, bonds, securities or other similar instruments issued by, such Person and shall include the designation of a Restricted Subsidiary as an Unrestricted Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and Section 1011, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the assets (net of liabilities) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the assets (net of liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, in each case as determined by the Board of Directors in good faith. "Investment Company Act" means the Investment Company Act of 1940 and any statute successor thereto, in each case as amended from time to time. "Investment Grade" means a rating in one of the four highest categories (without regard to subcategories within such rating categories) by a Rating Agency. "Investment Grade Rating Date" means the first date on which the Securities are rated Investment Grade by two Rating Agencies. "Issue Date" means the date on which Securities are first issued under the Indenture. 15 27 "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, security interest, lien, encumbrance, or other security arrangement of any kind or nature whatsoever on or with respect to such property or assets (including any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Maturity," when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Net Proceeds" from an Asset Sale means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Sale or received in any other noncash form) therefrom, in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Sale, (ii) all payments made on any Indebtedness that is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale, or to any other Person (other than the Company or a Restricted Subsidiary) owning a beneficial interest in the assets disposed of in such Asset Sale and (iv) appropriate amounts to be provided as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale. "Note Guarantee" means each Guarantee of the Securities by Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated, SmithKline Diagnostics, Inc. and Coulter Leasing Corporation pursuant to this Indenture, and any Guarantee of the Securities that may from time to time be executed and delivered pursuant to this Indenture. "Note Guarantor" means each of Coulter, Beckman Instruments (Naguabo), Inc., Hybritech Incorporated, SmithKline Diagnostics, Inc. and Coulter Leasing Corporation and any Restricted Subsidiary that has issued a Note Guarantee. "Notice of Default" means a written notice of the kind specified in Section 501(4) or 501(5). 16 28 "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Offshore Global Security" has the meaning set forth in Section 201. "Offshore Physical Security" has the meaning set forth in Section 201. "Offshore Security Exchange Date" has the meaning set forth in Section 203. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be reasonably acceptable to the Trustee. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities heretofore authenticated and delivered under this Indenture, except: (1) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (2) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (3) Securities as to which Defeasance has been effected pursuant to Section 1202; and (4) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; 17 29 provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver or other action hereunder as of any date, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. "Permitted Indebtedness" means: (i) Indebtedness incurred by the Company pursuant to the Credit Facility in an aggregate principal amount not to exceed $1,100.0 million outstanding at any time, minus the aggregate amount of all scheduled repayments of principal, and all mandatory prepayments of principal with Net Proceeds from Asset Sales, and plus (in the case of any refinancing thereof) the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing; provided that, so long as no term loan Indebtedness remains outstanding under the Credit Facility, the Company shall be permitted to incur revolving credit Indebtedness thereunder in an aggregate principal amount not to exceed $800 million outstanding at any time; (ii) Indebtedness of Foreign Subsidiaries in an aggregate principal amount outstanding at any time not exceeding, as to all such Foreign Subsidiaries, the greater of (a) $75 million and (b) an amount equal to the sum of (x) 80% of the combined book value of the net account receivables owned by Foreign Subsidiaries that are shown on the consolidated balance sheet of the Company as of the end of the most recently ended fiscal quarter for which financial statements of the Company are available plus (y) 50% of the combined book value of the inventory owned by Foreign Subsidiaries that is shown on such balance sheet, all as calculated on a combined basis and in accordance with GAAP; 18 30 (iii) Indebtedness represented by the Initial Securities or the Exchange Securities, any Guarantees in respect thereof, and any Indebtedness arising by reason of any Lien granted to secure any of the foregoing Indebtedness; (iv) Indebtedness owed by any Restricted Subsidiary to the Company or to another Restricted Subsidiary, or owed by the Company to any Restricted Subsidiary; provided, however, that any such Indebtedness shall be at all times held by a Person that is either the Company or a Restricted Subsidiary of the Company; provided, further, however, that upon either (a) the transfer or other disposition of any such Indebtedness to a Person other than the Company or another Restricted Subsidiary or (b) the sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of any such Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary, the incurrence of such Indebtedness shall be deemed to be an incurrence that is not permitted by this clause (iv); (v) Indebtedness of the Company or any Restricted Subsidiary in the form of Purchase Money Obligations or Capital Lease Obligations, in an aggregate amount not in excess of $30 million outstanding at any time; (vi) Indebtedness of the Company or any Restricted Subsidiary arising in the ordinary course of business (a) pursuant to Interest Rate Agreements designed to protect the Company or any Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Subsidiary as long as such obligations do not exceed the aggregate principal amount of such Indebtedness then outstanding, (b) under any Currency Hedging Arrangements, which if related to Indebtedness do not increase the amount of such Indebtedness other than as a result of foreign exchange fluctuations, or (c) under any Commodity Price Protection Agreements, which if related to Indebtedness do not increase the amount of such Indebtedness other than as a result of foreign exchange fluctuations; (vii) Indebtedness of the Company or any Restricted Subsidiary arising from the honoring of a check, draft or similar instrument of such Person drawn against insufficient funds, provided that such Indebtedness is extinguished within five Business Days of its incurrence; (viii) Indebtedness of the Company or any Restricted Subsidiary consisting of Guarantees, indemnities, or obligations in respect of purchase price adjustments, in connection with the acquisition or disposition of assets; 19 31 (ix) Indebtedness of the Company or any Restricted Subsidiary in respect of (a) judgment, performance, surety and other bonds provided by such Person with respect to obligations of such Person in the ordinary course of business, (b) letters of credit securing obligations incurred in the ordinary course of business or (c) other letters of credit in an amount not to exceed $5 million in the aggregate outstanding at any time; (x) Indebtedness of the Company or any Restricted Subsidiary consisting of Guarantees in respect of loans or advances made to officers or employees of the Company or any Restricted Subsidiary, or Guarantees otherwise made on their behalf, (a) in respect of travel, entertainment and moving related expenses incurred in the ordinary course of business, or (b) in the ordinary course of business not exceeding $500,000 in the aggregate outstanding at any time; (xi) Any Refinancing Indebtedness incurred in respect of any Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii) of this definition of "Permitted Indebtedness," any Capital Lease Obligations described in clause (v) of this definition of "Permitted Indebtedness" or any Indebtedness permitted to be incurred pursuant to the first sentence of Section 1010; (xii) Indebtedness of the Company or any Restricted Subsidiary that is outstanding on the Issue Date; (xiii) Acquired Debt of any Restricted Subsidiary, provided that at the time of the incurrence thereof and after giving effect thereto on a pro forma basis, (x) no De fault or Event of Default will have occurred and be continuing or would result therefrom and (y) the Company could incur at least $1.00 of additional Indebtedness pursuant to the first sentence of Section 1010; (xiv) Indebtedness of any Restricted Subsidiary in an aggregate principal amount not exceeding $10 million outstanding at any time, as to all such Restricted Subsidiaries that incur Indebtedness pursuant to this clause (xiv); (xv) Guarantees by the Company of any Indebtedness of any Restricted Subsidiary incurred by such Subsidiary in compliance with Section 1010, provided that if such Indebtedness is subordinated in right of payment to any other Indebtedness, such Guarantee shall be subordinated in right of payment to the Securities at least to the same extent as such Indebtedness is so subordinated to such other Indebtedness; (xvi) any Guarantee by any Note Guarantor of Bank Indebtedness of the Company incurred pursuant to clause (i), (xi) or (xvii) of this definition of "Permitted 20 32 Indebtedness" or the first sentence of Section 1010, provided that (a) if such Indebtedness is subordinated in right of payment to any other Indebtedness, such Guarantee shall be subordinated in right of payment to the Securities at least to the same extent as such Indebtedness is so subordinated to such other Indebtedness, and (b) upon such Person no longer being a Note Guarantor, there shall be deemed to have occurred a new incurrence of such Guarantee not permitted by this clause (xvi); and (xvii) Indebtedness of the Company in addition to that described in clauses (i), (iii) through (xii) and (xv) above, and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, so long as the aggregate principal amount of all such Indebtedness incurred pursuant to this clause (xvii) does not exceed $50 million outstanding at any time. For purposes of determining compliance with any such Dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the Dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt, provided that (x) the Dollar-equivalent principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date, (y) if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such Dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced, and (z) the Dollar-equivalent principal amount of Indebtedness denominated in a foreign currency and incurred pursuant to the Credit Facility shall be calculated based on the relevant currency exchange rate in effect on, at the Company's option, (i) the Issue Date, (ii) any date on which any of the respective commitments under the Credit Facility shall be reallocated between or among facilities or subfacilities thereunder, or on which such rate is otherwise calculated for any purpose thereunder, or (iii) the date of such incurrence. The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing. For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness incurred pursuant to and in compliance with, Section 1010, (i) any other obligation of the obligor on such Indebtedness (or of any other Person that 21 33 could have incurred such Indebtedness as the obligor thereon in compliance with such covenant) arising under any Guarantee, Lien or letter of credit supporting such Indebtedness shall be disregarded to the extent that such Guarantee, Lien or letter of credit secures the principal amount of such Indebtedness; (ii) in the event that Indebtedness is entitled to be incurred pursuant to the first paragraph of such covenant or meets the criteria of more than one of the types of Indebtedness described in the definition of "Permitted Indebtedness", the Company, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; and (iii) the amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in accordance with GAAP. Indebtedness of any Person that is not a Restricted Subsidiary, which Indebtedness is outstanding at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or a Restricted Subsidiary, shall be deemed to have been incurred at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or a Restricted Subsidiary, and Indebtedness which is assumed at the time of the acquisition of any asset shall be deemed to have been incurred at the time of such acquisition. Accrual of interest, the accretion of accreted value of principal, and the payment of interest in the form of additional Indebtedness having the same terms as the original Indebtedness on which such payment is made (which payment is made pursuant to the terms of such original Indebtedness as initially issued), will not be deemed an incurrence of Indebtedness for purposes of Section 1010. "Permitted Investments" means (i) any Investment in the Company or any Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any Investment in a Person if, as a result of such Investment, (a) such Person becomes a Restricted Subsidiary, or (b) such Person either (1) is merged, consolidated or amalgamated with or into the Company or one of its Restricted Subsidiaries and the Company or such Restricted Subsidiary is the surviving Person, or (2) transfers or conveys substantially all of its assets to, or is liquidated into, the Company or one of its Restricted Subsidiaries; (iv) Investments in accounts and notes receivable acquired in the ordinary course of business; (v) any securities or other Investments received in connection with any sale or other disposition of property or assets (including Equity Interests); (vi) obligations under any Interest Rate Agreement, Currency Hedging Arrangement or Commodity Price Protection Agreement permitted pursuant to Section 1010; (vii) securities or other Investments received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments, including in connection with any bankruptcy proceeding or other reorganization of another Person; (viii) Investments in existence or made pursuant to legally binding written commitments in existence on the Issue Date; (ix) pledges or deposits with respect to leases or utilities, provided to third 22 34 parties in the ordinary course of business; (x) bonds secured by assets leased to and operated by the Company or any Restricted Subsidiary that were issued in connection with the financing of such assets so long as the Company or any Restricted Subsidiary may obtain title to such assets at any time by paying a nominal fee, canceling such bonds and terminating the transaction; (xi) Investments in a joint venture or similar entity that is not a Restricted Subsidiary, made in the ordinary course of business; (xii) Investments in customers or suppliers, not to exceed $10 million in the aggregate outstanding at any time; and (xiii) Investments in an amount not exceeding $50 million in the aggregate outstanding at any time. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Physical Securities" has the meaning set forth in Section 201. "Place of Payment" has the meaning specified in Section 1002. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "Principal Property" means any real property of the Company or any of its Subsidiaries, and any equipment located at or comprising a part of any such property, having a net book value, as of the date of determination, in excess of the greater of $50 million and 10% of Consolidated Net Tangible Assets of the Company; provided, however, that Principal Property shall not include Equipment Held for Resale. "Private Placement Legend" has the meaning set forth in Section 203. "Purchase Money Obligation" means any Indebtedness secured by a Lien on assets related to the business of the Company or the Restricted Subsidiaries, and any additions and accessions thereto, which are purchased or constructed by the Company or any Restricted Subsidiary at any time after the Issue Date; provided that (i) any security agreement or 23 35 conditional sales or other title retention contract pursuant to which the Lien on such assets is created (collectively a "Security Agreement") shall be entered into within 180 days after the purchase or substantial completion of the construction of such assets and shall at all times be confined solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom, (ii) at no time shall the aggregate principal amount of the outstanding Indebtedness secured thereby be increased, except in connection with the purchase of additions and accessions thereto and except in respect of fees and other obligations in respect of such Indebtedness and (iii) (a) the aggregate outstanding principal amount of Indebtedness secured thereby (determined on a per asset basis in the case of any additions and accessions) shall not at the time such Security Agreement is entered into exceed 100% of the purchase price to the Company or any Restricted Subsidiary of the assets subject thereto or (b) the Indebtedness secured thereby shall be with recourse solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom. "Rating Agency" means each of Standard & Poor's Ratings Services, Duff & Phelps Credit Rating Co. and Moody's Investors Service, Inc. (or, in any case, if such Person ceases to rate the Securities for reasons outside the control of the Company, any other "nationally recognized statistical rating organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act) selected by the Company as a replacement Rating Agency). "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Reference Treasury Dealer" means each of Merrill Lynch & Co., Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated, BancAmerica Robertson Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. "Refinancing Indebtedness" means any Indebtedness incurred in connection with or given in exchange for the renewal, extension, substitution, refunding, defeasance, refinancing, repayment or replacement (a "refinancing") of any Indebtedness described in clauses (i), (ii), (iii), (xi), (xii) or (xiii) of the definition of "Permitted Indebtedness," any Capital Lease Obligations described in clause (v) of the definition of "Permitted Indebtedness" 24 36 or any Indebtedness permitted to be incurred pursuant to the first sentence of Section 1010; provided, however, that (a) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount (or accrued amount, if less) of the Indebtedness so renewed, extended, substituted, refunded, defeased, refinanced or replaced ("refinanced"), plus the reasonable fees, underwriting discounts, premiums and other costs and expenses incurred in connection therewith), (b) such Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; (c) if the Indebtedness being refinanced is subordinated in right of payment to any Securities, such Refinancing Indebtedness shall be at least as subordinated in right of payment to the Securities as the Indebtedness being refinanced; and (d) the obligor on such Refinancing Indebtedness shall be the obligor on the Indebtedness being refinanced, the Company, or (in the case of Indebtedness of a Foreign Subsidiary that is being refinanced) any Foreign Subsidiary; it being understood that any Indebtedness incurred pursuant to clauses (i), (ii) or (v) of the definition of "Permitted Indebtedness" that is so refinanced shall be deemed to remain outstanding for the purpose of determining compliance with any limitations or restrictions set forth in such clauses. "Registration Rights Agreement" means the Registration Rights Agreement dated on or about the Issue Date among the Company and the Initial Purchasers for the benefit of themselves and the Holders, as the same may be amended from time to time in accordance with the terms thereof. "Registration Statement" means any Registration Statement as defined in the Registration Rights Agreement. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of either series means the date specified for that purpose in Section 301. "Resale Restriction Termination Date" has the meaning specified in the Private Placement Legend set forth in Section 203. "Responsible Officer," when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. 25 37 "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means (i) any dividend or other distribution declared or paid on any Capital Stock of the Company or any of its Restricted Subsidiaries (other than dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or distributions payable to the Company or any Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or distributions has any stockholder other than the Company or another Restricted Subsidiary, to such stockholder on no more than a pro rata basis, measured by value)); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Restricted Subsidiary (other than any Capital Stock owned by the Company or any Restricted Subsidiary, or from all holders of such Capital Stock of a Restricted Subsidiary on a pro rata basis); (iii) any payment to purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to any Securities (other than a purchase, redemption, defeasance or other acquisition or retirement for value in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such acquisition or retirement); or (iv) any Restricted Investment. "Restricted Payment Amount" means the sum of: (a) an amount equal to 50% of the Company's aggregate cumulative Consolidated Net Income accrued on a cumulative basis from the Issue Date (or, if such aggregate cumulative Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit), plus (b) the aggregate amount of all net cash proceeds received since the Issue Date by the Company (1) as capital contributions in the form of common equity to the Company after the Issue Date, (2) from the issuance and sale (other than to a Restricted Subsidiary) of its Capital Stock (other than Disqualified Stock), (3) from the issuance to a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of any Securities) and (4) from the issuance and sale by the Company or any Restricted Subsidiary after the Issue Date of Disqualified Stock or debt securities that have been converted into or exchanged for Capital Stock of the Company (other than Disqualified Stock), plus the amount of cash received by the Company or any Restricted Subsidiary upon such conversion or exchange, in each case to the extent that such proceeds are not used to redeem, repurchase, retire or otherwise acquire Capital Stock or any 26 38 Indebtedness of the Company or any Restricted Subsidiary, pursuant to clause (ii) or (iii) of the second paragraph of Section 1011, plus (c) the amount of the net reduction in Investments by the Company in Unrestricted Subsidiaries resulting from (x) the payment of cash dividends or the repayment in cash of the principal of loans or the cash return on any Investment, in each case to the extent received by the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or extinguishment of any Guarantee of Indebtedness of any Unrestricted Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the Company (valued as provided in the definition of "Investment"), such aggregate amount of the net reduction in Investments not to exceed in the case of any Unrestricted Subsidiaries the amount of Restricted Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments, plus (d) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the amount of cash proceeds received with respect to such Restricted Investment, net of taxes and the cost of disposition, not to exceed the amount of Restricted Investments made after the Issue Date. "Restricted Subsidiary" means any Subsidiary of the Company which owns or leases a Principal Property; provided that, prior to an Investment Grade Rating Date, "Restricted Subsidiary" means any Subsidiary of the Company (other than an Unrestricted Subsidiary) for all purposes other than as used in Sections 1008 and 1009. "Securities Act" means the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "series," when used with respect to the Securities, means the 2003 Notes or the 2008 Notes, as applicable. 27 39 "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity" means, when used with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the purchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subsidiary" of a Person means a Person more than 50% of the outstanding voting stock or other Equity Interests of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting" stock or other Equity Interests means stock or other Equity Interests which ordinarily has voting power for the election of directors, trustees or similar managers, whether at all times or only so long as no senior class of stock or other Equity Interests has such voting power by reason of any contingency. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of either series shall mean the Trustee with respect to Securities of that series. "2003 Notes" and "2008 Notes" have the respective meanings specified in the first recital to this Indenture. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors as provided below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate (a "Designation") any Subsidiary of the Company (other 28 40 than a Subsidiary that owns any Capital Stock of, or owns, or holds any Lien on, any property of the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated) to be an Unrestricted Subsidiary if: (a) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (b) the Company could make an Investment (other than a Permitted Investment) at the time of such Designation (assuming the effectiveness thereof) in an amount (the "Designation Amount") equal to the Fair Market Value of the Capital Stock of such Subsidiary on such date; and (c) the Company could incur $1.00 of additional Indebtedness under the first sentence of Section 1010 at the time of such Designation (assuming the effectiveness thereof). The Board of Directors may revoke (a "Revocation") any Designation of a Subsidiary as an Unrestricted Subsidiary if: (a) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; (b) the Company could incur $1.00 of additional Indebtedness under the first sentence of Section 1010 at the time of such Revocation (assuming the effectiveness thereof); and (c) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred under the Indenture. Any Designation or Revocation must be evidenced by a Board Resolution certifying compliance with the foregoing provisions. In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to Section 1011 for all purposes of the Indenture in the Designation Amount. The Company shall not, and shall not permit any Restricted Subsidiary to, at any time (i) provide a Guarantee of any Indebtedness of any Unrestricted Subsidiary, (ii) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (iii) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except to the extent permitted under Section 1011. "U.S. Global Security" has the meaning set forth in Section 201. "U.S. Government Obligation" has the meaning specified in Section 1204. "U.S. Physical Security" has the meaning set forth in Section 201. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." 29 41 "Voting Stock" of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment at final maturity, in respect thereof, with (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding aggregate principal amount of such Indebtedness. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for certificates provided for in Section 1004) shall include, (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. 30 42 SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company or a Note Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any Note Guarantor stating that the information with respect to such factual matters is in the possession of the Company or any Note Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders; Record Dates. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying 31 43 that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. The ownership of Securities shall be proved by the Security Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company or any Note Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of either series entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date (or their duly designed proxies), and no other Holders, shall be entitled to take the relevant action, whether or not such Persons remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106. 32 44 The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of either series entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 502, (iii) any request to institute proceedings referred to in Section 507(2) or (iv) any direction referred to in Section 512, in each case with respect to Securities of such series. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106. With respect to any record date set pursuant to this Section, the party hereto which sets such record dates may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 106, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. 33 45 SECTION 105. Notices, Etc., to Trustee, Company and Note Guarantor. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company or any Note Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Services Division, or (2) the Company or any Note Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first- class postage prepaid, to the Company or such Note Guarantor addressed to it at the address of the Company's principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under the Trust Indenture Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust 34 46 Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by each of the Company and the Note Guarantors shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture, in the Securities or in any Note Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture, in the Securities or in any Note Guarantee, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. THIS INDENTURE, THE SECURITIES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS). SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity. 35 47 ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series and the Trustee's certificate of authentication relating thereto shall be in substantially the forms set forth, or referenced, in this Article and Exhibit A annexed hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or Depositary therefor or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. The terms and provisions contained in the Securities annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Note Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Initial Securities offered and sold in reliance on Rule 144A under the Securities Act may be issued in the form of one or more permanent global Securities in substantially the form set forth in Exhibit A and contain each of the legends set forth in Section 203 (the "U.S. Global Security"), deposited with the Trustee, as custodian for the Depositary or its nominee, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Initial Securities offered and sold in offshore transactions in reliance on Regulation S under the Securities Act shall be issued in the form of a single permanent global Security in substantially the form set forth in Exhibit A (the "Offshore Global Security") deposited with the Trustee, as custodian for the Depositary or its nominee, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Offshore Global Security may from time to time be increased or decreased by adjustments made in the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Initial Securities issued pursuant to Section 305 in 36 48 exchange for or upon transfer of beneficial interests in the U.S. Global Security or the Offshore Global Security (x) shall be in the form of permanent certificated Securities substantially in the form set forth in Exhibit A and shall contain the Private Placement Legend as set forth in Section 203 (the "U.S. Physical Securities") or (y), on or after the Offshore Security Exchange Date and subject to Section 203, shall be in the form of permanent certificated Securities substantially in the form set forth in Exhibit A (the "Offshore Physical Securities"), respectively, as hereinafter provided. The Offshore Physical Securities and the U.S. Physical Securities are sometimes collectively herein referred to as the "Physical Securities". The U.S. Global Security and the Offshore Global Security are sometimes collectively referred to as the "Global Securities". Exchange Securities shall be issued substantially in the form set forth in Exhibit A. SECTION 202. Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, As Trustee By ------------------------------------- Authorized Officer Dated: SECTION 203. Restrictive and Global Security Legends. Unless and until (a) (i) an Initial Security is exchanged for an Exchange Security in an Exchange Offer pursuant to an effective Exchange Offer Registration Statement or (ii) an Initial Security is sold pursuant to an effective Shelf Registration Statement, in each case pursuant to the Registration Rights Agreement, or (b) the Resale Restriction Termination Date as herein provided, (A) each U.S. Global Security and U.S. Physical Security shall bear the following legend set forth below (the "Private Placement Legend") on the face thereof and (B) the Offshore Global Security and Offshore Physical Securities shall bear the Private Placement Legend on the face thereof until 37 49 at least 41 days after the date hereof (the "Offshore Security Exchange Date") and receipt by the Company and the Trustee of a certificate substantially in the form provided in Exhibit C: THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) OUTSIDE THE UNITED STATES PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY 38 50 DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. AS USED HEREIN, THE TERMS "UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Each Global Security, whether or not an Initial Security, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE. 39 51 ARTICLE THREE THE SECURITIES SECTION 301. Amount; Series; Terms. The titles of the Initial 2003 Notes and the Exchange 2003 Notes shall be the "7.10% Senior Notes due 2003" and the "7.10% Senior Notes due 2003, Series B", respectively. The titles of the Initial 2008 Notes and the Exchange 2008 Notes shall be the "7.45% Senior Notes due 2008" and the "7.45% Senior Notes due 2008, Series B", respectively. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107) shall be limited to $160,000,000 in the case of the 2003 Notes and $240,000,000 in the case of the 2008 Notes. The final Stated Maturity of the 2003 Notes shall be March 4, 2003, and the final Stated Maturity of the 2008 Notes shall be March 4, 2008. The 2003 Notes shall bear interest at the rate of 7.10% per annum, and the 2008 Notes shall bear interest at the rate of 7.45% per annum, in each case from March 4, 1998 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as further provided in the form of Security annexed hereto as Exhibit A. The Interest Payment Dates on which such interest shall be payable shall be March 4 and September 4 of each year, and the Regular Record Dates for any interest payable on each such Interest Payment Date shall be the immediately preceding February 19 and August 19, respectively. The principal of, and premium, if any, and interest on the Securities shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, provided, however, that at the option of the Company payment of interest on a Security may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Upon a Change of Control Triggering Event, each Holder of Securities will have the right to require that Company purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Securities held by such Holder, as further provided in Section 1012. The Securities will be redeemable at the option of the Company as provided in Article Eleven. The Securities will not be entitled to the benefit of a sinking fund. The Securities shall be substantially in the form of Exhibit A to this Indenture, as further provided in Article Two. 40 52 SECTION 302. Denominations. The Securities of each series shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. On Company Order, the Trustee shall authenticate for original issue Initial 2003 Notes and Initial 2008 Notes in an aggregate principal amount not to exceed $160,000,000 in the case of the 2003 Notes and $240,000,000 in the case of the 2008 Notes. On Company Order, the Trustee shall authenticate for original issue Exchange 2003 Notes and Exchange 2008 Notes in an aggregate principal amount not to exceed $160,000,000 in the case of the 2003 Notes and $240,000,000 in the case of the 2008 Notes; provided that such Exchange Securities shall be issuable only upon the valid surrender for cancellation of Initial Securities of a like aggregate principal amount in accordance with an Exchange Offer pursuant to the Registration Rights Agreement. In each case, the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such authentication of Securities. Such Company Order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of 2003 Notes outstanding at any time shall not exceed $160,000,000. The aggregate principal amount of 2008 Notes outstanding at any time shall not exceed $240,000,000. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. 41 53 SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of either series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of either series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of either series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. Until so exchanged, the temporary Securities of either series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of a series at the office or agency of the Company in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. At the option of the Holder, Securities of either series may be exchanged for other Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, 42 54 and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. If the Securities of either series are to be redeemed in part, the Company shall not be required (A) to issue, register the transfer of or exchange any Securities of that series (or of that series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Securities selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (B) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security 43 55 of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of either series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the Place of Payment, provided, however, that at the option of the Company payment of interest on a Security may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Any interest on any Security of either series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its selection in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The 44 56 Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to each Holder of Securities of such series in the manner set forth in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of either series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, 45 57 whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. SECTION 310. Computation of Interest. Interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 311. Book-Entry Provisions for Global Securities. (a) Each Global Security initially shall (i) be registered in the name of the Depositary for such Global Securities or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 203. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security, and the Depositary may be treated by the Company, the Note Guarantors, the Trustee and any agent of the Company, the Note Guarantors or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Note Guarantors, the Trustee or any agent of the Company, the Note Guarantors or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a beneficial owner of any Security. The registered holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (b) Transfers of a Global Security shall be limited to transfers of such Global Security in whole, but not in part, to the Depositary, its successors or their respective 46 58 nominees. Interests of beneficial owners in a Global Security may be transferred or exchanged for Physical Securities in accordance with the applicable rules and procedures of the Depositary and the provisions of Sections 305 and 312. In addition, U.S. Physical Securities or Offshore Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Security or the Offshore Global Security, respectively, if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the applicable Global Security or the Depositary ceases to be a "Clearing Agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Physical Securities under the Indenture or (iii) an Event of Default has occurred and is continuing and the Security Registrar has received a written request from the Depositary to issue Physical Securities. (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Security to beneficial owners for Physical Securities pursuant to paragraph (b), the Security Registrar shall record on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the beneficial interest in the Global Security being transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Securities of like tenor and principal amount of authorized denominations. (d) In connection with a transfer of an entire Global Security to beneficial owners pursuant to paragraph (b), the applicable Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the applicable Global Security, an equal aggregate principal amount at maturity of U.S. Physical Securities (in the case of the U.S. Global Security) or Offshore Physical Securities (in the case of the Offshore Global Security), as the case may be, of authorized denominations. (e) Any beneficial interest in one of the Global Securities that is transferred to a person who takes delivery in the form of an interest in the other Global Security will, upon transfer, cease to be an interest in such Global Security and become an interest in the other Global Security and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Security for as long as it remains such an interest. (f) Any Physical Security delivered in exchange for an interest in a Global Security pursuant to paragraph (b) shall, unless such exchange is made on or after the Resale 47 59 Restriction Termination Date and except as otherwise provided in Section 203 and Section 312, bear the Private Placement Legend. SECTION 312. Transfer Provisions. Unless and until (i) an Initial Security is exchanged for an Exchange Security in the Exchange Offer pursuant to an effective Registration Statement or (ii) an Initial Security is sold pursuant to an effective Registration Statement, in each case, pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) General. The provisions of this Section 312 shall apply to all transfers involving any Physical Security and any beneficial interest in any Global Security. (b) Certain Definitions. As used in this Section 312 only, "delivery" of a certificate by a transferee or transferor means the delivery to the Security Registrar by such transferee or transferor of the applicable certificate duly completed; "holding" includes both possession of a Physical Security and ownership of a beneficial interest in a Global Security, as the context requires; "transferring" a Global Security means transferring that portion of the principal amount of the transferor's beneficial interest therein that the transferor has notified the Security Registrar that it has agreed to transfer; and "transferring" a Physical Security means transferring that portion of the principal amount thereof that the transferor has notified the Security Registrar that it has agreed to transfer. As used in this Indenture, "Accredited Investor Certificate" means a certificate substantially in the form set forth in Exhibit D; "Regulation S Certificate" means a certificate substantially in the form set forth in Exhibit E; "Rule 144A Certificate" means a certificate substantially in the form set forth in Exhibit F; and "Non-Registration Opinion and Supporting Evidence" means a written opinion of counsel reasonably acceptable to the Company to the effect that, and such other certification or information as the Company may reasonably require to confirm that, the proposed transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. (c) Deemed Delivery of a Rule 144A Certificate in Certain Circumstances. A Rule 144A Certificate, if not actually delivered, will be deemed delivered if (A) (i) the transferor advises the Company and the Trustee in writing that the relevant offer and sale were made in accordance with the provisions of Rule 144A (or, in the case of a transfer of a Physical Security, the transferor checks the box provided on the Physical Security to that effect) and (ii) the transferee advises the Company and the Trustee in writing that (x) it and, if applicable, each account for which it is acting in connection with the relevant transfer, is a qualified institutional buyer within the meaning of Rule 144A, (y) it is aware that the transfer 48 60 of Securities to it is being made in reliance on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A, and (z) prior to the proposed date of transfer it has been given the opportunity to obtain from the Company the information referred to in Rule 144A(d)(4), and has either declined such opportunity or has received such information (or, in the case of a transfer of a Physical Security, the transferee signs the certification provided on the Physical Security to that effect); or (B) the transferor holds the U.S. Global Security and is transferring to a transferee that will take delivery in the form of the U.S. Global Security. (d) Procedures and Requirements. 1. If the proposed transfer occurs prior to the Offshore Security Exchange Date, and the proposed transferor holds: (A) a U.S. Physical Security which is surrendered to the Security Registrar, and the proposed transferee or transferor, as applicable: (i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Security, then the Security Registrar shall (x) register such transfer in the name of such transferee and record the date thereof in its books and records, (y) cancel such surrendered U.S. Physical Security and (z) deliver a new U.S. Physical Security to such transferee duly registered in the name of such transferee in principal amount equal to the principal amount being transferred of such surrendered U.S. Physical Security; (ii) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Security, then the Security Registrar shall (x) cancel such surrendered U.S. Physical Security, (y) record an increase in the principal amount of the U.S. Global Security equal to the principal amount being transferred of such surrendered U.S. Physical Security and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or (iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Offshore Global Security, then the Security 49 61 Registrar shall (x) cancel such surrendered U.S. Physical Security, (y) record an increase in the principal amount of the Offshore Global Security equal to the principal amount being transferred of such surrendered U.S. Physical Security and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer. In any of the cases described in this Section 312(d)(1)(A), the Security Registrar shall deliver to the transferor a new U.S. Physical Security in principal amount equal to the principal amount not being transferred of such surrendered U.S. Physical Security, as applicable. (B) the U.S. Global Security, and the proposed transferee or transferor, as applicable: (i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Security, then the Security Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the U.S. Global Security in an amount equal to the beneficial interest therein being transferred, (y) deliver a new U.S. Physical Security to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; (ii) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Security, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; or (iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Offshore Global Security, then the Security Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the U.S. Global Security in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the 50 62 principal amount of the Offshore Global Security equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer. (C) the Offshore Global Security, and the proposed transferee or transferor, as applicable: (i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Security, then the Security Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the Offshore Global Security in an amount equal to the beneficial interest therein being transferred, (y) deliver a new U.S. Physical Security to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; (ii) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Security, then the Security Registrar shall (x) record a decrease in the principal amount of the Offshore Global Security in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the U.S. Global Security equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or (iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Offshore Global Security, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; provided, however, that until the Offshore Security Exchange Date occurs, beneficial interests in the Offshore Global Security may be held only in or through accounts maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting for the account thereof), and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account. 51 63 2. If the proposed transfer occurs on or after the Offshore Security Exchange Date and the proposed transferor holds: (A) a U.S. Physical Security which is surrendered to the Security Registrar, and the proposed transferee or transferor, as applicable: (i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Security, then the procedures set forth in Section 312(d)(1)(A)(i) shall apply; (ii) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Security, then the procedures set forth in Section 312(d)(1)(A)(ii) shall apply; or (iii) delivers a Regulation S Certificate, then the Security Registrar shall cancel such surrendered U.S. Physical Security and at the direction of the transferee, either: (x) register such transfer in the name of such transferee, record the date thereof in its books and records and deliver a new Offshore Physical Security to such transferee in principal amount equal to the principal amount being transferred of such surrendered U.S. Physical Security, or (y) if the proposed transferee is or is acting through an Agent Member, record an increase in the principal amount of the Offshore Global Security equal to the principal amount being transferred of such surrendered U.S. Physical Security and notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer. In any of the cases described in this Section 312(d)(2)(A), the Security Registrar shall deliver to the transferor a new U.S. Physical Security in principal amount equal to the principal amount not being transferred of such surrendered U.S. Physical Security, as applicable. 52 64 (B) the U.S. Global Security, and the proposed transferee or transferor, as applicable: (i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Security, then the procedures set forth in Section 312(d)(1)(B)(i) shall apply; or (ii) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Security, then the procedures set forth in Section 312(c)(1)(B)(ii) shall apply; or (iii) delivers a Regulation S Certificate, then the Security Registrar shall (x) record a decrease in the principal amount of the U.S. Global Security in an amount equal to the beneficial interest therein being transferred, (y) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer and (z) at the direction of the transferee, either: (x) register such transfer in the name of such transferee, record the date thereof in its books and records and deliver a new Offshore Physical Security to such transferee in principal amount equal to the amount of such decrease, or (y) if the proposed transferee is or is acting through an Agent Member, record an increase in the principal amount of the Offshore Global Security equal to the amount of such decrease. (C) an Offshore Physical Security which is surrendered to the Security Registrar, and the proposed transferee or transferor, as applicable: (i) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests delivery in the form of the U.S. Global Security, then the Security Registrar shall (x) cancel such surrendered Offshore Physical Security, (y) record an increase in the principal amount of the U.S. Global Security equal to the principal amount being transferred of such surrendered 53 65 Offshore Physical Security and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; (ii) requests that the proposed transferee receive a beneficial interest in the Offshore Global Security and the proposed transferee is or is acting through an Agent Member, then the Security Registrar shall (x) cancel such surrendered Offshore Physical Security, (y) record an increase in the principal amount of the Offshore Global Security equal to the principal amount being transferred of such surrendered Offshore Physical Security and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or (iii) does not make a request covered by Section 312(d)(2)(C)(i) or Section 312(d)(2)(C)(ii), then the Security Registrar shall (x) register such transfer in the name of such transferee and record the date thereof in its books and records, (y) cancel such surrendered Offshore Physical Security and (z) deliver a new Offshore Physical Security to such transferee duly registered in the name of such transferee in principal amount equal to the principal amount being transferred of such surrendered Offshore Physical Security. In any of the cases described in this Section 312(d)(2)(C), the Security Registrar shall deliver to the transferor a new Offshore Physical Security in principal amount equal to the principal amount not being transferred of such surrendered Offshore Physical Security, as applicable. (D) the Offshore Global Security, and the proposed transferee or transferor, as applicable: (i) delivers (or is deemed to have delivered pursuant to clause (c) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests delivery in the form of the U.S. Global Security, then the Security Registrar shall (x) record a decrease in the principal amount of the Offshore Global Security in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the U.S. Global Security equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; (ii) requests that the proposed transferee receive a beneficial interest in the Offshore Global Security and the proposed transferee is or is acting through 54 66 an Agent Member, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; or (iii) does not make a request covered by Section 312(d)(2)(D)(i) or Section 312(d)(2)(D)(ii), then the Security Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the Offshore Global Security in an amount equal to the beneficial interest therein being transferred, (y) deliver a new Offshore Physical Security to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer. (e) Execution, Authentication and Delivery of Physical Security. In any case in which the Security Registrar is required to deliver a Physical Security to a transferee or transferor, the Company shall execute, and the Trustee shall authenticate and make available for delivery, such Physical Security. (f) Certain Additional Terms Applicable to Physical Securities. Any transferee entitled to receive a Physical Security may request that the principal amount thereof be evidenced by one or more Physical Securities in any authorized denomination or denominations and the Security Registrar shall comply with such request if all other transfer restrictions are satisfied. (g) Transfers Not Covered by Section 312(d). The Security Registrar shall effect and record, upon receipt of a written request from the Company so to do, a transfer not otherwise permitted by Section 312(d), such recording to be done in accordance with the otherwise applicable provisions of Section 312(d), upon the furnishing by the proposed transferor or transferee of a Non-Registration Opinion and Supporting Evidence. (h) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in the Indenture. The Security Registrar shall not register a transfer of any Security unless such transfer complies with the restrictions with respect thereto set forth in this Indenture. The Security Registrar shall not be required to determine (but may rely upon a determination made by the Company) the sufficiency of any such certifications, legal opinions or other information. 55 67 (i) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Security Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Security Registrar shall deliver only Securities that bear the Private Placement Legend unless (i) the circumstances exist contemplated by the fifth paragraph of Section 201 and the first paragraph of Section 203 (with respect to an Offshore Physical Security or Offshore Global Security) or the requested transfer, exchange or replacement is made on or after the Resale Restriction Termination Date (with respect to any Security), (ii) there is delivered to the Security Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Securities are exchanged for Exchange Securities pursuant to the Exchange Offer. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or 56 68 (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose money in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default," wherever used herein with respect to Securities of either series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be 57 69 effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of or any premium on any Security of that series at its Maturity; or (3) failure to offer to repurchase or to repurchase the Securities of that series in the event of a Change of Control in accordance in all material respects with the provisions of Section 1012 or to perform or to comply with any provision of Section 801; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Restricted Subsidiary (including a default with respect to Securities other than of that series) having an aggregate principal amount outstanding of at least $20,000,000, or under any mortgage, indenture or instrument (including this Indenture) under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any Restricted Subsidiary having an aggregate principal amount outstanding of at least $20,000,000, whether such indebtedness now exists or shall hereafter be created, which default (A) shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto or (B) shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without, in the case of Clause (A), such indebtedness having been discharged or without, in the case of Clause (B), such indebtedness having been discharged or such acceleration having been rescinded or annulled, in each such case within a period of 10 days after there shall have been 58 70 given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default and requiring the Company or such Restricted Subsidiary to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled, as the case may be, and stating that such notice is a "Notice of Default" hereunder; provided, however, that, subject to the provisions of Sections 601 and 602, the Trustee shall not be deemed to have knowledge of such default unless either (A) a Responsible Officer of the Trustee shall have actual knowledge of such default or (B) the Trustee shall have received written notice thereof from the Company, from any Restricted Subsidiary, from any Holder, from the holder of any such indebtedness or from the trustee under any such mortgage, indenture or other instrument; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company or any Restricted Subsidiary in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company or any Restricted Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Restricted Subsidiary under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Restricted Subsidiary or of any substantial part of its respective property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company or any Restricted Subsidiary of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or any Restricted Subsidiary in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator other similar official of the Company or any Restricted Subsidiary or of any substantial part of its respective property, or the making by it of an assignment for the benefit of 59 71 creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or any Restricted Subsidiary in furtherance of any such action; or (8) any Note Guarantee ceases to be in full force and effect or any Note Guarantor denies in writing that it has any liability under its Note Guarantee (other than by reason of the termination of the Indenture or the release of any such Note Guarantee in accordance with this Indenture). SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(6) or 501(7)) with respect to Securities of either series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. If an Event of Default specified in Section 501(6) or 501(7) with respect to Securities of either series at the time Outstanding occurs, the principal amount of all the Securities of that series shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of either series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and 60 72 (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default with respect to Securities of either series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company or any Note Guarantor (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the 61 73 Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture, the Securities or the Note Guarantees may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively. 62 74 SECTION 507. Limitation on Suits. No Holder of any Security of either series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and 63 75 such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities of either series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of at least a majority in principal amount of the Outstanding Securities of either series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default 64 76 (1) in the payment of the principal of or any premium or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. SECTION 515. Waiver of Usury, Stay or Extension Laws. Each of the Company and the Note Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Company and the Note Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have 65 77 reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. If a default occurs hereunder with respect to Securities of either series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders 66 78 pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein, in the Securities and in the Note Guarantees, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Note Guarantors, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, of the Securities or of the Note Guarantees. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. 67 79 SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. SECTION 608. Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. To the extent permitted by such Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of each series, or a trustee under the Senior Indenture, dated as of May 15, 1996, between the Company and the Trustee. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be one (and only one) Trustee hereunder with respect to the Securities of each series, which may be Trustee hereunder for Securities of the other series. Each Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee with respect to the Securities of either series shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. 68 80 SECTION 610. Resignation and Removal; Appointment of Successor. No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. The Trustee may resign at any time with respect to the Securities of either series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. The Trustee may be removed at any time with respect to the Securities of either series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent Jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of either series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any 69 81 such successor Trustee may be appointed with respect to the Securities of either or both of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of either series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of either series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of either series and each appointment of a successor Trustee with respect to the Securities of either series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one (but not both) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of either series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which 70 82 (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that series to which the appointment of such successor Trustee relates. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee 71 83 may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to either series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. 72 84 An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 106 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to either series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, As Trustee By ------------------------------------ As Authenticating Agent By ------------------------------------ Authorized Officer Dated: 73 85 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (1) semi-annually, not later than June 30 and December 31 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of each series as of the preceding June 15 or December 15, as the case may be, and (2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. Preservation of Information; Communications to Holders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 703. Reports by Trustee. The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. 74 86 A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person (a "successor Person"), and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust or other entity organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary 75 87 at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by Section 1008, the Company or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; (4) if such transaction occurs prior to an Investment Grade Rating Date, the Company could incur at least $1.00 of additional Indebtedness pursuant to the first sentence of Section 1010, on a pro forma basis after giving effect to such transaction; (5) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and (6) each Note Guarantor shall have by supplemental indenture confirmed that its Note Guarantee will apply to any such successor Person's obligations under this Indenture and under the Securities of each series unless such Note Guarantor shall have been released and discharged from all of its obligations under its Note Guarantee in accordance with this Indenture. Upon an Investment Grade Rating Date, clause (4) of this Section 801 will cease to be effective with respect to any subsequent transaction governed by this Section 801. SECTION 802. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. 76 88 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Note Guarantors, when authorized by their respective Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company or a Note Guarantor, and the assumption by any such successor of the covenants of the Company or such Note Guarantor herein and in the Securities and/or any Note Guarantee, as the case may be; or (2) to add to the covenants of the Company or any Note Guarantor for the benefit of the Holders of all Securities, or to surrender any right or power herein conferred upon the Company or any Note Guarantor, as applicable, herein, in the Securities or in any Note Guarantee, as the case may be; or (3) to add any additional Events of Default for the benefit of the Holders of all Securities; or (4) to provide for additional Note Guarantees or other guarantees of the Securities or to secure the Securities or any Note Guarantee or other guarantee of the Securities; or (5) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or both series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611; or (6) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this Clause (6) shall not adversely affect the interests of the Holders of Securities of either series in any material respect. 77 89 SECTION 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of at least a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company and the Note Guarantors, when authorized by their respective Board Resolutions, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of any Security which would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in principal amount of the Outstanding Securities of either series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or of certain defaults hereunder and their consequences, provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1015, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 1015 or the deletion of this proviso, in accordance with the requirements of Sections 611 and 901(5), or (4) amend or modify any of the provisions of Article Thirteen or any Note Guarantee in any manner adverse to the Holders of Securities of either series. 78 90 A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of the other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. SECTION 906. Reference in Securities to Supplemental Indentures. Securities of either series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of either series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by 79 91 the Holder and every subsequent Holder of that Security or portion of that Security that evidences the same debt as the consenting Holder's Security, whether or not notation of the consent is made upon any Security. Subject to the following paragraph and Section 104, any such Holder or subsequent Holder may revoke the consent as to such Holder's Security or portion of such Security by notice to the Trustee or the Company received by the Trustee or the Company, as the case may be, before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, set any day as a record date for the purpose of determining the Holders of Outstanding Securities of either series entitled to consent to any amendment, supplement or waiver, as further provided in Section 104. If a record date is set pursuant hereto, then, notwithstanding the last sentence of the immediately preceding paragraph, the Holders of Outstanding Securities of the relevant series on such record date (or their duly designated proxies), and no other Holders, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons remain Holders after such record date. No such consent shall be valid or effective for more than 180 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder of Securities, unless it makes a change described in any of clauses (1) through (3) of the first paragraph of Section 902. In that case, the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York an office or agency where Securities of either series may be presented or surrendered for payment (the "Place of Payment"), where Securities of either series may be surrendered for registration of transfer or 80 92 exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company hereby designates the Corporate Trust Office as the Place of Payment, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of either series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to either series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for either series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for either series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (2) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, upon the written request of the Trustee, forthwith pay to the Trustee 81 93 all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or any premium or interest on any Security of either series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company or any Note Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company or any Note Guarantor shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its and each Note Guarantor's existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of 82 94 Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or such Note Guarantor and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1006. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1008. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, issue, assume or guarantee any indebtedness of the Company or any Subsidiary secured by a Lien upon any Principal Property, or upon shares of capital stock or evidences of indebtedness issued by any Restricted Subsidiary and owned by the Company or any Restricted Subsidiary, now owned or hereafter owned by the Company, without making effective provision to secure all of the Securities of each series then outstanding by such Lien, equally and ratably with any and all other indebtedness thereby secured, so long as such indebtedness shall be so secured. The foregoing restrictions shall not apply, however, to (1) Liens on any property existing at the time of the acquisition thereof; (2) Liens on property of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of such corporation (or a division thereof) as an entirety or substantially as an entirety to the 83 95 Company or a Restricted Subsidiary, provided that such Lien as a result of such merger, consolidation, sale, lease or other disposition is not extended to property owned by the Company or such Restricted Subsidiary immediately prior thereto; (3) Liens on property of a corporation existing at the time such corporation becomes a Restricted Subsidiary; (4) Liens securing indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (5) Liens to secure all or part of the cost of acquisition, construction, development or improvement of the underlying property, or to secure indebtedness incurred to provide funds for any such purpose, provided that the commitment of the creditor to extend the credit secured by any such Lien shall have been obtained not later than twenty-four months after the later of (a) the completion of the acquisition, construction, development or improvement of such property or (b) the placing in operation of such property or of such property as so constructed, developed or improved; (6) Liens on any property created, assumed or otherwise brought into existence in contemplation of the sale or other disposition of the underlying property, whether directly or indirectly, by way of share disposition or otherwise; provided that the Company must have disposed of such property within 180 days from the creation of such Liens and any indebtedness secured by such Liens shall be without recourse to the Company or any Subsidiary; (7) Liens in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments; (8) Liens to secure indebtedness of joint ventures in which the Company or a Restricted Subsidiary has an interest, to the extent such Liens are on property or assets of, or equity interests in, such joint ventures; (9) Liens on Equipment Held for Resale; and (10) any indebtedness secured by Liens existing on the date of this Indenture or any extension, renewal or replacement or refunding of any Lien existing on the date of this Indenture or referred to in clauses (1) to (3) or (5); provided, however, that the aggregate principal amount of indebtedness secured thereby and not otherwise authorized by clauses (1) to (3) or (5), shall not exceed the aggregate principal amount of indebtedness, plus any premium or fee payable in connection with any such extension, renewal, replacement, or refunding, so secured at the time of such extension, renewal, replacement or refunding. Notwithstanding the restrictions described above, the Company and its Restricted Subsidiaries may incur, issue, assume or guarantee debt secured by Liens without equally and ratably securing the Securities of each series then outstanding, provided, that at the time of such incurrence, issuance, assumption or guarantee, after giving effect thereto and to the retirement of any indebtedness which is concurrently being retired, the aggregate amount of all outstanding indebtedness secured by Liens so incurred, other than any indebtedness secured by Liens permitted as described in clauses (1) through (10) above, and together with all outstanding Attributable Value of all sale and leaseback transactions permitted as described in Section 1009 hereof does not exceed 15% of the Consolidated Net Tangible Assets of the Company. 84 96 SECTION 1009. Limitation on Sale and Leaseback Transactions. Sale and leaseback transactions by the Company or any Restricted Subsidiary involving any Principal Property are prohibited unless either (1) the Company or its Restricted Subsidiaries would be entitled pursuant to the provisions described in clauses (1) through (10) of the second paragraph of Section 1008 hereof to issue, assume or guarantee indebtedness secured by a Lien on such Principal Property without equally and ratably securing the Securities of each series than outstanding or (2) the Company or such Restricted Subsidiary shall apply, or cause to be applied to the retirement of its secured debt within 120 days after the effective date of the sale and leaseback transaction, an amount not less than the greater of (i) the net proceeds (net of all legal, title and recording tax expenses, commissions and other fees and expenses incurred and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such sale) of the sale of the Principal Property leased pursuant to such arrangement or (ii) the fair market value of the Principal Property so leased. This restriction will not apply to a sale and leaseback transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries or involving the taking back of a lease for a period of less than three years. Notwithstanding the restrictions described above, the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction provided, that at the time of such transaction, after giving effect thereto, the Attributable Value thereof, together with all indebtedness secured by Liens permitted pursuant to Section 1008 hereto other than all indebtedness secured by Liens permitted as described in clauses (1) through (10) of the second paragraph of Section 1008 hereof and other than the Attributable Value of such sale and leaseback transactions permitted by the preceding paragraph, does not exceed 15% of Consolidated Net Tangible Assets of the Company. SECTION 1010. Limitation on Incurrence of Indebtedness. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or directly or indirectly enter into any Guarantee of, or in any other manner become directly or indirectly liable for ("incur"), any Indebtedness (including Acquired Debt), except that the Company may incur Indebtedness if, at the time of, and immediately after giving pro forma effect to, such incurrence of Indebtedness, the Consolidated Coverage Ratio of the Company for the most recently ended four fiscal quarters for which financial statements are available would be at least 2.0 to 1. The foregoing limitations will not apply to the incurrence by the Company or any Restricted Subsidiary, as the case may be, of any Permitted Indebtedness of such Person. Upon an Investment Grade Rating Date, this Section 1010 will cease to be effective. 85 97 SECTION 1011. Limitation on Restricted Payments. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment, unless at the time of and immediately after giving effect to the proposed Restricted Payment (with the value of any such Restricted Payment, if other than cash, to be as determined in good faith by the Board of Directors of the Company, which determination shall be conclusive), (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, (ii) the Company could incur at least $1.00 of additional Indebtedness pursuant to the first sentence of Section 1010 and (iii) the aggregate amount of all Restricted Payments made after the Issue Date shall not exceed the Restricted Payment Amount. The foregoing provisions will not prohibit the following actions (collectively, "Permitted Payments"): (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such payment would have been permitted under the Indenture and such payment shall be deemed to have been paid on such date of declaration for purposes of clause (iii) of the preceding paragraph; (ii) the redemption, repurchase, retirement or other acquisition of any Capital Stock or any Indebtedness of the Company that is subordinated in right of payment to the Securities in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary) of Capital Stock of the Company (other than any Disqualified Stock); (iii) the defeasance, redemption, repurchase, retirement or other acquisition of any Indebtedness of the Company that is subordinated in right of payment to the Securities in exchange for, or out of the proceeds of, the substantially concurrent sale of Refinancing Indebtedness that is (x) at least as subordinated in right of payment to the Securities as the Indebtedness being refinanced and (y) permitted to be incurred pursuant to Section 1010; (iv) the redemption, repurchase, retirement or other acquisition of any Indebtedness of the Company that is subordinated in right of payment to the Securities upon a Change of Control to the extent required by the agreement governing such Indebtedness but only if the Company shall have complied with Section 1012 and purchased all Securities tendered pursuant to the offer to repurchase all of the Securities required thereby, prior to purchasing or repaying such Indebtedness; 86 98 (v) payments by the Company to purchase or otherwise acquire Capital Stock of the Company (including options, warrants or other rights to acquire such Capital Stock) from departing or deceased directors, officers or employees of the Company or its Subsidiaries, whether pursuant to the terms of an employee benefit plan or employment agreement or otherwise; provided that the aggregate amount of all such repurchases shall not exceed $2 million in any fiscal year; and (vi) the payment by the Company of dividends on the common stock of the Company in an amount not to exceed $25 million in any fiscal year; provided that, in the case of clauses (v) and (vi), no Default or Event of Default shall have occurred or be continuing at the time of such Permitted Payment after giving effect thereto. For purposes of clause (iii) of the first paragraph of this Section 1011, Permitted Payments made pursuant to clauses (i), (v) and (vi) of the immediately preceding paragraph shall be included (with respect to clause (i), as of the date of declaration) as Restricted Payments made since the Issue Date. Upon an Investment Grade Rating Date, this Section 1011 will cease to be effective. SECTION 1012. Change of Control. Upon the occurrence of a Change of Control Triggering Event, each holder of the Securities of either series shall have the right to require that the Company repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's Securities at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of such repurchase. Within 30 days following any such Change of Control Triggering Event, the Company will be required to mail a notice to each holder of a Security (with a copy to the Trustee) stating (1) that a Change of Control Triggering Event has occurred and that such holder has the right to require the Company to repurchase such holder's Securities at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of repurchase (the "Change of Control Offer"); (2) the repurchase date, which shall be a Business Day and be not earlier than 20 Business Days or later than 60 Business Days from the date such notice is mailed (the "Repurchase Date"); (3) that interest on any Security tendered will continue to accrue; (4) that interest on any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue after the repurchase of any Security on the Repurchase Date; (5) that holders electing to have a Security purchased pursuant to the Change of Control Offer will be required to surrender such Security, with the 87 99 form entitled "Option to Elect Purchase" on the reverse of the Security completed, to the Trustee at the address specified in the notice prior to the close of business on the Business Day prior to the Repurchase Date; (6) that holders of Securities will be entitled to withdraw their election on the terms and conditions set forth in such notice; and (7) that holders of Securities that elect to have their Securities purchased only in part will be issued new Securities in a principal amount equal to the then unpurchased portion of the Securities surrendered. For so long as the Securities are in the form of Global Securities, upon any such Change of Control Triggering Event, the Company will be required to deliver to the Depositary, within the time periods specified above, for re-transmittal to its participants, a notice substantially to the effect specified in clauses (1) through (4) and (6) of the previous paragraph. Such notice shall also specify the required procedures (furnished by the Depositary) for holders of interests in the Global Security to tender and receive payment of the purchase price for interests in accordance with the Depositary's rules, regulations and practices (including the Depositary's "Repayment Option Procedures" to the extent applicable). On the Repurchase Date, the Company shall (i) accept for payment such surrendered Securities or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee Securities so accepted with an officers' certificate identifying the Securities or portions thereof so tendered. The Company will publicly announce the result of the Change of Control Offer as soon as practicable after the Repurchase Date. The Company will comply with all applicable tender offer rules, including, without limitation, Rule 14e-1 under the Exchange Act in connection with a Change of Control Offer. SECTION 1013. Future Note Guarantors. The Company will cause each Restricted Subsidiary that Guarantees any Bank Indebtedness promptly to execute and deliver to the Trustee a supplemental indenture substantially in the form set forth in Exhibit B to this Indenture pursuant to which such Restricted Subsidiary will guarantee the Company's obligations under the Indenture and the Securities of each series, in accordance with and as further provided in Section 1302. SECTION 1014. Provision of Financial Statements and Reports. Whether or not the Company is then subject to Section 13(a) or 15(d) of the Exchange Act, the Company will file with the Commission (unless such filing is not permitted under the Exchange Act), so long as the Securities of either series are outstanding, the annual reports, quarterly reports and 88 100 other periodic reports that the Company would have been required to file with the Commission pursuant to such Section 13(a) or 15(d) if the Company were so subject, and such documents shall be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company will also in any event (i) within 15 days of each Re quired Filing Date, (a) transmit or cause to be transmitted by mail to all Holders of Securities, as their names and addresses appear in the Security Register, without cost to such Holders, and (b) file with the Trustee copies of the annual reports, quarterly reports and other periodic reports which the Company would have been required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were subject to such Sections and (ii) if filing such documents by the Company with the Commission is prohibited under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective Holder at the Company's cost. SECTION 1015. Waiver of Certain Covenants. The Company may, with respect to the Securities of either series, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to 901(2) for the benefit of the Holders of such series or in Sections 1008 through 1014, inclusive, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Optional Redemption. The Securities of each series will be redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Securities or (ii) as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the date of redemption. Redemption of Securities as permitted by this Section 1101 shall be made in accordance with this Article. 89 101 SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of either series (including any such redemption affecting only a single Security), the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of either series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed or unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security of such series, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. If less than all the Securities of such series and of a specified tenor are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities 90 102 redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities of either series consisting of more than a single Security are to be redeemed, the identification (and, in the case of partial redemption of any such Securities, the principal amounts) of the particular Securities to be redeemed and, if less than all the Outstanding Securities of either series consisting of a single Security are to be redeemed, the principal amount of the particular Security to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, and (5) the place or places where each such Security is to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. SECTION 1105. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. 91 103 SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may elect, at its option at any time, to have Section 1202 or Section 1203 applied to any Securities or either series of Securities, upon compliance with the conditions set forth below in this Article. Any such election shall be evidenced by a Board Resolution. SECTION 1202. Defeasance and Discharge. Upon the Company's exercise of its option (if any) to have this Section applied to any Securities or either series of Securities, as the case may be, the Company shall be deemed to have been discharged from its obligations with respect to such Securities as provided in this Section on and after the date the conditions 92 104 set forth in Section 1204 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 1204 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (2) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (4) this Article. Subject to compliance with this Article, the Company may exercise its option (if any) to have this Section applied to any Securities notwithstanding the prior exercise of its option (if any) to have Section 1203 applied to such Securities. SECTION 1203. Covenant Defeasance. Upon the Company's exercise of its option (if any) to have this Section applied to any Securities or either series of Securities, as the case may be, (1) the Company shall be released from its obligations under Section 801(3), Sections 1006 through 1011, inclusive, and any covenants provided pursuant to Section 901(2) for the benefit of the Holders of such Securities and (2) the occurrence of any event specified in Section 501(4) (with respect to any of Section 801(3), Sections 1006 through 1011, inclusive, and any such covenants provided pursuant to Section 901(2)) and Section 501(5) shall be deemed not to be or result in an Event of Default, in each case with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 1204 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that, with respect to such Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 501(4)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1204. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to the application of Section 1202 or Section 1203 to any Securities or either series of Securities, as the case may be: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee which satisfies the requirements contemplated by Section 609 and agrees to comply with the provisions of this Article applicable to it) as trust funds in trust for the purpose of making the following payments, specifically 93 105 pledged as security for, and dedicated solely to, the benefits of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on such Securities on the respective Stated Maturities, in accordance with the terms of this Indenture and such Securities. As used herein, "U.S. Government Obligation" means (x) any security which is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation which is specified in Clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (2) In the event of an election to have Section 1202 apply to any Securities or either series of Securities, as the case may be, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this instrument, there has been a change in the applicable Federal income tax law, in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. 94 106 (3) In the event of an election to have Section 1203 apply to any Securities or either series of Securities, as the case may be, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. (4) The Company shall have delivered to the Trustee an Officer's Certificate to the effect that neither such Securities nor any other Securities of the same series, if then listed on any securities exchange, will be delisted as a result of such deposit. (5) No event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Securities or any other Securities shall have occurred and be continuing at the time of such deposit or, with regard to any such event specified in Sections 501(6) and (7), at any time on or prior to the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 91st day). (6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act). (7) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (8) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act unless such trust shall be registered under such Act or exempt from registration thereunder. (9) The Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with. SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and 95 107 Section 1206, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 1204 in respect of any Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any such Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities. Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1204 with respect to any Securities which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect the Defeasance or Covenant Defeasance, as the case may be, with respect to such Securities. SECTION 1206. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Section 1202 or 1203 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1205 with respect to such Securities in accordance with this Article; provided, however, that if the Company makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust. 96 108 ARTICLE THIRTEEN GUARANTEE OF SECURITIES SECTION 1301. Unconditional Guarantee. (a) Each Note Guarantor hereby jointly and severally and fully and unconditionally guarantees to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns that: (1) the principal of, and premium, if any, and interest on, the Securities of each series will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Securities of each series and all other obligations of the Company or the Note Guarantors to the Holders or the Trustee hereunder or thereunder (including fees, expenses or other) and all other Indenture Obligations will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Securities of either series or any of such other Indenture Obligations with respect to the Securities of either series, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment when due of any amount so guaran teed, or failing performance of any other obligation of the Company to the Holders of Securities of either series, for whatever reason, each Note Guarantor will be obligated to pay or cause the payment of, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Securities of either series shall constitute an event of default under this Note Guarantee, and shall entitle the Holders of Securities of such series to accelerate the obligations of the Note Guarantor hereunder in the same manner and to the same extent as the obligations of the Company. Each Note Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of this Indenture, the Securities of either series or the obligations of the Company or any other Note Guarantor to the Holders or the Trustee hereunder or thereunder, the absence of any action to enforce the same, any waiver or consent by any Holder of Securities with respect to any provisions hereof or thereof, any release of any other Note Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Note Guarantee is affixed to any particular Security, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Note Guarantor hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that (except as otherwise provided in Section 1303) its 97 109 Note Guarantee will not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and this Note Guarantee. This Note Guarantee is a guarantee of payment and not of collection. Each Note Guarantor further agrees that, as between it, on the one hand, and the Holders of Securities and the Trustee, on the other hand, (1) subject to this Article Thirteen, the maturity of the obligations guaranteed hereby may be accelerated as and to the extent provided in Article Five hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any acceleration of such obligations as provided in Article Five hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by such Note Guarantor for the purpose of this Note Guarantee. Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the Indenture Obligations or against the Company or any other Person or any property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Note Guarantors of their liabilities and obligations under their respective Note Guarantees or under this Indenture. Until terminated in accordance with Section 1303, this Note Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities of either series are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on such Securities, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Securities of the relevant series shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. (b) Each Note Guarantor that makes a payment or distribution under this Note Guarantee shall have the right to seek contribution from any non-paying Note Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Note Guarantee. (c) Notwithstanding any of the foregoing, each Note Guarantor's liability under this Note Guarantee shall be limited to the maximum amount that would not result in this Note Guarantee constituting a fraudulent conveyance or fraudulent transfer under applicable law. 98 110 (d) Each Note Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that its Note Guarantee, and the waiver set forth in Section 1304, is knowingly made in contemplation of such benefits. SECTION 1302. Additional Note Guarantors. Each Restricted Subsidiary that is required to become a Note Guarantor pursuant to Section 1013 shall promptly execute and deliver to the Trustee a supplemental indenture substantially in the form set forth in Exhibit B to this Indenture, evidencing its Note Guarantee on substantially the terms set forth in this Article Thirteen. Concurrently therewith, the Company shall deliver to the Trustee an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and that, subject to the applicable bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization, moratorium and other laws now or hereafter in effect affecting creditors' rights or remedies generally and the general principles of equity, such supplemental indenture is a valid and binding agreement of such Restricted Subsidiary, enforceable against such Restricted Subsidiary in accordance with its terms. SECTION 1303. Release of a Note Guarantee. (a) Any Note Guarantor shall be automatically and unconditionally released and discharged from all of its obligations under its Note Guarantee, and such Note Guarantee shall terminate, at any such time that such Note Guarantor is released and discharged from all of its obligations under all of its Guarantees in respect of Bank Indebtedness, unless such release results from payment under such Guarantee. Upon the delivery by the Company to the Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to the effect that the transaction giving rise to such release of such Note Guarantee was made by the Company in accordance with the provisions of this Indenture and the Securities, the Trustee shall execute any documents reasonably required in order to evidence such release and discharge of such Note Guarantor from its obligations under and termination of its Note Guarantee. (b) Upon the sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Capital Stock held by the Company and its Subsidiaries in, or all or substantially all the assets of, a Note Guarantor (which sale, exchange or transfer is not prohibited by this Indenture), such Note Guarantor shall be automatically and unconditionally released and discharged from all its obligations under its Note Guarantee, and such Note Guarantee shall terminate. Upon such occurrence, the Trustee shall execute any documents reasonably required in order to evidence such release, discharge and termination in respect of such Note Guarantee. 99 111 (c) Upon the release of any Note Guarantor from its Note Guarantee pursuant to the provisions of the Indenture, each other Note Guarantor not so released shall remain liable for the full amount of principal of, and premium, if any, and interest on, the Securities as and to the extent provided in this Article Thirteen. (d) Each Note Guarantee shall terminate and cease to be of further effect upon (i) defeasance of the Company's obligations in accordance with Section 1202 hereof and (ii) satisfaction and discharge of this Indenture in accordance with Section 401. SECTION 1304. Waiver of Subrogation. Each Note Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Securities of either series and this Indenture or such Note Guarantor's obligations under its Note Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Securities of either series against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, until this Indenture is discharged and all of the Securities of both series are discharged and paid in full. If any amount shall be paid to any Note Guarantor in violation of the preceding sentence and the Securities of the relevant series shall not have been paid in full, such amount shall have been deemed to have been paid to such Note Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities of such series, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon such Securities, whether matured or unmatured, in accordance with the terms of this Indenture. SECTION 1305. Reliance on Judicial Order or Certificate of Liquidating Agent Regarding Dissolution, etc. Upon any payment or distribution of assets of any Note Guarantor referred to in this Article Thirteen, the Trustee, subject to the provisions of Section 601, and the Holders of Securities of either series shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to such Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of other Indebtedness of such Note Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Thirteen; provided that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article Thirteen. 100 112 SECTION 1306. Article Thirteen Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article Thirteen shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Thirteen in addition to or in place of the Trustee. SECTION 1307. No Suspension of Remedies. Nothing contained in this Article Thirteen shall limit the right of the Trustee or the Holders of Securities of either series to take any action to accelerate the maturity of such Securities pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law. ------------------------ 101 113 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 102 114 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BECKMAN INSTRUMENTS, INC. By D. K. WILSON ------------------------------------- Attest: WILLIAM H. MAY - ------------------------ COULTER CORPORATION By WILLIAM H. MAY ------------------------------------- Attest: JOHN A. WEISS - ------------------------ BECKMAN INSTRUMENTS (NAGUABO), INC. By WILLIAM H. MAY ------------------------------------- Attest: JOHN A. WEISS - ------------------------ HYBRITECH INCORPORATED By WILLIAM H. MAY ------------------------------------- 103 115 Attest: JOHN A. WEISS - ------------------------ 104 116 SMITHKLINE DIAGNOSTICS, INC. By D. K. WILSON ------------------------------------- Attest: JOHN A. WEISS - ------------------------ COULTER LEASING CORPORATION By WILLIAM H. MAY ------------------------------------- Attest: JOHN A. WEISS - ------------------------ THE FIRST NATIONAL BANK OF CHICAGO By JOHN R. PRENDIVILLE ------------------------------------- Attest: LELAND HANSEN - ------------------------ 105 117 EXHIBIT A (FACE OF SECURITY) BECKMAN INSTRUMENTS, INC. [7.10][7.45]% [Series B]* Senior Note due [2003][2008] CUSIP No._________ No. _________ $ ________ Beckman Instruments, Inc., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co.,____________________, or registered assigns, the principal sum of ___________________________________ Dollars on March 4, [2003][2008], and to pay interest thereon from March 4, 1998 or from the most recent Interest Payment Date to which interest has been paid or duly provided for [on this Security or on the Initial Security surrendered in exchange therefor]*, semi-annually on March 4 and September 4 in each year, commencing September 4, 1998, at the rate of [7.10][7.45]% per annum[(subject to adjustment as provided below)]**[, except that interest accrued on this Security for periods prior to the date on which the Initial Security was surrendered in exchange for this Security will accrue at the rate or rates borne by the Securities from time to time during such periods]*, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be February 19 or August 19 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor - -------- * Include only for Exchange Security. ** Include only for Initial Security. A-1 118 Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [The Holder of this Security is entitled to the benefits of the Registration Rights Agreement, dated March 4, 1998, among the Company and the Initial Purchasers named therein. In the event that either (i) the Exchange Offer Registration Statement is not filed with the Securities and Exchange Commission on or prior to the 45th calendar day following the Issue Date, (ii) the Exchange Offer Registration Statement has not been declared effective on or prior to the 120th calendar day following the Issue Date, (iii) the Exchange Offer is not consummated or the Shelf Registration Statement is not declared effective, in either case, on or prior to the 150th calendar day following the Issue Date or (iv) the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable (each such event referred to in clauses (i) through (iv) above, a "Registration Default"), the interest rate borne by this Security shall be increased by one-quarter of one percent per annum (0.25%) upon the occurrence of each Registration Default, which rate will increase by one-quarter of one percent (0.25%) each 90-day period that such additional interest continues to accrue under any such circumstance, with an aggregate maximum increase in the interest rate equal to one-half of one percent (0.50%) per annum until such Registration Default has been cured. Upon (w) the filing of the Exchange Offer Registration Statement after the 45-day period described in clause (i) above, (x) the effectiveness of the Exchange Offer Registration Statement after the 120-day period described in clause (ii) above, (y) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 150-day period described in clause (iii) above, or (z) the cure of any Registration Default described in clause (iv) above, the interest rate borne by this Security from the date of such filing, effectiveness, consummation or cure, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that if, after any such reduction in interest rate, a different event specified in clause (i), (ii), (iii) or (iv) above occurs, the interest rate will again be increased pursuant to the foregoing provisions.]* Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The Borough of Manhattan, The City of New York, in such coin or currency of the United States - -------- * Include only for Initial Security. A-2 119 of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. BECKMAN INSTRUMENTS, INC. By ------------------------------------- Name: Title: [SEAL] Attest: - -------------------------- This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, As Trustee A-3 120 By ------------------------------------- Authorized Officer Dated: A-4 121 (REVERSE OF SECURITY) This Security is one of the duly authorized issue of [7.10][7.45]% [Series B]* Senior Notes due [2003][2008] of the Company (herein called the "Securities"), issued under an Indenture, dated as of March 4, 1998 (herein called the "Indenture," which term shall have the meaning assigned to it in such instrument), between the Company, as issuer, the Note Guarantors, as guarantors, and The First National Bank of Chicago, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to [$160,000,000][$240,000,000]. This Security is entitled to the benefits of the certain senior Note Guarantees of the Note Guarantors and may thereafter be entitled to certain other senior Note Guarantees made for the benefit of the Holders. Reference is made to Article Thirteen of the Indenture and to the Note Guarantees for terms relating to such Note Guarantees. The Securities are subject to redemption upon not less than 30 days' notice by mail, at any time, as a whole or in part, at the election of the Company, at a Redemption Price equal to the greater of (i) 100% of the principal amount of such Securities or (ii) as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The Securities will not be entitled to the benefit of a sinking fund. - -------- * Include only for Exchange Security. A-5 122 The Indenture provides that, upon the occurrence of a Change of Control Triggering Event, each Holder will have the right to require that the Company repurchase all or any part of such Holder's Securities at a repurchase price in cash equal to 100% of the aggregate principal amount thereof plus accrued interest, if any, to the date of such repurchase. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security or certain restrictive covenants and certain Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of at least a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall A-6 123 not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in denominations of $1,000.00 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. THE INDENTURE, THIS SECURITY AND THE NOTE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS). A-7 124 All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. A-8 125 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned holder hereby sell(s) assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ---------------------------------- - -------------------------------------------------------------------------------- (Please print or typewrite name and address including zip code of assignee) - -------------------------------------------------------------------------------- the within Security and all rights thereunder, hereby irrevocably constituting and appointing - -------------------------------------------------------------------------------- attorney to transfer such Security on the books of the Company with full power of substitution in the premises. [In connection with any transfer of this Security occurring prior to the date which is the earlier of the date of an effective Registration Statement or March 4, 2000, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Security is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Security is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Security and the Indenture. A-9 126 If none of the foregoing boxes is checked, the Trustee or other Security Registrar shall not be obligated to registered this Security in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 312 of the Indenture shall have been satisfied.]* Date: ------------------------- -------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: ------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. [TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has - -------- * Include only for Initial Security, except Offshore Physical Security in accordance with the Indenture. A-10 127 determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: --------------------- ---------------------------------------- NOTICE: To be executed by an executive officer]** - ---------- ** Include only for Initial Security, except Offshore Physical Security in accordance with the Indenture. A-11 128 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Security purchased by the Company pursuant to Section 1012 of the Indenture, check the Box: [ ]. If you wish to have a portion of this Security purchased by the Company pursuant to Section 1012 of the Indenture, state the amount (in original principal amount) below: $ --------------------------- Date: ------------------------------------ Your Signature: ------------------------------------ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ------------------------------ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-12 129 EXHIBIT B Form of Supplemental Indenture in Respect of Note Guarantee This Supplemental Indenture, dated as of [_________] (this "Supplemental Indenture"), among [name of Note Guarantor] (the "Note Guarantor"), [Company] (together with its successors and assigns, the "Company"), each other then existing Subsidiary Guarantor under the Indenture referred to below, and [Trustee], as Trustee under the Indenture referred to below. W I T N E S S E T H: WHEREAS, the Company and the Trustee have heretofore become parties to an Indenture, dated as of March 4, 1998, as amended (as amended, supplemented, waived or otherwise modified, the "Indenture"), providing for the issuance of an aggregate principal amount of $160,000,000 of 7.10% Senior Notes due 2003 and 7.10% Series B Senior Notes due 2003 of the Company (collectively, the "2003 Notes") and an aggregate principal amount of $240,000,000 of 7.45% Senior Notes due 2008 and 7.45% Series B Senior Notes due 2008 of the Company (collectively, the "2008 Notes" and, together with the 2003 Notes, the "Securities"); WHEREAS, Sections 1013 and 1302 of the Indenture provide that under certain circumstances the Company is required to cause the Note Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the Note Guarantor shall guarantee the Company's obligations under the Securities pursuant to a Note Guarantee on the terms and conditions set forth herein and in Article Thirteen of the Indenture; and WHEREAS, pursuant to Section 901 of the Indenture, the parties hereto are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Holder; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Note Guarantor, the Company, the other Note Guarantors and the Trustee mutually covenant and agree for the benefit of the Holders of the Securities as follows: 1. Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined. The words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. B-1 130 2. Agreement to Guarantee. The Note Guarantor hereby agrees, jointly and severally with all other Note Guarantors and fully and unconditionally, to guarantee the Company's obligations under the Indenture and the Securities of each series on the terms and subject to the conditions set forth in Article Thirteen of the Indenture and to be bound by all other applicable provisions of the Indenture as a Note Guarantor. 3. Termination, Release and Discharge. The Note Guarantor's Note Guarantee shall terminate and be of no further force or effect, and the Note Guarantor shall be released and discharged from all obligations in respect of such Note Guarantee, as and when provided in Section 1303 of the Indenture. 4. Parties. Nothing in this Supplemental Indenture is intended or shall be construed to give any Person, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of the Note Guarantor's Note Guarantee or any provision contained herein or in Article Thirteen of the Indenture. 5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS). 6. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture. 7. Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement. 8. Headings. The section headings herein are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NAME OF GUARANTOR], B-2 131 By: ------------------------------------- Name: Title: Address: [COMPANY] By: ------------------------------------- Name: Title: [Add signature block for any other existing Note Guarantor] [TRUSTEE] By: ------------------------------------- Name: Title: B-3 132 EXHIBIT C Form of Certificate to Be Delivered upon Termination of Restricted Period On or after April 14, 1998 The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services Division Re: Beckman Instruments, Inc. (the "Company") [7.10][7.45]% Senior Notes due [2003][2008] (the "Securities") Ladies and Gentlemen: This letter relates to $___________ principal amount of Securities represented by the offshore global security certificate (the "Offshore Global Security"). Pursuant to Section 203 of the Indenture dated as of March 4, 1998 relating to the Securities (the "Indenture"), we hereby certify that (1) we are the beneficial owner of such principal amount of Securities represented by the Offshore Global Security and (2) we are a Non-U.S. Person to whom the Securities could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended ("Regulation S"). Accordingly, you are hereby requested to issue an Offshore Physical Security representing the undersigned's interest in the principal amount of Securities represented by the Offshore Global Security, all in the manner provided by the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ------------------------------------- C-1 133 EXHIBIT C Authorized Signature C-2 134 EXHIBIT D Form of Accredited Investor Certificate Transferee Letter of Representation The First National Bank of Chicago, as Trustee One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services Division Ladies and Gentlemen: In connection with our proposed purchase of $________ aggregate principal amount of the [7.10][7.45]% Senior Notes due 200[3][8] (the "Securities") of Beckman Instruments, Inc. (the "Company"), we confirm that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor", and we are acquiring the Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or other applicable securities laws and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand and acknowledge that the Securities have not been registered under the Securities Act or any other applicable securities law and may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, or pursuant to an exemption therefrom, and in each case in compliance with the conditions for transfer set forth below. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the D-1 135 Securities are eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a "Qualified Institutional Buyer" within the meaning of Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring the Securities for its own account or for the account of such an institutional "accredited investor" for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and to compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver to the trustee (the "Trustee") under the Indenture pursuant to which the Securities are issued a letter from the transferee substantially in the form of this letter to the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. We acknowledge that the Company and the Trustee reserve the right prior to any offer, sale or other transfer of the Securities pursuant to clauses (d), (e) and (f) above prior to the Resale Restriction Termination Date to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. 3. We are acquiring the Securities purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion. 4. You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereto to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS). Very truly yours, D-2 136 (Name of Purchaser) By: ------------------------------------ Date: ------------------------------------ Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: By: --------------------------------- Date: --------------------------------- Taxpayer ID number: ------------------- D-3 137 EXHIBIT E Form of Regulation S Certificate Regulation S Certificate To: The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services Division Re: Beckman Instruments Inc. (the "Company") [7.10][7.45]% Senior Notes due [2003][2008] (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $_____ aggregate principal amount of Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S ("Regulation S") under the Securities Act of 1933, as amended (the "Securities Act"), and accordingly, we hereby certify as follows: 1. The offer of the Securities was not made to a person in the United States (unless such person or the account held by it for which it is acting is excluded from the definition of "U.S. person" pursuant to Rule 902(o) of Regulation S under the circumstances described in Rule 902(i)(3) of Regulation S) or specifically targeted at an identifiable group of U.S. citizens abroad. 2. Either (a) at the time the buy order was originated, the buyer was outside the United States or we and any person acting on our behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market, and neither we nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States. 3. Neither we, any of our affiliates, nor any person acting on our or their behalf has made any directed selling efforts in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable. E-1 138 4. The proposed transfer of Securities is not part of a plan or scheme to evade the registration requirements of the Securities Act. 5. If we are a dealer or a person receiving a selling concession or other fee or remuneration in respect of the Securities, and the proposed transfer takes place before the Offshore Security Exchange Date referred to in the Indenture, dated as of March 4, 1998, among the Company, the Note Guarantors thereunder and the Trustee, or we are an officer or director of the Company or a distributor, we certify that the proposed transfer is being made in accordance with the provisions of Rules 903 and 904(c) of Regulation S. You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [NAME OF SELLER] By: ------------------------------------- Name: Title: Address: Date of this Certificate: _______________ __, 199_ E-2 139 EXHIBIT F Form of Rule 144A Certificate Rule 144A Certificate To: The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services Division Re: Beckman Instruments, Inc. (the "Company") [7.10][7.45]% Senior Notes due [2003][2008] (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $______ aggregate principal amount of Securities, we confirm that such sale has been effected pursuant to and in accordance with Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"). We are aware that the transfer of Securities to us is being made in reliance on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have been given the opportunity to obtain from the Company the information referred to in Rule 144A(d)(4), and have either declined such opportunity or have received such information. You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [NAME OF PURCHASER] By: ------------------------------------- Name: Title: F-1 140 Address: Date of this Certificate: _________ __, 199_ F-2 EX-4.2 3 REGISTRATION RIGHTS AGREEMENT DATED MARCH 4, 1998 1 Exhibit 4.2 ================================================================================ Registration Rights Agreement Dated As of March 4, 1998 among Beckman Instruments, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated Salomon Brothers Inc Citicorp Securities, Inc. Credit Suisse First Boston Corporation Morgan Stanley & Co. Incorporated BancAmerica Robertson Stephens First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. ================================================================================ 2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into this 4th day of March 1998, among Beckman Instruments, Inc., a Delaware corporation (the "Company"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated, BancAmerica Robertson Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement, dated February 25, 1998, (the "Purchase Agreement"), among the Company and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of an aggregate of $160 million principal amount of the Company's 7.10% Senior Notes due 2003 (the "2003 Notes") and an aggregate of $240 million principal amount of the Company's 7.45% Senior Notes due 2008 (the "2008 Notes" and, together with the 2003 Notes, the "Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Closing Date" shall mean the Closing Time as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. 3 "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof. "Exchange Offer Registration" offer shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "Exchange Period" shall have the meaning set forth in Section 2.1 hereof "Exchange Securities" shall mean the 7.10% Senior Notes due 2003, Series B and the 7.45% Senior Notes due 2008, Series B, issued by the Company under the Indenture containing terms identical to the Securities in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends), to be offered to Holders of Securities in exchange for Registrable Securities pursuant to the Exchange Offer. "Holder" shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture. "Indenture" mean the Indenture relating to the Securities, dated as of March 4, 1998, among the Company, the Note Guarantors parties thereto and The First National Bank of Chicago, as trustee, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof. "Initial Purchaser" or "Initial Purchasers" shall have the meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Outstanding (as defined in the Indenture) Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of 2 4 Registrable Securities is required hereunder, Registrable Securities held by the Company and other obligors on the Securities or any Affiliate (as defined in the Indenture) of the Company shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount. "Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, Citicorp Securities, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated, BancAmerica Robertson Stephens, First Chicago Capital Markets, Inc. and Goldman, Sachs & Co. and any other broker-dealer which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities. "Person" shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or incorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean the Securities of any Holder; provided, however, that such Securities shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities can be sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Securities shall have ceased to be outstanding or (iv) the Exchange Offer is consummated (except in the case of Securities purchased from the Company and continued to be held by the Initial Purchasers). "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the reasonable 3 5 fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all reasonable fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, (viii) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of counsel to the Initial Purchasers in connection therewith, (ix) the reasonable fees and disbursements of Debevoise & Plimpton, special counsel representing the Holders of Registrable Securities and (x) any reasonable fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder, it being understood that in no event shall the Company be liable for the fees and expenses of more than one counsel (in addition to any local counsel) in connection with registration pursuant to either Section 2.1 or 2.2. "Registration Statement" shall mean any registration statement of the Company which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission. 4 6 "Shelf Registration" shall mean a registration effected pursuant to Section 2.2 hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. 2. Registration Under the 1993 Act. 2.1. Exchange Offer. The Company shall (A) prepare and, as soon as practicable but not later than 45 calendar days following the Closing Date, file with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Securities, a like principal amount of Exchange Securities, (B) use its best efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act within 120 calendar days of the Closing Date, (C) use its best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its best efforts to cause the Exchange Offer to be consummated not later than 150 calendar days following the Closing Date. The Exchange Securities will be issued under the Indenture. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the Company for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. 5 7 In connection with the Exchange Offer, the Company shall: (a) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "Exchange Period"); (c) utilize the services of the Depositary for the Exchange Offer, (d) permit Holders to withdraw tendered Registrable Securities at any time prior to the expiration time of the Exchange Period. (Eastern Standard Time), on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing his election to have such Securities exchanged; (e) notify each Holder that any Registrable Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (f) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. As soon as practicable after the close of the Exchange Offer, the Company shall: (i) accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto; (ii) deliver to the Trustee for cancellation all Registrable Securities so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver Exchange Securities to each Holder of Registrable Securities so accepted for exchange in a principal amount 6 8 equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange. Interest on each Exchange Security will accrue from the most recent interest payment date to which interest has been paid on the Registrable Securities surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the date of original issuance. The Exchange Offer shall not be subject to any conditions, other than (i) that the Exchange Offer, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer. The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. 2.2. Shelf Registration. (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer Registration Statement is not declared effective within 120 calendar days following the Closing Date or the Exchange Offer is not consummated within 150 calendar days after the Closing Date, (iii) upon the written request of any of the Initial Purchasers with respect to any Registrable Securities which any of them acquired directly from the Company or (iv) upon the written request of any Holder that either (x) is not permitted pursuant to applicable law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC to participate in the Exchange Offer or (y) participates in the Exchange Offer and does not receive fully tradable Exchange Securities pursuant to the Exchange Offer, then in case of each of clauses (i) through (iv) the Company shall, at its cost: (a) As promptly as practicable, file with the SEC, and thereafter shall use its best efforts to cause to be declared effective as promptly as practicable but no later than 7 9 150 calendar days after the Closing Date, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement. (b) Use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities. (c) Notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly as reasonably practicable after its being used or filed with the SEC. 2.3. Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. 2.4. Effectiveness. (a) The Company will be deemed not to have used its best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, 8 10 as the case may be, to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law. (b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. 2.5. Interest. The Indenture executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer Registration Statement is not filed with the Commission on or prior to the 45th calendar day following the Closing Date, (b) the Exchange Offer Registration Statement has not been declared effective on or prior to the 120th calendar day following the Closing Date, (c) the Exchange Offer is not consummated or, if required, a Shelf Registration Statement is not declared effective, in either case, on or prior to the 150th calendar day following the Closing Date or (d) the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable (each such event referred to in clauses (a) through (d) above, a "Registration Default"), the interest rate borne by the Securities shall be increased by one-quarter of one percent per annum (0.25%) upon the occurrence of each Registration Default, which rate will increase by one-quarter of one percent (0.25%) each 90-day period that such additional interest continues to accrue under any such circumstance, with an aggregate maximum increase in the interest rate equal to one-half of one percent (0.50%) per annum until such Registration Default has been cured. Upon (w) the filing of the Exchange Offer Registration Statement after the 45-day period described in clause (i) above, (x) the effectiveness of the Exchange Offer Registration Statement after the 120-day period described in clause (ii) above, (y) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 150-day period described in clause (iii) above, or (z) the cure of any Registration Default described in clause (iv) above, the interest rate borne by the Securities from the date of such filing, effectiveness, consummation or cure, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that if, after any 9 11 such reduction in interest rate, a different event specified in clause (i), (ii), (iii) or (iv) above occurs, the interest rate will again be increased pursuant to the foregoing provisions. 3. Registration Procedures. In connection with the obligations of the Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall: (a) prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all respects with the requirements of Regulation S-T under the Securities Act, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act and comply with the provisions of the 1933 Act applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holders that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Registrable Securities and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable 10 12 Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (d) use its best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject; (e) notify promptly each Holder of Registrable Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Company that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below, and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange 11 13 Securities, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (f) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution" which section shall include all information that the Initial Purchasers may reasonably request, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchasers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer;" and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange 12 14 of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and (B) in the case of any Exchange Offer Registration Statement, the Company agrees to deliver to the Initial Purchasers on behalf of the Participating Broker-Dealers upon the effectiveness of the Exchange Offer Registration Statement (i) an opinion of counsel or opinions of counsel substantially in the form attached hereto as Exhibit A, (ii) an officers' certificate substantially in the form customarily delivered in a public offering of debt securities and (iii) a comfort letter or comfort letters in customary form if permitted by Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accountants (or if such a comfort letter is not permitted, an agreed upon procedures letter in customary form) at least as broad in scope and coverage as the comfort letter or comfort letters delivered to the Initial Purchasers in connection with the initial sale of the Securities to the Initial Purchasers; (g) (i) in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (h) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (i) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested); (j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Registrable Securities; 13 15 (k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified; (l) in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Company as shall be reasonably requested by the Holders of Registrable Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document; (m) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary; (n) (i) cause the Indenture to be qualified under the Trust Indenture Act of 1939 (the "TIA") in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (o) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: 14 16 (i) make such representations and warranties to the Holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Registrable Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, if any, and use reasonable efforts to have such letter addressed to the selling Holders of Registrable Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Securities, which agreement shall be in form, substance and scope customary for similar offerings; (v) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and (vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Securities being sold and the managing underwriters, if any. 15 17 The above shall be done at (i) the effectiveness of such Registration Statement (and each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder; (p) in the case of a Shelf Registration, make available for inspection by representatives of the Holders of the Registrable Securities and any underwriters participating in any disposition pursuant to a Shelf Registration Statement and any counsel or accountant retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; (q) (i) in the case of an Exchange Offer Registration Statement, a time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and make such changes in any such document prior to the filing thereof as the Initial Purchasers may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Registrable Securities shall reasonably object, and make the representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and (ii) in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Securities, to the Initial Purchasers, to counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders or the Initial Purchasers on behalf of the Holders of Registrable Securities or any underwriter may reasonably object and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Holders of Registrable Securities, the Initial Purchasers on behalf of such Holders, or any underwriter. 16 18 (r) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; (s) cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and (t) upon consummation of an Exchange Offer, obtain a customary opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Securities and the related indenture, and (ii) each of the Exchange Securities and related indenture constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (with customary exceptions). In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holder and the Proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing for use in connection with any Shelf Registration Statement or Prospectus included therein, including, without limitation, information specified in item 507 of Regulation S-K under the 1933 Act. Each Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed with respect to such Holder in order to make any information with respect to such Holder previously furnished to the Company by such Holder not materially misleading. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Company shall give any such notice to 17 19 suspend the disposition of Registrable Securities pursuant to a Shelf Registration Statement as a result of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(v) hereof, the Company shall be deemed to have used its best efforts to keep the Shelf Registration Statement effective during such period of suspension provided that the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Shelf Registration Statement and shall extend the period during which the Shelf Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. In the event that the Company fails to effect the Exchange Offer or file any Shelf Registration Statement and maintain the effectiveness of any Shelf Registration Statement as provided herein, the Company shall not file any Registration Statement with respect to any securities (within the meaning of Section 2(l) of the 1933 Act) of the Company other than Registrable Securities. If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Registrable Securities included in such offering and shall be acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 4. Indemnification, Contribution. (a) The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an "Underwriter") and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the 18 20 omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party as provided herein), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers, such Holder or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Company, the Initial Purchasers, each Underwriter and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls the Company, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company expressly for use in the Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any 19 21 amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give written notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent it considers 20 22 such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. (e) If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand, the Holders on another hand, and the Initial Purchasers on another hand, from the offering of the Securities, the Exchange Securities and the Registrable Securities (taken together) included in such offering or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand, the Holders on another hand and the Initial Purchasers on another hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company from the offering of the Securities, the Exchange Securities and the Registrable Securities (taken together) included in such offering shall in each case be deemed to include the proceeds received by the Company in connection with the offering of the Securities pursuant to the Purchase Agreement. The parties hereto agree that any underwriting discount or commission or reimbursement of fees paid to the Initial Purchasers pursuant to the Purchase Agreement shall not be deemed to be a benefit received by the Initial Purchasers in connection with the offering of the Exchange Securities or Registrable Securities included in such offering. The relative fault of the Company on the one hand, the Holders on another hand, and the Initial Purchasers on another hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Holders or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and 21 23 expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4, each person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Company, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers' respective obligations to contribute pursuant to this Section 7 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint. 5. Miscellaneous. 5.1. Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder. If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the 1933 Act within the limitation of the exemptions 22 24 provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. 5.2. No Inconsistent Agreements. The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. 5.3. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure. 5.4. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the initial Purchasers; and (b) if to the Company, initially at the Company's address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture. 23 25 5.5. Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. 5.6. Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. 5.7. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 5.8. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof 5.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. 5.10. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other 24 26 respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 25 27 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BECKMAN INSTRUMENTS, INC. By: D. K. WILSON ------------------------------------- Name: Dennis K. Wilson Title: Vice President, Finance and Chief Financial Officer Confirmed and accepted as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED SALOMON BROTHERS INC CITICORP SECURITIES, INC CREDIT SUISSE FIRST BOSTON CORPORATION MORGAN STANLEY & CO. INCORPORATED BANC AMERICA ROBERTSON STEPHENS FIRST CHICAGO CAPITAL MARKETS, INC. GOLDMAN, SACHS & CO. BY: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: MATTHEW YOUNG ------------------------------------- Name: Matthew Young Title: Vice President 26 28 Exhibit A Form of Opinion of Counsel We are of the opinion that the Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial data and supplemental schedules included or incorporated by reference therein or omitted therefrom and the Form T-1, as to which we need express no opinion), comply as to form in all material respects with the requirements of the 1933 Act and the applicable rules and regulations promulgated under the 1933 Act. In addition, we have participated in conferences with officers and other representatives of the Company and the Note Guarantors, representatives of the independent public accountants of the Company and the Note Guarantors and representatives of the Initial Purchasers, at which the contents of the Registration Statement and the Prospectus and related matters were discussed and, although we are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus and have not made any independent check or verification thereof, during the course of such participation, no facts came to our attention that caused us to believe that the Registration Statement or any amendment thereto, at the time the Registration Statement or any such amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto, at the time the Prospectus was issued, at the time any such amended or supplemented Prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that we express no belief with respect to the financial statements and schedules and other financial data included in the Registration Statement and the Prospectus. EX-5.1 4 OPINION OF LATHAM & WATKINS RE:VALIDITY OF NOTES 1 EXHIBIT 5.1 LATHAM & WATKINS Attorneys at Law 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Telephone (213) 485-1234 Fax (213) 891-8763 April 16, 1998 Beckman Coulter, Inc. 2500 Harbor Boulevard Fullerton, CA 92834 Re: Beckman Coulter, Inc. Registration Statement on Form S-4 (File No. 333- ) Ladies and Gentlemen: At your request, we have examined the Registration Statement on Form S-4 (the "Registration Statement") referenced above, which you are filing on the date hereof with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of (i) $160,000,000 principal amount of your 7.10% Senior Notes due 2003 and (ii) $240,000,000 principal amount of your 7.45% Senior Notes due 2008 (together, the "Exchange Notes"), to be offered and issued by Beckman Coulter, Inc. (the "Company"), together with guarantees of the Exchange Notes (the "Guarantees") by Beckman Instruments (Naguabo) Inc., a California corporation, Hybritech Incorporated, a California corporation, SmithKline Diagnostics, Inc., a Delaware corporation and Coulter Corporation, a Delaware corporation (collectively, the "Guarantors") pursuant to an Indenture dated March 4, 1998 (the "Indenture") among the Company, the Guarantors and The First National Bank of Chicago, as trustee. As such counsel, we have made such legal and factual examinations and inquiries as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon oral or written statements and representations of officers and other representatives of the Company, the Guarantors and others. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York and the California Corporations Code and the General Corporation Law of the State of Delaware, and we express no opinion with respect to the applicability thereto, or the effect thereon, of any other laws. Based upon the foregoing, we are of the opinion that, upon issuance thereof in the manner described in the Registration Statement, the Exchange Notes will be legally valid and binding obligations of the Company and the Guarantees will be legally valid and binding obligations of the respective Guarantors. The opinion rendered above is subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; (iii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy; and (iv) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Section 515 of the Indenture. 2 Beckman Coulter, Inc. April 16, 1998 Page 2 This opinion is rendered only to you and is solely for your benefit in connection with the transactions covered hereby. This opinion may not be relied upon by you for any other purpose, or furnished to, quoted to, or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. We consent to your filing this opinion as an exhibit to the Registration Statement. Very truly yours, LATHAM & WATKINS EX-8.1 5 OPINION OF LATHAM & WATKINS RE:CERTAIN TAX MATTERS 1 Exhibit 8.1 LATHAM & WATKINS Attorneys at Law 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Telephone (213) 485-1234 Fax (213) 891-8763 April 16, 1998 Beckman Coulter, Inc. 2500 Harbor Boulevard Fullerton, CA 92834 Re: Registration Statement on Form S-4 ---------------------------------- Ladies and Gentlemen: In connection with the registration by Beckman Coulter, Inc., a Delaware corporation (the "Company"), of $160,000,000 aggregate principal amount of its 7.10% Senior Notes due 2003 (the "2003 Notes") and $240,000,000 aggregate principal amount of its 7.45% Senior Notes due 2008 (the "2008 Notes" and, together with the 2003 Notes, the "Notes") under the Securities Act of 1933, as amended (the "Act"), on Form S-4 filed with the Securities and Exchange Commission (the "Commission") on April 17, 1998 (File No. 333-_____) (the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The Notes will be issued pursuant to an indenture (the "Indenture"), dated as of March 4, 1998, between the Company, The First National Bank of Chicago, as trustee, Beckman Instruments (Naguabo) Inc., Hybritech Incorporated, SmithKline Diagnostics, Inc., Coulter Corporation and Coulter Leasing Corporation. In our capacity as your special counsel, we have made such legal and factual examinations and inquiries as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. 2 Beckman Instruments, Inc. April 16, 1998 Page 2 Subject to the foregoing and the other matters set forth herein, it our opinion that, as of the date hereof: Based on the facts set forth in the Registration Statement, it is our opinion that the statements in the prospectus under the heading "Certain United States Federal Tax Considerations," in so far as they describe provisions of United States federal income tax law, are accurate in all material respects. This opinion is based on various statutory provisions, regulations promulgated thereunder and interpretations thereof by the Internal Revenue Service and courts having jurisdiction over such matters, all of which are subject to change either prospectively or retroactively. Any variation or difference in the facts as incorporated herein might affect the conclusions stated herein. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Certain United States Federal Tax Considerations" therein. Very truly yours, LATHAM & WATKINS EX-12.1 6 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 BECKMAN COULTER, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
PRO-FORMA YEAR ENDED DECEMBER 31, YEAR ENDED --------------------------------------- DECEMBER 31, 1997 1997 1996 1995 1994 1993 ----------------- ------ ----- ---- ---- ----- (Loss) earnings before income taxes 28.9 (251.9) 111.5 72.4 74.9 (53.9) Add: Interest expense 91.3 29.4 18.1 13.4 13.2 12.7 Portion of rents representative of interest factor 14.9 10.6 9.9 9.7 8.2 10.4 ----- ------ ----- ---- ---- ----- (Loss) earnings as adjusted 135.1 (211.9) 139.5 95.5 96.3 (30.9) Fixed charges: Interest expense 91.3 29.4 18.1 13.4 13.2 12.7 Portion of rents representative of interest factor 14.9 10.6 9.9 9.7 8.2 10.4 ----- ------ ----- ---- ---- ----- Total fixed charges 106.2 40.0 28.0 23.1 21.4 23.1 ----- ------ ----- ---- ---- ----- Ratio of earnings to fixed charges 1.3 --* 5.0 4.1 4.5 --* ===== ====== ===== ==== ==== =====
* Earnings were inadequate to cover fixed charges for the years ended December 31, 1997 and 1993. The coverage deficiencies were approximately $251.9 and $53.9, respectively. EX-23.1 7 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Stockholders and Board of Directors Beckman Coulter, Inc.: We consent to the inclusion of our report dated January 23, 1998, except as to note 16 which is as of March 4, 1998, with respect to the consolidated balance sheets of Beckman Coulter, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1997, and to the reference to our firm under the heading "Independent Public Accountants" in the prospectus. KPMG Peat Marwick LLP Orange County, California April 17, 1998 EX-23.2 8 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.2 ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the use of our report and to all references to our Firm included in this S-4 Registration Statement of Beckman Instruments, Inc. ARTHUR ANDERSEN LLP Miami, Florida, April 14, 1998 EX-23.3 9 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.3 The Stockholders and the Board of Directors Beckman Coulter, Inc.: We consent to the inclusion of our report dated December 12, 1997, except as to note R which is as of March 4, 1998, with respect to the consolidated statements of operations, stockholders' equity, and cash flows for the seven months ended October 31, 1997 of Coulter Corporation and subsidiaries, which report appears in the Form S-4 of Beckman Coulter, Inc. dated April 17, 1998, and to the reference to our firm under the heading "Independent Certified Public Accountants" in the prospectus. KPMG Peat Marwick LLP Miami, Florida, April 17, 1998 EX-25.1 10 FORM T-1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) THE FIRST NATIONAL BANK OF CHICAGO (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER) A NATIONAL BANKING ASSOCIATION 36-0899825 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) THE FIRST NATIONAL BANK OF CHICAGO ONE FIRST NATIONAL PLAZA, SUITE 0286 CHICAGO, ILLINOIS 60670-0286 ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ------------------------- BECKMAN COULTER, INC. (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER) DELAWARE 95-1040600 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 2500 HARBOR BOULEVARD FULLERTON, CALIFORNIA 92834 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) DEBT SECURITIES (TITLE OF INDENTURE SECURITIES) 2 ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 2 3 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and the State of Illinois, on this 19th day of March, 1998. THE FIRST NATIONAL BANK OF CHICAGO, TRUSTEE By /s/ John R. Prendiville John R. Prendiville Vice President * EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1996 (REGISTRATION NO. 333-14201). 3 4 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT March 19, 1998 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of an indenture between Beckman Instruments, Inc. and The First National Bank of Chicago, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO By /s/ John R. Prendiville John R. Prendiville Vice President 4 5 EXHIBIT 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/97 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Ste 0303 Page RC-1 City, State Zip: Chicago, IL 60670 FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31,1997 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400 THOUSANDS RCFD BIL MIL THOU ----------------- ------ ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1).......... 0081 4,267,336 1.a. b. Interest-bearing balances(2)................................... 0071 6,893,837 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D)... 1773 5,691,722 2.b. 3. Federal funds sold and securities purchased under agreements to resell 1350 6,339,940 3. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C)..................................................... RCFD 2122 25,202,984 4.a. b. LESS: Allowance for loan and lease losses.............. RCFD 3123 419,121 4.b. c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)................... 2125 24,783,863 4.d. 5. Trading assets (from Schedule RD-D)....................... 3545 6,703,332 5. 6. Premises and fixed assets (including capitalized leases).. 2145 743,426 6. 7. Other real estate owned (from Schedule RC-M)..... 2150 7,727 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)............................ 2130 134,959 8. 9. Customers' liability to this bank on acceptances outstanding 2155 644,340 9. 10. Intangible assets (from Schedule RC-M).................... 2143 268,501 10. 11. Other assets (from Schedule RC-F)......................... 2160 2,004,432 11. 12. Total assets (sum of items 1 through 11).................. 2170 58,483,415 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 5 6 Legal Title of Bank: The First National Bank of Chicago Call Date:09/30/97 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Ste 0303 Page RC-2 City, State Zip: Chicago, IL 60670 FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN Thousands BIL MIL THOU LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1)................... RCON 2200 21,756,846 13.a (1) Noninterest-bearing(1).................... RCON 6631 9,197,227 13.a.1 (2) Interest-bearing.......................... RCON 6636 559,619 13.a.2 b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II)... RCFN 2200 14,811,410 13.b. (1) Noninterest bearing....................... RCFN 6631 332,801 13.b.1 (2) Interest-bearing.......................... RCFN 6636 14,478,609 13.b.2 14. Federal funds purchased and securities sold under agreements to repurchase: RCFD 2800 4,535,422 14 15. a. Demand notes issued to the U.S. Treasury RCON 2840 43,763 15.a b. Trading Liabilities(from Schedule RC-D)..............................................RCFD 3548 6,523,239 15.b 16. Other borrowed money: a. With a remaining maturity of one year or less RCFD 2332 1,360,165 16.a b. With a remaining maturity of than one year through three years. A547 576,492 16.b . c. With a remaining maturity of more than three years ................................ A548 703,981 16.c 17. Not applicable 18. Bank's liability on acceptance executed and outstanding RCFD 2920 644,341 18 19. Subordinated notes and debentures (2)... RCFD 3200 1,700,000 19 20. Other liabilities (from Schedule RC-G)........... RCFD 2930 1,322,077 20 21. Total liabilities (sum of items 13 through 20)... RCFD 2948 53,987,736 21 22. Not applicable EQUITY CAPITAL 23. Perpetual preferred stock and related surplus.... RCFD 3838 0 23 24. Common stock..................................... RCFD 3230 200,858 24 25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,999,001 25 26. a. Undivided profits and capital reserves........ RCFD 3632 1,273,239 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities.................................... RCFD 8434 24,096 26.b. 27. Cumulative foreign currency translation adjustments RCFD 3284 (1,515) 27 28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,495,679 28 29. Total liabilities and equity capital (sum of items 21 and 28)...... RCFD 3300 58,483,415 29 Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A.. . ....RCFD 6724 . M.1 1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other with generally accepted auditing standards by a certified external auditors (may be required by state chartering public accounting firm which submits a report on the bankauthority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external conducted in accordance with generally accepted auditing auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external submits a report on the consolidated holding company auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work) 3 = Directors' examination of the bank conducted in 8 = No external audit work accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority)
- ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. 6 EX-99.1 11 LETTER OF TRANSMITTAL AND ANCILLARY DOCUMENTS 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL OFFER TO EXCHANGE 7.10% SENIOR NOTES DUE 2003 FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003 AND 7.45% SENIOR NOTES DUE 2008 FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008 OF BECKMAN COULTER, INC. PURSUANT TO THE PROSPECTUS, DATED APRIL , 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1998 UNLESS EXTENDED. To: The First National Bank of Chicago, The Exchange Agent By Registered or Certified Mail: The First National Bank of Chicago One North State Street 9th Floor Chicago, Illinois 60602 By Overnight Delivery: The First National Bank of Chicago One North State Street 9th Floor Chicago, Illinois 60602 By Hand Delivery: The First National Bank of Chicago One North State Street 9th Floor Chicago, Illinois 60602 By Facsimile: (312) 407-4656 Confirm by Telephone: (312) 407-2068 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN TO THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned hereby acknowledges receipt of the Prospectus dated April , 1998 (the "Prospectus") of Beckman Coulter, Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together with the Prospectus constitute the Company's offer (the "Exchange Offer") to exchange (i) its outstanding 7.10% Senior Notes due 2003 (the "Initial 2003 Notes"), of which an aggregate of $160,000,000 in principal amount is outstanding, for an equal principal amount of newly issued 7.10% Senior Notes due 2003 (the "Exchange 2003 Notes"), and (ii) its outstanding 7.45% Senior Notes due 2008 (the "Initial 2008 Notes" and together with the Initial 2003 Notes, the "Initial Notes"), of which an aggregate of $240,000,000 in principal amount is outstanding, for an equal principal amount of newly issued 7.45% Senior Notes due 2008 (the "Exchange 2008 Notes" and together with the Exchange 2003 Notes, the "Exchange Notes"), which Exchange Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This Letter of Transmittal is to be completed by a Holder of Initial Notes if (i) certificates representing the Initial Notes are to be forwarded herewith or (ii) delivery of Initial Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company ("DTC"). Holders whose Initial Notes are not immediately available, or who cannot deliver their Initial Notes or who 2 are unable to complete the procedure for book-entry transfer of their Initial Notes on a timely basis (a "Book-Entry Confirmation") must tender their Initial Notes and this Letter of Transmittal in accordance with the guaranteed delivery procedures set forth under the heading "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Holder" with respect to the Exchange Offer means any person in whose name Initial Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Initial Notes must complete this Letter of Transmittal in its entirety. 2 3 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW - -------------------------------------------------------------------------------- BOX 1 - ------------------------------------------------------------------------------------------------------------------------ AGGREGATE PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES) OF HOLDER(S) OF PRINCIPAL AMOUNT TENDERED** (MUST INITIAL NOTES CERTIFICATE REPRESENTED BY BE IN INTEGRAL (PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S)* MULTIPLE OF $1,000) - ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF INITIAL 2003 NOTES TENDERED - ------------------------------------------------------------------------------------------------------------------------ -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- Total - ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF INITIAL 2008 NOTES TENDERED - ------------------------------------------------------------------------------------------------------------------------ -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- Total - ------------------------------------------------------------------------------------------------------------------------ * Need not be completed by Holders tendering by book-entry transfer (see below). ** Unless otherwise indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Initial Notes will be deemed to have tendered the entire aggregate principal amount set forth in the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal. The minimum permitted tender is $1,000 in principal amount of Initial Notes. All other tenders must be in integral multiples of $1,000. - ------------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS DEFINED HEREIN) ONLY): Name of Tendering Institution Account Number ________________________ Transaction Code Number [ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name(s) of Registered Holders Date of Execution of Notice of Guaranteed Delivery Window Ticket Number (if available) Name of Institution which Guaranteed Delivery Account Number (if delivered by book-entry transfer) 3 4 SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer described in the Prospectus and this Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Initial Notes indicated in Box 1 above. Subject to, and effective upon, the acceptance for exchange of the tendered Initial Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the order of the Company, all right, title, and interest in, to and under the tendered Initial Notes. Each DTC participant transmitting by means of DTC a computer-generated message forming part of a Book-Entry Confirmation, on behalf of itself and the beneficial owner of the Initial Notes tendered thereby, acknowledges receipt of the Prospectus and this Letter of Transmittal and agrees to be bound by the terms and conditions of the Exchange Offer as set forth in the Prospectus and this Letter of Transmittal. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign, and transfer the tendered Initial Notes and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, and adverse claims when the tendered Initial Notes are acquired by the Company as contemplated herein. The undersigned and each beneficial owner of Initial Notes tendered by the undersigned will, upon request, execute and deliver any additional documents reasonably requested by the Company as necessary or desirable to complete and give effect to the transactions contemplated hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney in fact of the undersigned with respect to the tendered Initial Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver the tendered Initial Notes to the Company or cause ownership of the tendered Initial Notes to be transferred to, or upon the order of, the Company, and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon the acceptance by the Company of the tendered Initial Notes pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of the tendered Initial Notes, all in accordance with the terms of the Exchange Offer. The undersigned also acknowledges that this Exchange Offer is being made by the Company in reliance on an interpretation by the staff of the Securities and Exchange Commission (the "Commission"), as set forth in certain no-action letters to third parties, that the Exchange Notes issued in exchange for the tendered Initial Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by Holders thereof (other than a broker-dealer, as set forth below, or any such Holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such Holder's business and such Holders have no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of such Exchange Notes. By tendering, each Holder of Initial Notes represents to the Company that (i) any Exchange Notes acquired in exchange for Initial Notes tendered hereby will have been acquired in the ordinary course of business of the undersigned or such other beneficial owner(s) ("Beneficial Owner(s)") receiving such Exchange Notes; (ii) neither the undersigned nor any Beneficial Owner has an arrangement with any person to participate in the distribution of such Exchange Notes; (iii) the undersigned and each Beneficial Owner acknowledge and agree that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes or interests therein acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters, (iv) the undersigned and each Beneficial Owner understand that a secondary resale transaction described in 4 5 clause (iii) above and any resales of Exchange Notes or interests therein obtained by such Holder in exchange for Initial Notes or interests therein originally acquired by such Holder directly from the Company should be covered by an effective registration statement containing the selling security Holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (v) neither the undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. By tendering, each Holder of Initial Notes that is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account pursuant to the Exchange Offer, represents that the Initial Notes to be exchanged for the Exchange Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the Holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned understands that tenders of Initial Notes pursuant to the procedures described under the captions "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any Beneficial Owner(s), and every obligation of the undersigned or any Beneficial Owners hereunder shall be binding upon the heirs, representatives, successors, and assigns of the undersigned and such Beneficial Owner(s). If any tendered Initial Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Initial Notes will be returned, without expense, to the undersigned at the address shown below or at such different address as may be indicated herein under "Special Issuance Instructions" as promptly as practicable after the Expiration Date. Unless otherwise indicated under "Special Issuance Instructions," the Company will issue the certificates representing the Exchange Notes issued in exchange for the Initial Notes accepted for exchange and return any Initial Notes not tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," the Company will send the certificates representing the Exchange Notes issued in exchange for the Initial Notes accepted for exchange and any certificates for Initial Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, the Company will issue the certificates representing the Exchange Notes issued in exchange for the Initial Notes accepted for exchange in the name(s) of, and return any Initial Notes not tendered or not exchanged, and send said certificates to the person(s) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Initial Notes from the name of the registered Holder(s) hereof if the Company does not accept for exchange any of the tendered Initial Notes. Holders of Initial Notes who wish to tender their Initial Notes and (i) whose Initial Notes are not immediately available, or (ii) who cannot deliver their Initial Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date (or who cannot comply with the book-entry transfer procedure on a timely basis) may tender their Initial Notes according to the guaranteed delivery procedures set forth in the Prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." IN ORDER TO VALIDLY TENDER INITIAL NOTES FOR EXCHANGE, A HOLDER OF INITIAL NOTES MUST COMPLETE, EXECUTE AND DELIVER THIS LETTER OF TRANSMITTAL. 5 6 - ------------------------------------------------------------------------------------------------------------------- BOX 2 TENDERING HOLDER SIGNATURE (SEE INSTRUCTIONS 1 AND 5) - ------------------------------------------------------------------------------------------------------------------- X SIGNATURE GUARANTEE (Signature(s) of Registered Holder(s) or (If required by Instruction 5) Authorized Signatory) X Date: (Authorized Signature) X (Signature(s) of Registered Holder(s) or (Name) Authorized Signatory) Date: (Title) The above lines must be signed by the registered Holder(s) of Initial Notes exactly as their name(s) (Name of Firm) appear(s) on the Initial Notes or by person(s) Date: authorized to become registered Holder(s) by a properly completed bond power from the registered Holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Initial Notes to which this Letter of Transmittal relate are held of record by two or more joint Holders, then all such Holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer, or other person acting in a fiduciary or representative capacity, such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority so to act. See Instruction 5. Name(s): Capacity: Street Address: (include zip code) Area Code and Telephone Number: Tax Identification or Social Security Number: Please Complete Substitute Form W-9 - -------------------------------------------------------------------------------------------------------------------
6 7 BOX 3 (SEE INSTRUCTIONS 5 AND 6) - -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS To be completed ONLY (i) if To be completed ONLY if certificates certificates for Initial Notes in a for Initial Notes in a principal amount principal amount not accepted are to be not accepted issued in the name of the issued in the name of someone other person whose signature appears on the than the person whose signature appears face of this Letter of Transmittal are on the face of this Letter of to be sent to someone other than such Transmittal or (ii) if Initial Notes person or to such person at an address tendered by book-entry transfer which other than that shown in Box 1 entitled are not accepted are to be returned by "Description of Initial Notes." credit to an account maintained at DTC. Name Name - --------------------------------------- --------------------------------------- (Please Print) (Please Print) Address Address ======================================= ======================================= (Include Zip Code) (Include Zip Code) - --------------------------------------- --------------------------------------- (Tax Identification or Social Security (Tax Identification or Social Security No.) No.) Credit unaccepted Initial Notes tendered by book entry transfer to the DTC account set forth below: - --------------------------------------- (DTC Account Number)
7 8 INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THE INITIAL NOTES AND THIS LETTER OF TRANSMITTAL. This Letter of Transmittal is to be completed by a Holder of Initial Notes if (i) certificates representing the Initial Notes are to be forwarded herewith or (ii) delivery of Initial Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC pursuant to the procedures set forth under the heading "The Exchange Offer--Book-Entry Transfer" in the Prospectus. Certificates for any physically tendered Initial Notes, or any Book-Entry Confirmation, as applicable, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, it is recommended that the Holder use properly insured, registered mail with return receipt requested. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases sufficient time should be allowed to assure timely delivery. NO LETTER OF TRANSMITTAL OR INITIAL NOTES SHOULD BE SENT TO THE COMPANY. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Initial Notes and (i) whose Initial Notes are not immediately available or (ii) who cannot deliver their Initial Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Initial Notes according to the guaranteed delivery procedures set forth below (if this Letter of Transmittal is being delivered). Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"), and the Notice of Guaranteed Delivery must be signed by the Holder; (ii) prior to the Expiration Date, the Exchange Agent must have received from the Holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of Initial Notes, the certificate number or numbers of the Initial Notes, and, in each case, the principal amount of the Initial Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange ("NYSE") trading days after the Expiration Date, either a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing the Initial Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Initial Notes in proper form for transfer and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five NYSE trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their Initial Notes according to the guaranteed delivery procedures set forth above. 3. TENDER BY HOLDER. Only a Holder in whose name Initial Notes are registered on the books of the registrar (or the legal representative or attorney-in-fact of such registered Holder) may tender such Initial Notes in the Exchange Offer. Any beneficial owner of Initial Notes who is not the registered Holder should arrange with the registered Holder to execute and deliver this Letter of Transmittal on his or her behalf or must, prior to completing and executing this Letter of Transmittal and delivering the Initial Notes, either make appropriate arrangements to register ownership of the Initial Notes in such beneficial owner's name or obtain a properly completed bond power from the registered Holder. 8 9 4. PARTIAL TENDERS. Tenders of Initial Notes will be accepted only in integral multiples of $1,000 principal amount. If less than the entire number of Initial Notes are tendered, the tendering Holder should fill in the number of Initial Notes tendered in the column labeled "Principal Amount of Initial Notes Tendered" of Box 1 above. The entire number of Initial Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire number of all Initial Notes indicated in Box 1 above is not tendered, Initial Notes in a principal amount equal to Initial Notes not tendered as well as Exchange Notes exchanged for any Initial Notes tendered will be delivered to the address or account, as applicable, indicated in Box 1, unless a different address or account, as applicable, is provided in Box 3 of this Letter of Transmittal. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder(s) of the Initial Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the Initial Notes without alteration, enlargement or any change whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder(s) of Initial Notes tendered and the certificate(s) for Exchange Notes issued in exchange therefor is to be issued (or any untendered principal amount of Initial Notes is to be reissued) to the registered Holder, said Holder need not and should not endorse any certificates representing the tendered Initial Notes, nor provide a separate bond power. In any other case, such Holder must either properly endorse certificates representing the Initial Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal, with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or facsimile hereof) is signed by a person other than the registered Holder(s) of any Initial Notes listed, this Letter of Transmittal must be accompanied by appropriate bond powers signed as the name of the registered Holder(s) appear(s) on the face of the Initial Notes without alteration, enlargement or any change whatsoever. If this Letter of Transmittal (or facsimile hereof) or any certificates representing the Initial Notes or bond power are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Letter of Transmittal. Signatures on bond powers required by this Instruction 5 must be guaranteed by an Eligible Institution. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution that is a member of a recognized signature guarantee medallion program (an "Eligible Program"). Signatures on this Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal is signed by the registered Holder(s) of the Initial Notes tendered herewith and such Holder(s) has not completed the box set forth herein entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" or (ii) if such Initial Notes are tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders of Initial Notes should indicate, in the applicable box or boxes, the name and address to which Exchange Notes and/or substitute Initial Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 7. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the sale and transfer of Initial Notes to it or its order pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and sale of Initial Notes to the Company or its order pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or on any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption from taxes therefrom is not submitted with this Letter of Transmittal, the amount of transfer taxes will be billed directly to such tendering Holder. 9 10 8. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of tendered Initial Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the right to reject any and all Initial Notes not validly tendered or any Initial Notes the Company's acceptance of which would, in the opinion of the Company or its counsel, be unlawful. The Company also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Initial Notes as to any ineligibility of any Holder who seeks to tender Initial Notes in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Initial Notes must be cured within such time as the Company shall determine. The Company will use reasonable efforts to give notification of defects or irregularities with respect to tenders of Initial Notes, but shall not incur any liability for failure to give such notification. 9. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend, waive, or modify specified conditions of the Exchange Offer as enumerated in the Prospectus in the case of any tendered Initial Notes. 10. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or contingent tender of Initial Notes or transmittal of this Letter of Transmittal will be accepted. 11. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES. Any tendering Holder whose Initial Notes have been mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the address indicated on the cover of this Letter of Transmittal for further instruction. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address on the cover of this Letter of Transmittal. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 13. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited withdrawal rights set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH A BOOK-ENTRY CONFIRMATION AND ANY OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY, AS APPLICABLE) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON OR PRIOR TO THE EXPIRATION DATE. 10 11 IMPORTANT TAX INFORMATION Under current federal income tax law, a Holder whose tendered Initial Notes are accepted for exchange may be subject to backup withholding unless the Holder provides the Exchange Agent with either (i) such Holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder of Initial Notes is awaiting a TIN) and that (A) the Holder of Initial Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report interest or dividends or (B) the Internal Revenue Service has notified the Holder of Initial Notes that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such Holder is an individual, the TIN is such Holder's social security number. If the Exchange Agent is not provided with the correct taxpayer identification number, the Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such Holder of the Exchange Notes may be subject to backup withholding. Certain Holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on Substitute Form W-9. A foreign individual may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the Holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any payment made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The Holder is required to give the Exchange Agent the social security number or employer identification number of the record owner of the Initial Notes. If the Initial Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. 11 12 - --------------------------------------------------------------------------------------------- PAYER'S NAME: THE FIRST NATIONAL BANK OF CHICAGO - --------------------------------------------------------------------------------------------- Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX SUBSTITUTE AT RIGHT AND CERTIFY BY SIGNING AND DATING FORM W-9 BELOW ----------------------------------------------------- - ----------------------------------------------------------------------------------------- TIN Social Security Number or Employer Identification Number ----------------------------------------------------- DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE Name (Please Print) PAYOR'S REQUEST FOR TAXPAYER -------------------------------------------------------- IDENTIFICATION NUMBER (TIN) Address AND CERTIFICATION -------------------------------------------------------- City State Zip Code - -------------------------------------------------------------------------------------------------------- Part 2 -- Awaiting TIN [ ] Please see below. - -------------------------------------------------------------------------------------------------------- Part 3 -- CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) the number shown on this form is my correct taxpayer identification number (or a TIN has not been issued to me but I have mailed or delivered an application to receive a TIN or intend to do so in the near future), (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or the IRS has notified me that I am no longer subject to backup withholding, and (3) all other information provided on this form is true, correct and complete. Signature Date __________________ - --------------------------------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 3 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2) in Part 3 above. - -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 20% of all reportable payments made to me thereafter will be withheld until I provide a number. - ------------------------------------------------------------ --------------------------------------------- Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 20% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 12 13 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR -- Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payor.
============================================================= GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF -- ============================================================= 1. An individual's account The individual 2. Two or more individuals The actual owner of (joint account) the account or, if combined funds, the first individual on the account1 3. Custodian account of a minor The minor2 (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor-trustee1 trust account (grantor is also trustee) b. So-called trust account that The actual owner1 is not a legal or valid trust under State law 5. Sole proprietorship account The owner3 - --------------------------------------------------------------------------------- GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- - --------------------------------------------------------------------------------- 6. A valid trust, estate The legal entity (Do or pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)4 7. Corporate account The corporation 8. Association, club, The organization religious, charitable, educational or other tax-exempt organization 9. Partnership account The partnership 10. A broker or registered The broker or nominee nominee 11. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district or prison) that receives agricultural program payments =============================================================
1 List first and circle the name of the person whose number you furnish. 2 Circle the minor's name and furnish the minor's social security number. 3 Show the name of the owner. 4 List first and circle the name of the valid trust, estate or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 14 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempt from backup withholding on ALL payments include the following: - - A corporation. - - A financial institution. - - An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under 403(b)(7). - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - - An international organization, or any agency or instrumentality thereof. - - A dealer in securities or commodities required to register in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under section 584(a). - - A trust exempt from tax under Section 644 or described in Section 4947. - - An entity registered at all times during the tax year under the Investment Company Act of 1940. - - A foreign central bank of issue. - - Payments made to a middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. - - A futures commission merchant registered with the Commodity Futures Trading Commission. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt interest dividends under Section 852). - - Payments described in Section 6049(b)(5) to nonresident aliens. - - Payments of tax-free covenant bonds under Section 1451. - - Payments made by certain foreign organizations. - - Mortgage interest paid by you. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see Sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and the regulations thereunder. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 20% of certain taxable payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN PAYMENTS. -- If you fail to include properly on your tax return certain items reported to the IRS such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under payment of tax attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE 15 NOTICE OF GUARANTEED DELIVERY OF 7.10% SENIOR NOTES DUE 2003 AND 7.45% SENIOR NOTES DUE 2008 BECKMAN COULTER, INC. PURSUANT TO THE PROSPECTUS DATED APRIL , 1998 THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY HOLDER OF 7.10% SENIOR NOTES DUE 2003 (THE "INITIAL 2003 NOTES") AND ANY HOLDER OF 7.45% SENIOR NOTES DUE 2008 (THE "INITIAL 2008 NOTES" AND TOGETHER WITH THE INITIAL 2003 NOTES, THE "INITIAL NOTES") OF BECKMAN COULTER, INC., A DELAWARE CORPORATION (THE "COMPANY"), WHO WISHES TO TENDER HIS OR HER INITIAL NOTES PURSUANT TO THE COMPANY'S EXCHANGE OFFER, AS DEFINED IN THE PROSPECTUS (THE "PROSPECTUS"), DATED APRIL , 1998 AND (i) WHOSE CERTIFICATES REPRESENTING INITIAL NOTES ARE NOT IMMEDIATELY AVAILABLE, (ii) WHO CANNOT DELIVER HIS OR HER CERTIFICATES OR ANY OTHER DOCUMENT REQUIRED BY THE LETTER OF TRANSMITTAL ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (iii) WHO CANNOT COMPLETE THE PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS. SUCH FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY TO THE EXCHANGE AGENT, SEE "THE EXCHANGE OFFER--GUARANTEED DELIVERY PROCEDURES" IN THE PROSPECTUS. To: The First National Bank of Chicago, The Exchange Agent By Registered or Certified Mail: By Hand Delivery: The First National Bank of Chicago The First National Bank of Chicago One North State Street One North State Street 9th Floor 9th Floor Chicago, Illinois 60602 Chicago, Illinois 60602 By Overnight Delivery: By Facsimile: (312) 407-4656 The First National Bank of Chicago One North State Street Confirm by Telephone: 9th Floor Chicago, Illinois 60602 (312) 407-2068
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN TO ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. 16 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions of the Exchange Offer as set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Initial 2003 Notes and Initial 2008 Notes specified below pursuant to the guaranteed delivery procedures set forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The undersigned hereby tenders the Initial Notes listed below: - ------------------------------------------------------------------------------------------------------------------- INITIAL 2003 NOTES CERTIFICATE NUMBERS (IF AVAILABLE) PRINCIPAL AMOUNT TENDERED - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- INITIAL 2008 NOTES CERTIFICATE NUMBERS (IF AVAILABLE) PRINCIPAL AMOUNT TENDERED - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- If Initial Notes will be tendered by SIGN HERE book-entry transfer: -------------------------------------------- Signature(s) Name of Tendering Institution: -------------------------------------------- - -------------------------------------------- Name(s) (Please Print) -------------------------------------------- Account No. -------------------------------------------- at The Depository Trust Company Address -------------------------------------------- Zip Code -------------------------------------------- Area Code and Telephone No. Date: - ---------------------------------------------------------------------------------------------
2 17 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents that the above named person(s) "own(s)" the Initial Notes tendered hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents that such tender of Initial Notes complies with Rule 14e-4 under the Exchange Act and (c) guarantees that delivery to the Exchange Agent of the certificate(s) representing the Initial Notes in proper form for transfer or a Book-Entry Confirmation, pursuant to the procedures for book-entry transfer set forth in the Prospectus, and delivery of a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signatures and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day after the Expiration Date. SIGN HERE ------------------------------------ Name of Firm ------------------------------------ Authorized Signature ------------------------------------ Name (please print) ------------------------------------ Title ------------------------------------ Address ------------------------------------ Zip Code ------------------------------------ Area Code and Telephone No. Date: DO NOT SEND INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF INITIAL NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 3 18 INSTRUCTIONS 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth on the cover hereof prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and all other required documents to the Exchange Agent is at the election and risk of the Holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, it is recommended that the Holder use properly insured, registered mail with return receipt requested. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases sufficient time should be allowed to assure timely delivery. For a full description of the guaranteed delivery procedures, see the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." NO NOTICE OF GUARANTEED DELIVERY SHOULD BE SENT TO THE COMPANY. 2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered Holder(s) of the Initial Notes referred to herein, the signature must correspond with the name(s) as written on the face of the Initial Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a person other than the registered Holder(s) of any Initial Notes listed, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers signed as the name of the registered Holder(s) appear(s) on the face of the Initial Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address specified in the Prospectus. Holders also may contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 4 19 OFFER TO EXCHANGE 7.10% SENIOR NOTES DUE 2003 FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003 AND 7.45% SENIOR NOTES DUE 2008 FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008 OF BECKMAN COULTER, INC. To Securities Dealers, Commercial Banks, Trust Companies and Other Nominees: We are enclosing herewith the materials listed below relating to the offer (the "Exchange Offer") by Beckman Coulter, Inc. (the "Company") to exchange (i) its outstanding 7.10% Senior Notes due 2003 (the "Initial 2003 Notes"), of which an aggregate of $160,000,000 in principal amount is outstanding, for an equal principal amount of newly issued 7.10% Senior Notes due 2003 (the "Exchange 2003 Notes"), and (ii) its outstanding 7.45% Senior Notes due 2008 (the "Initial 2008 Notes" and together with the Initial 2003 Notes, the "Initial Notes"), of which an aggregate of $240,000,000 in principal amount is outstanding, for an equal principal amount of newly issued 7.45% Senior Notes due 2008 (the "Exchange 2008 Notes" and together with the Exchange 2003 Notes, the "Exchange Notes"), which Exchange Notes have been registered under the Securities Act of 1933, as amended, upon the terms and subject to the conditions set forth in the Prospectus, dated April , 1998 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. Enclosed herewith are copies of the following documents: 1. The Prospectus; 2. Letter of Transmittal; 3. Notice of Guaranteed Delivery; 4. Letter which may be sent to your clients for whose account you hold Initial Notes registered in your name or in the name of your nominee, with space provided for obtaining such client's instruction with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). To tender Initial Notes, certificates for Initial Notes or a Book-Entry Confirmation, a duly executed and properly completed Letter of Transmittal or a facsimile thereof and any other required documents must be received by the Exchange Agent as provided in the Prospectus and the Letter of Transmittal. The Company will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Initial Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Initial Notes to it, except as otherwise provided in Instruction 7 of the enclosed Letter of Transmittal. Additional copies of the enclosed material may be obtained from The First National Bank of Chicago, One North State Street, 9th Floor, Chicago, Illinois 60602, (312) 407-2068. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU AS THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 20 OFFER TO EXCHANGE 7.10% SENIOR NOTES DUE 2003 FOR ALL OUTSTANDING 7.10% SENIOR NOTES DUE 2003 AND 7.45% SENIOR NOTES DUE 2008 FOR ALL OUTSTANDING 7.45% SENIOR NOTES DUE 2008 OF BECKMAN COULTER, INC. To Our Clients: We are enclosing herewith a Prospectus, dated April , 1998 (the "Prospectus") and a related Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by Beckman Coulter, Inc. (the "Company") to exchange (i) its outstanding 7.10% Senior Notes due 2003 (the "Initial 2003 Notes"), of which an aggregate of $160,000,000 in principal amount is outstanding, for an equal principal amount of newly issued 7.10% Senior Notes due 2003 (the "Exchange 2003 Notes"), and (ii) its outstanding 7.45% Senior Notes due 2008 (the "Initial 2008 Notes" and together with the Initial 2003 Notes, the "Initial Notes"), of which an aggregate of $240,000,000 in principal amount is outstanding, for an equal principal amount of newly issued 7.45% Senior Notes due 2008 (the "Exchange 2008 Notes" and together with the Exchange 2003 Notes, the "Exchange Notes"), which Exchange Notes have been registered under the Securities Act of 1933, as amended, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. These materials are being forwarded to you as the beneficial owner of Initial Notes carried by us for your account or benefit but not registered in your name. A tender of any Initial Notes may be made only by us as the registered Holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Initial Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered Holder promptly if they wish to tender Initial Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all Initial Notes, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Initial Notes. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER TO PERMIT US TO TENDER INITIAL NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE PROVISIONS OF THE EXCHANGE OFFER. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. If you wish to have us tender any or all of your Initial Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Initial Notes held by us and registered in our name for your account or benefit. 21 INSTRUCTIONS The undersigned hereby acknowledges receipt of your letter and enclosed materials referred to therein relating to the Exchange Offer of Beckman Instruments, Inc. THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF INITIAL NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED, PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. [ ] Please TENDER my Initial Notes held by you for the account or benefit of the undersigned. I have identified on a signed schedule attached hereto the principal amount of Initial Notes to be tendered if I wish to tender less than all of my Initial Notes. [ ] Please DO NOT TENDER any Initial Notes held by you for the account of the undersigned. Date: ----------------------------------------------------- Signature(s): ----------------------------------------------------- ----------------------------------------------------- Name(s) (please print)
Unless a specific contrary instruction is given in a signed Schedule attached hereto, your signature(s) hereon shall constitute an instruction to us to tender all of your Initial Notes. -----END PRIVACY-ENHANCED MESSAGE-----