-----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, BTVZzjofjjUi7k2Dn3Mmjao1H5jZN8SanP1jOgfunSrSfTYgUIEedMEzxNRQIvGJ ZpAqVm1j6IZ1e4FkU71g4A== 0000950123-01-001799.txt : 20010228 0000950123-01-001799.hdr.sgml : 20010228 ACCESSION NUMBER: 0000950123-01-001799 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20010227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APBIOTECH CENTRAL INDEX KEY: 0001121625 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 223747272 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-47120 FILM NUMBER: 1554749 BUSINESS ADDRESS: STREET 1: AMERSHAM PLACE LITTLE CHALFONT STREET 2: BUCKINGHAMSHIRE CITY: ENGLAND HP7 9NA MAIL ADDRESS: STREET 1: AMERSHAM PLACE LITTLE CHALFOND STREET 2: BUCKINGHAMSHIRE CITY: ENGLAND HP7 9NA S-1/A 1 y42738a1s-1a.txt AMENDMENT NO. 1 TO FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 2001 REGISTRATION NO. 333-47120 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ APBIOTECH INC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 8731 22-3747272 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
800 CENTENNIAL AVENUE PO BOX 1327 PISCATAWAY, NEW JERSEY 08855-1327 (732) 457-8000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ ANDREW CARR CHIEF EXECUTIVE OFFICER APBIOTECH INC 800 CENTENNIAL AVENUE PO BOX 1327 PISCATAWAY, NEW JERSEY 08855-1327 (732) 457-8000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: JEFFREY M. OAKES MARK KESSEL DAVIS POLK & WARDWELL SHEARMAN & STERLING 99 GRESHAM STREET 599 LEXINGTON AVENUE LONDON EC2V 7NG NEW YORK, NEW YORK 10022 UNITED KINGDOM (212) 848-4000 44 20 7418-1300
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, please 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, please 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(c) 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. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE OFFERING PRICE(2) REGISTRATION FEE(3) - --------------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $.01 per share.......................... 20,930,000 shares $17.00 $355,810,000 $90,353 - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1)Includes an aggregate of 2,730,000 shares which the Underwriters have the option to purchase solely to cover over-allotments. (2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act. (3)$26,400 previously paid. ------------------------ 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS (Subject to Completion) Issued February 26, 2001 18,200,000 Shares [APBiotech LOGO] COMMON STOCK ------------------------ APBIOTECH INC IS OFFERING 18,200,000 SHARES OF ITS COMMON STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $15.00 AND $17.00 PER SHARE. ------------------------ WE HAVE APPLIED TO LIST THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "APBI." ------------------------ INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 12. ------------------------ PRICE $ A SHARE ------------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS APBIOTECH ----------- ------------- ----------- Per Share...................................... $ $ $ Total.......................................... $ $ $
APBiotech has granted the underwriters the right to purchase up to an additional 2,730,000 shares of common stock to cover over-allotments. The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on or about , 2001. ------------------------ MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO. JPMORGAN SALOMON SMITH BARNEY , 2001 3 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 3 The Offering.......................... 8 Summary Consolidated Financial Data... 9 Risk Factors.......................... 11 Forward-Looking Statements............ 19 Use of Proceeds....................... 20 Dividends............................. 20 Capitalization........................ 21 Dilution.............................. 23 Unaudited Pro Forma Condensed Financial Statements................ 25 Selected Consolidated Financial Data................................ 30 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 32 Business.............................. 47 Management............................ 71
PAGE ---- Principal Stockholders................ 81 The Reorganization.................... 82 Relationship with Nycomed Amersham and Pharmacia........................... 84 Description of Capital Stock.......... 90 Shares Eligible for Future Sale....... 94 Material United States Federal Income Tax Consequences to Non-United States Stockholders................. 96 Underwriters.......................... 98 Legal Matters......................... 100 Experts............................... 100 Where You Can Find More Information... 100 Index to Consolidated Financial Statements.......................... F-1
------------------------ UNTIL , 2001 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 2 4 PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and may not contain all the information that is important to you. You should carefully read the more detailed information regarding us and our common stock and our financial statements appearing elsewhere in this prospectus before making an investment decision. In this prospectus, "APBiotech," "we," "us" and "our" refer to APBiotech Inc and its subsidiaries. This prospectus contains estimates regarding our market size and market share. These estimates are based on internal company information largely derived from various third party sources. While we believe our internal research is reliable, it has not been verified by any independent sources. APBiotech is a leading global provider of biotechnology systems, products and services used in gene and protein research, drug discovery and development and biopharmaceutical manufacturing. During 2000, our net sales totaled over $927.0 million. Our 50,000 customers include pharmaceutical, biotechnology and agrochemical companies, research institutes, universities and medical research centers. We have a long-standing commitment to research and development and a track record of innovation. This has enabled us to build a strong, broad product portfolio and future product pipeline. Many of our products form the basis for what we call integrated systems. These are whole systems that enable our customers to efficiently meet their research and manufacturing objectives. These systems consist of equipment or instruments, reagents optimized for use with the instruments and software to analyze and link the research results. Our products span the entire drug discovery, development and manufacturing process, which broadly involves the following activities: Genomics -- DNA sequencing--identifying the exact order of the "letters" in the DNA genetic code; -- SNP analysis and genotyping--understanding the function of genes and genetic variations, called single nucleotide polymorphisms, or SNPs, between individuals; -- Gene expression analysis--understanding which genes are active in a particular cell or group of cells and their role; Proteomics -- Protein analysis--identifying and understanding the proteins for which genes code, and how these proteins control cellular function; Drug Screening -- Drug screening--finding possible drug candidates which will interact with identified protein targets; -- Toxicology--eliminating drug candidates that are toxic or have unacceptable side effects; 3 5 Manufacturing -- Scale up to production--purifying and separating biological molecules on a laboratory and industrial scale; and -- Biopharmaceutical manufacturing--purifying and separating biological molecules for the manufacture of biopharmaceuticals. Biopharmaceuticals are drugs, such as insulin, that are based on biological molecules. The following chart illustrates the breadth of our product range and identifies some of our key products in these key areas. DRUG DISCOVERY THROUGH TO MANUFACTURING [DRUG TO MANUFACTURING GRAPH] STRATEGY AND COMPETITIVE STRENGTHS Our vision is to enable the era of molecular medicine in which the genetic basis for disease will be understood, leading to earlier and more accurate diagnosis of disease and more effective treatment. Our strategy is to build on our position as a leading provider of biotechnology systems to enable the molecular medicine revolution. Our drug discovery and separations segments operate in markets which we believe represent significant opportunities for growth. Our systems, products and services are critical components of research into genes and proteins, the discovery and development of drugs, and the manufacture of biopharmaceuticals. We believe that we are well positioned with both our commercial and academic customers as a result of the following set of competitive strengths: -- The breadth of our technologies and our comprehensive product lines which span the entire drug discovery, development and manufacturing processes. We offer well-recognized, branded products such as our MegaBACE(TM) DNA sequencing system, our LEADseeker(TM) drug screening system and our Sepharose(TM) separations media for use in biopharmaceutical manufacturing. 4 6 -- Our commitment to research and development, our long-standing reputation for scientific excellence and our development of innovative products. We have a strong record in developing, and are continuing to develop, state-of-the-art technologies, both internally and in partnerships with others. We expect that this commitment to research will result in new product introductions in 2001. Our intellectual property portfolio, which is a vital asset in our industry, supports our research and development. -- Our global market franchise with strong customer relationships. Our global strengths in sales, operations and research and development enable us to offer our customers a complete set of products to meet their needs. We estimate that most of the top 50 pharmaceutical companies have entered into technology transfer agreements with us, under which they can gain early access to developing technologies. We believe that our bioprocess products are used in the production of almost all biopharmaceuticals. -- Strong management team. We have a strong management team with an average of over 15 years of experience in the life science industry. -- Our partnership approach. We have a history of strategic development through acquisitions, investments and research alliances as well as through strategic partnerships with our customers. These alliances have resulted in some of our key products and have provided us with early access to new technologies. -- An integrated portfolio. The strong market position of our laboratory products segment enables us to more effectively manage the life cycle of novel products from our drug discovery business once these products become widely accepted in the general research community. There is also a link between our laboratory separations products and our bioprocess business where we enable customers to scale up processes for the purification of biopharmaceuticals which they have developed in the laboratory. The industry segments in which we operate are highly competitive and characterized by the use of advanced technology. In addition the application of molecular medicine is in early stages of development and it is difficult to predict precisely how it will progress over time. Our strategy is also subject to competitive pressures which could make it difficult to achieve our goals. These competitive pressures include the rapidly changing needs of our customers and our ability to continue to develop innovative new products. For a more detailed discussion of the risks that we face you should read "Risk Factors." 5 7 Our business includes three principal segments that share activities in research and development, sales and marketing, distribution, manufacturing and service. The following table sets forth our estimated market size, market share and market position in each of our principal business segments as of June 30, 2000 based on the preceding twelve month period. The information below is based on the markets in which we directly compete.
- ------------------------------------------------------------------------------------------ ESTIMATED ESTIMATED ESTIMATED MARKET SIZE MARKET MARKET BUSINESS SEGMENT TYPES OF PRODUCTS (IN MILLIONS) SHARE POSITION - ------------------------------------------------------------------------------------------ Drug discovery Systems to improve the $1,500 15% 2 effectiveness of life science and pharmaceutical research and development and the speed to market for drugs - ------------------------------------------------------------------------------------------ Separations Systems for use in the $350 55% 1 -- Bioprocess purification and production of biopharmaceuticals, such as insulin and vaccines, on a large scale -- Laboratory Systems for use in the $400 30% 1 separations purification and separation of proteins during the laboratory research and development stages - ------------------------------------------------------------------------------------------ Laboratory products Tools and technical $1,900 15% 1 knowledge for use in the purification, detection and analysis of biological molecules by life science researchers - ------------------------------------------------------------------------------------------
COMMITMENT TO RESEARCH We are founded on a strong research and development heritage, employing almost 800 scientists in research and development alone. We invested $112.2 million, or 12.1% of our net sales, in research and development for the year ended December 31, 2000, increasing our investments in research and development over prior years to take advantage of significant growth opportunities, particularly in our drug discovery business. This research commitment is leading to important new product introductions, including the recent launches of the Ettan(TM) range of new proteomics systems, the MegaBACE(TM) sequencing systems, the Typhoon(TM) scanner and the AKTAprime chromatography system. Our research and development spending decisions are based on a technology's commercial viability and its ability to meet our return on investment criteria. 6 8 We continue to invest in new technologies, developed both internally and externally. We conduct research in Uppsala, Sweden; Cardiff and Amersham in the United Kingdom; Piscataway, New Jersey and Sunnyvale and San Francisco, California in the United States; and Tokyo, Japan. External development is achieved through collaborations with specialist companies as well as academic researchers. Our intellectual property position, which is a key asset in our industry, is strong. We currently own 427 issued patents and have 701 patent applications pending. During the year ended December 31, 2000, we applied for 64 new patents. RELATIONSHIP WITH NYCOMED AMERSHAM AND PHARMACIA On August 5, 1997 Nycomed Amersham plc (formerly Amersham International) formed a new subsidiary, Amersham Pharmacia Biotech Ltd., which we refer to in this prospectus as APBiotech Ltd., which included the operations of its Life Science division. APBiotech Ltd. then merged with Pharmacia Biotech, the Swedish-based biotechnology supply business of Pharmacia Corporation (formerly Pharmacia & Upjohn). APBiotech Ltd. accounted for the merger under the purchase method of accounting. Nycomed Amersham and Pharmacia entered into a number of agreements, including a shareholders' agreement relating to the corporate governance and operation of our business, trademark license agreements, a general services agreement and two contract manufacture agreements with us. Since our formation, we have been run as a separate legal entity. REORGANIZATION In order to facilitate our initial public offering, Nycomed Amersham and Pharmacia have agreed to reorganize their existing shareholdings in APBiotech Ltd. by forming APBiotech Inc, a Delaware corporation, to issue the shares in this offering and become the holding company for our operating businesses. The formation of APBiotech Inc, the restructuring of the shareholder arrangements and share ownership, revisions to our existing capital structure, including the issuance of two classes of common shares, and changes to other existing arrangements with Nycomed Amersham are all part of the reorganization. As part of the reorganization, Pharmacia will receive our Class B common stock. The reorganization will be completed just prior to the closing of this offering. Prior to implementation of the reorganization and this offering, Nycomed Amersham controls 55% and Pharmacia controls 45% of our issued share capital and voting rights. Immediately after the reorganization and this offering, Nycomed Amersham's percentage of the voting rights in our outstanding common shares will be reduced to approximately 46.8% (or 45.5% if the underwriters exercise the over-allotment option), but Nycomed Amersham will continue to consolidate us within the Nycomed Amersham group. Pharmacia's percentage of the voting rights in our outstanding common shares will remain unchanged. ------------------------ Our principal executive offices are located at 800 Centennial Avenue, PO Box 1327, Piscataway, New Jersey 08855-1327. Our telephone number is (732) 457-8000. Our address on the worldwide web is www.apbiotech.com. Information contained in or connected to our website will not be deemed to be incorporated into this prospectus. 7 9 THE OFFERING Common stock offered..................... 18,200,000 shares Common shares to be outstanding after this offering: Common stock........................... 121,343,689(1) shares Class B common stock(2)................ 87,285,484 shares ------------- Total......................... 208,629,173 shares ------------- ------------- Over-allotment option.................... 2,730,000 shares Voting rights: Common stock........................... One vote per share Class B common stock................... 1.1374 votes per share Use of proceeds.......................... Our net proceeds from this offering will be about $272.3 million. We will use approximately $270.6 million to repay indebtedness owed to Nycomed Amersham. We will use the balance of the net proceeds for general corporate purposes. Dividend policy.......................... We do not intend to pay dividends on our common stock for the foreseeable future. We plan to retain any earnings for use in the operation of our business and to fund future growth. Proposed Nasdaq National Market symbol... APBI
- ------------ (1) Includes over-allotment shares which will be purchased by Nycomed Amersham if not exercised by the underwriters. (2) To be issued to Pharmacia as part of the reorganization. 8 10 SUMMARY CONSOLIDATED FINANCIAL DATA The following table presents summary consolidated financial and operating data for Amersham Pharmacia Biotech Ltd., or APBiotech Ltd., and predecessor companies. The data presented in this table are derived from APBiotech Ltd.'s audited consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this prospectus. You should read the consolidated financial statements and notes, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a further explanation of the financial data summarized here. The pro forma information gives effect to the reorganization as if it had occurred on January 1, 2000. The pro forma as adjusted information gives effect to the offering as if it had occurred on January 1, 2000. For more information regarding this pro forma information, you should read "Unaudited Pro Forma Condensed Financial Statements."
YEAR ENDED DECEMBER 31, ----------------------------------------------------- PRO FORMA PRO FORMA AS ADJUSTED 1998(1) 1999 2000 2000 2000 ------- ------- ------- --------- ----------- (IN MILLIONS, EXCEPT PER SHARE DATA) STATEMENTS OF OPERATIONS DATA: Net sales..................... $729.4 $ 864.1 $ 927.0 $ 927.0 $ 927.0 Gross profit.................. 400.1 459.7 501.9 501.9 501.9 Selling, general and administrative expenses before integration costs, non-recurring charges and non-cash compensation expense..................... (268.7) (306.0) (353.0) (353.0) (353.0) Integration costs and non-recurring charges....... (47.2)(2) (29.8)(3) (2.7)(4) (2.7) (2.7) Non-cash compensation expense..................... (2.0) (.9) (10.6) (10.6) (10.6) Purchased in-process research and development............. -- -- (3.2)(5) (3.2) (3.2) Research and development...... (67.9) (89.6) (112.2) (112.2) (112.2) Other operating income (loss), net......................... (3.9) .7 2.8 2.8 2.8 ------- ------- ------- -------- -------- Operating income (loss)....... 10.4 34.1 23.0 23.0 23.0 Net income (loss)............. (15.8) (4.9) (18.3) (28.4) (16.2) Preferred stock dividend...... (9.3) (9.9) (9.4) -- -- ------- ------- ------- -------- -------- Net income (loss) available to common stockholders......... $(25.1) $ (14.8) $ (27.7) $ (28.4) (16.2) ======= ======= ======= ======== ======== Earnings per share, basic and diluted..................... $(25.10) $(14.80) $(27.70) $ (0.15) (0.08) OTHER DATA: EBITDA(6)..................... $ 76.0 $ 113.9 $ 115.2 $ 116.8 $ 129.0 Adjusted EBITDA(7)............ 78.0 114.8 125.8 127.4 139.6 Depreciation and amortization................ 61.8 77.1 89.4 89.4 89.4
9 11
AS OF DECEMBER 31, 2000 ------------------------------------ PRO FORMA ACTUAL PRO FORMA AS ADJUSTED -------- --------- ----------- (IN MILLIONS) BALANCE SHEET DATA: Total assets................................... $1,268.8 $1,268.8 1,270.5 Total debt..................................... 459.7 645.6 331.3 Redeemable preferred stock..................... 131.3 -- -- Total stockholders' equity..................... 325.2 237.7 553.7
Pro forma amounts give effect to the reorganization, and pro forma as adjusted gives effect to the issuance and sale of 18,200,000 shares of common stock by APBiotech in this offering at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, and the application of the net proceeds of this offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. - ------------ (1) Includes results of operations of Molecular Dynamics from the date of acquisition (September 1998). (2)Integration costs of $47.2 million include $6.5 million and $40.7 million, respectively, relating to the Molecular Dynamics acquisition and Pharmacia Biotech merger. See note 7 to the Consolidated Financial Statements. (3)Integration costs of $29.8 million include $19.8 million and $10.0 million, respectively, relating to the Molecular Dynamics acquisition and Pharmacia Biotech merger. See note 7 to the Consolidated Financial Statements. (4)Integration costs of $2.7 million relate to the Pharmacia Biotech merger. See note 7 to the Consolidated Financial Statements. (5)The purchased in-process research and development is a non-recurring charge of $3.2 million related to the acquisition of Praelux Inc. See note 6 to the Consolidated Financial Statements. (6) EBITDA is earnings before interest, taxes, depreciation and amortization. Due to the significant acquisitions we made in 1997 and 1998, which have resulted in high levels of goodwill, we believe EBITDA is an appropriate measure for investors to consider when analyzing our business. However, EBITDA should not be considered in isolation by investors as an alternative to operating income measures, as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. EBITDA measures presented in this prospectus may not be comparable to other similarly titled measures of other companies. EBITDA is not a measure of financial performance under generally accepted accounting principles. EBITDA may not be indicative of the historic operating results, nor is it meant to be predictive of potential future results. (7)Adjusted EBITDA consists of EBITDA as defined in (6) above, adjusted to remove non-cash compensation expense related to employee stock options included within selling, general and administrative expenses. Due to the high levels of non-cash expense related to employee stock options, we believe this measure is appropriate for investors to consider when analyzing our business. However, adjusted EBITDA should not be considered in isolation by investors as an alternative to operating income measures, as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. Adjusted EBITDA presented in this prospectus may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Adjusted EBITDA may not be indicative of the historic operating results, nor is it meant to be predictive of potential future results. 10 12 RISK FACTORS You should carefully consider the risks described below before making an investment decision. The following risks relate to our business and to the industry in which we operate, as well as the securities markets and ownership of our common stock. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Any of these risks may materially and adversely affect our business, financial condition or results of operations. The trading price of our common stock could decline due to any of these risks and you may lose all or part of your investment. RISKS RELATED TO OUR BUSINESS IF WE DO NOT KEEP UP WITH RAPID TECHNOLOGICAL CHANGE OR CONTINUE TO INTRODUCE NEW PRODUCTS, WE MAY BE UNABLE TO MAINTAIN MARKET SHARE OR TO RECOVER INVESTMENTS WE MAKE IN OUR TECHNOLOGIES. Technologies in the life science industry have undergone and are expected to continue to undergo rapid and significant change. We may not be able to keep pace with the rapid rate of change and introduce new products that will adequately meet the requirements of the marketplace or achieve market acceptance. If we fail to introduce new and innovative products, we could lose market share to our competitors and experience a reduction in our growth rate and damage to our reputation and business. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies. We believe successful new product introductions provide a significant competitive advantage because customers make an investment of time in selecting and learning to use a new product, and are reluctant to switch to a competing product after making their initial selection. However, we or others may make rapid technological developments which could result in our technologies, products or services becoming obsolete before we are able to recover the expenses incurred to develop them. IF WE CANNOT ENTER INTO NEW STRATEGIC ALLIANCES OR LICENSING AGREEMENTS OR MAINTAIN THE ONES THAT WE HAVE, WE MAY BE UNABLE TO COMMERCIALIZE OUR TECHNOLOGIES AND DEVELOP NEW PRODUCTS AND SERVICES. Our strategy of providing products to researchers working on a variety of life sciences projects requires us to continually develop a wide spectrum of products. To generate broad product lines, we believe it is advantageous to license technologies from others and to enter into strategic alliances in addition to our own product development efforts. As a result, our ability to license new technologies from third parties is and will continue to be critical to our ability to develop and offer new products. We develop a significant portion of our products using technology obtained through licensing agreements or through strategic alliances. Under our current strategy, and for the foreseeable future, we will remain dependent on licensing agreements and strategic alliances to further our business. We may be unable to maintain or expand existing strategic alliances or establish additional alliances or licensing arrangements necessary to continue to develop and commercialize products, and any of those arrangements may not be on terms favorable to us. In addition, our current or any future arrangements may be unsuccessful. If we are unable to obtain or maintain any third party license required to sell or develop our products or product enhancements, we may choose to obtain substitute technology either through licensing from another third party or by developing the necessary technology ourselves. Any substitute technology may be of lower quality or may involve increased cost, either of which could adversely affect our ability to provide our products competitively and harm our business. We also depend on collaborators for the development and manufacture of complex instrument systems and chemicals and other materials that are used in laboratory experiments and for development of software packages for analyzing data produced by these instrument systems. We cannot control the amount and timing of resources our collaborators devote to our products. We may not be able to enter into these research collaborations and licensing agreements, which would reduce our growth and harm our competitive position. For a discussion of our existing collaborations you should read "Business--Strategic Alliances." 11 13 IF WE DO NOT SUCCESSFULLY DISTINGUISH OUR PRODUCTS AND SERVICES FROM THOSE OF OUR COMPETITORS, WE MAY BE UNABLE TO COMPETE SUCCESSFULLY TO GENERATE REVENUE GROWTH. Competition in the life science industry is intense, and we expect it to increase. Rapid technological change and frequent new product introductions characterize the markets we serve. We compete with a variety of businesses that offer or are developing products and services that are substantially similar to our products and services. Many of the businesses competing with us have significant financial and other resources to invest in new technologies, substantial intellectual property portfolios, substantial experience in new product development, regulatory expertise, manufacturing capabilities and the distribution channels to deliver products to customers. An inability to continue developing products which distinguish us from our primary competitors could limit our ability to generate revenue growth. IF WE PURSUE ACQUISITIONS IN THE FUTURE, THEY MAY ABSORB SIGNIFICANT RESOURCES OR BE UNSUCCESSFUL. As part of our strategy, we may pursue acquisitions, investments and other relationships. Acquisitions may involve significant cash expenditures, debt incurrence, additional operating losses, dilutive issuances of equity securities and expenses that could have a material adverse effect on our operating results. For example, to the extent that we elect to pay the purchase price for acquisitions in shares of our stock or other equity securities, this issuance of additional shares of stock or other equity securities could be dilutive to our stockholders. It may be difficult for us to complete such transactions quickly and to integrate acquired businesses efficiently into our current business. Future acquisitions could expose us to currently unforseen liabilities and result in significant charges relating to amortization of goodwill and other intangible assets. Sizable acquisitions may also divert our senior management from focusing on our existing business. In addition, if any transaction involves customer bases or businesses located outside the United States, the transaction may be further complicated by the need to consider differing tax structures, the effects of currency fluctuations on our reported results and compliance with foreign laws and regulations. Our failure to properly identify and address these and other risks could limit our ability to realize the anticipated benefits of an acquisition. FLUCTUATIONS IN OUR OPERATING RESULTS COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DROP. Our operating results may vary from period to period due to numerous factors, many of which are outside our control, including the number, timing and market acceptance of new products that we or our competitors introduce. In addition, our business is subject to seasonal fluctuations due to calendar year budgeting for large capital items by customers, resulting generally in lower levels of sales in the first quarter of each year and higher levels of sales in the fourth quarter. Factors that may cause our results to vary by period include: -- the volume and timing of orders for our products and services; -- changes in the mix of our products and services offered; -- the number, timing and significance of new products and services introduced by our competitors; -- our ability to develop, market and introduce new and enhanced products and services on a timely basis; -- changes in the cost, quality and availability of reagents and components required to manufacture or use our products; -- the timing and costs of any acquisitions of businesses or technologies; and -- the availability of commercial and government funding to researchers who use our products and services. Research and development costs associated with our technologies, products and services, as well as personnel costs, marketing programs and overhead account for a substantial portion of our operating expenses. We cannot adjust these expenses quickly in the short term. If our revenues decline or do not grow as 12 14 anticipated, we may not be able to reduce our operating expenses accordingly. Failure to achieve anticipated levels of revenue could therefore significantly harm our operating results for a particular fiscal period. If our operating results in some quarters fail to meet the expectations of securities analysts or investors, the market price of our common stock is likely to fall. FOREIGN CURRENCY FLUCTUATIONS MAY RESULT IN TRANSLATION LOSSES WHICH WILL REDUCE OUR REPORTED EARNINGS. We currently market our products in over 100 countries throughout the world. Our international revenues, which include revenues from our subsidiaries in Europe, Japan, the Asia Pacific region and other regions outside of North America, represented just over 60% of our net sales during the past three years. We expect that international revenues will continue to account for a significant percentage of our revenues for the foreseeable future. We conduct a significant portion of our business in currencies other than the U.S. dollar, which is our reporting currency. We recognize foreign currency gains or losses resulting from our operations in the period incurred. As a result, currency fluctuations between the U.S. dollar and the other currencies in which we do business have caused and will continue to cause foreign currency transaction gains and losses. We cannot predict the effects of exchange rate fluctuations on our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates. In addition, we are subject to the legal and administrative practices related to foreign exchange in the countries where we operate, which could change. We engage in foreign exchange transactions to manage our foreign currency exposure, but our strategies may not adequately protect our operating results from the effects of exchange rate fluctuations. LIMITATIONS ON OUR ABILITY TO RAISE ADDITIONAL FUNDS IN THE FUTURE AND THE COST OF ADDITIONAL FUNDS MAY HINDER OUR ABILITY TO EXPAND OUR BUSINESS. We believe that existing cash and marketable securities, anticipated cash flow from operations and financing from Nycomed Amersham, together with a portion of the net proceeds of this offering will be sufficient to fund our currently planned operations through 2001. However, if we choose to enter into new businesses, or to invest in new technologies, in response to competitive or other pressures we may need to raise additional funds. We may also choose to raise additional capital due to market conditions or strategic considerations even if we have sufficient funds for our current operating plan. Additional financing may not be available when needed, or, if available, may not be available on favorable terms. In addition, Pharmacia has a veto right on our ability to issue new equity securities until April 1, 2002. These constraints on our ability to issue additional equity as consideration for acquisitions could adversely affect our ability to complete acquisitions we consider attractive. Our failure to obtain additional financing, should the need for it develop, could result in the delay or abandonment of any expansion of our business. If our source of additional funds includes additional indebtedness, we may become subject to restrictive financial covenants and the risks of increased leverage. If we obtain additional financing through additional public or private equity offerings, existing shareholders may suffer dilution. OUR OPERATIONS MUST COMPLY WITH ENVIRONMENTAL STATUTES AND REGULATIONS, AND ANY FAILURE TO COMPLY COULD RESULT IN EXTENSIVE COSTS WHICH WOULD HARM OUR BUSINESS. The manufacture of some of our products involves the use, transportation, storage and disposal of hazardous or toxic materials and is subject to various environmental protection and occupational health and safety laws and regulations in the countries in which we operate. We currently incur costs to comply with the environmental laws and regulations applicable to our operation and these costs may become more significant. In addition, our failure to comply with environmental laws and regulations and any costs associated with the unexpected and unintended releases of hazardous or toxic substances by us into the environment, or at disposal sites used by us, could expose us to substantial liability in the form of fines, penalties, remediation costs or other damages, or could lead to a shutdown of some of our operations. In addition, we are responsible for a portion of the decommissioning, waste storage and disposal costs associated with the Cardiff facility, which could result in a significant liability. 13 15 RISKS RELATED TO OUR INDUSTRY USE OF GENOMICS INFORMATION TO DEVELOP OR COMMERCIALIZE PRODUCTS IS UNPROVEN. The development of new drugs and the diagnosis of disease based on genomic information is unproven. Few therapeutic or diagnostic products based on genomic discoveries have been developed and commercialized. If our customers are unsuccessful in developing and commercializing products based on our products or services, we and our customers may be unable to generate sufficient revenues and our business may suffer as a result. Development of genomics-based products will be subject to risks of failure, in that such products: -- may be found to be toxic; -- may be ineffective; -- may fail to receive regulatory approvals; -- may fail to be developed prior to the successful marketing of similar products by competitors; or -- may infringe on proprietary rights of third parties. IF ETHICAL AND OTHER CONCERNS SURROUNDING THE USE OF GENETIC INFORMATION BECOME WIDESPREAD, THERE MAY BE LESS DEMAND FOR OUR KEY PRODUCTS. Genetic testing has raised ethical issues regarding confidentiality and the appropriate use of the resulting information. For these reasons, governmental authorities may call for limits on, or regulation of, the use of genetic testing, or they may prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. The development of products based on the use of genetic information represents a significant market opportunity for our drug discovery business. Any of the scenarios mentioned above could reduce the potential market for our products, which could seriously harm our business. REDUCTIONS IN RESEARCH AND DEVELOPMENT BUDGETS AND CAPITAL SPENDING POLICIES OF OUR CUSTOMERS MAY REDUCE OUR SALES. REDUCTIONS IN GOVERNMENT FUNDING OF LIFE SCIENCE RESEARCH MAY ALSO REDUCE DEMAND FOR OUR PRODUCTS. A significant portion of our products such as our MegaBACE(TM) DNA sequencing systems or our bioprocess systems are capital purchases for our customers, which include pharmaceutical, biotechnology and agrochemical companies, research institutes, universities and medical research centers. Fluctuations in the research and development budgets or capital spending policies of these organizations could have a significant effect on the demand for our products. Research and development budgets and capital spending policies fluctuate due to changes in available resources, spending priorities and institutional budgetary policies. Any significant decrease in life sciences research and development expenditures by our customers could seriously damage our business. A significant portion of our sales are to researchers, universities, government laboratories and private foundations whose funding is dependent upon both the level and timing of funding from government sources. Also, a portion of our direct revenues comes from the National Institutes of Health, or NIH, Small Business Innovation Research grant fund. As a result, the timing and amount of revenues from these sources may vary significantly due to factors that can be difficult to foresee. Although the level of research funding has increased during the past several years, grants have, in the past, been frozen for extended periods or have otherwise become unavailable to various institutions without advance notice. Government funding of research and development is subject to the political process, which is inherently unpredictable. Also, government proposals aiming to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund research and development activities. If researchers were not able to obtain, for any extended period, government funding necessary to purchase our products or if there is a decrease in overall research funding, that could reduce our sales and damage our business. 14 16 RISKS RELATED TO OUR INTELLECTUAL PROPERTY THE SCOPE OF OUR ISSUED PATENTS MAY NOT PROVIDE US WITH ADEQUATE PROTECTION OF OUR INTELLECTUAL PROPERTY, WHICH WOULD HARM OUR COMPETITIVE POSITION. THE MEASURES THAT WE RELY UPON IN ADDITION TO PATENTS TO PROTECT OUR INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE TO PROTECT OUR PRODUCTS AND SERVICES AND COULD AFFECT OUR ABILITY TO COMPETE. Any issued patents that cover our proprietary technologies may not provide us with substantial protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability. The United States federal courts or equivalent national courts or patent offices elsewhere may invalidate our patents or find them unenforceable. Competitors may also be able to design around our patents. If we are unable to protect our patented technologies, we may not be able to commercialize our technologies, products or services and our competitors could commercialize our technologies. We also rely on a combination of trade secrets, copyrights and trademarks, nondisclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights. While we generally require employees, collaborators, consultants and other third parties to enter into confidentiality agreements where appropriate, it is not always possible to enforce these arrangements. Monitoring the unauthorized use of our technology is difficult, and the steps we have taken may not prevent unauthorized use of our technology. The disclosure or misappropriation of our intellectual property for any of the above reasons could harm our ability to protect our rights and our competitive position. WE ARE INVOLVED IN PENDING INTELLECTUAL PROPERTY DISPUTES AND MAY IN THE FUTURE BECOME INVOLVED IN SIMILAR DISPUTES REGARDING OUR PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS, WHICH COULD RESULT IN THE FORFEITURE OF THESE RIGHTS, EXPOSE US TO SIGNIFICANT LIABILITY AND DIVERT MANAGEMENT'S FOCUS. In order to protect or enforce our patent rights, we may need to initiate patent litigation against third parties. In addition, we have been and may in the future be sued by third parties alleging that we are infringing their intellectual property rights. These lawsuits are expensive, take significant time and divert management's focus from other business concerns. These lawsuits could result in the invalidation or limitation of the scope of our patents, forfeiture of the rights associated with our patents or an injunction preventing us from selling any allegedly infringing product. In addition, we may not prevail or a court may find damages or award other remedies in favor of our opposing party in any of these suits. During the course of these suits, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these announcements to be negative, which could cause the market price of our stock to decline. We are currently involved in litigation with the Applied Biosystems Group and the Celera Genomics Group of Applera Corporation regarding the infringement of several patents, both as plaintiff and defendant. You should read "Business--Legal Proceedings" for a description of these lawsuits. We may not be successful in this litigation. An adverse determination in, or settlement of these lawsuits could involve: -- one or more of our patents being found invalid or unenforceable; -- the payment of significant monetary damages by us; -- a redesign of some of our products, including our MegaBACE(TM) DNA sequencing systems; and/or -- if redesign is not possible, the inability to further sell the infringing product. These lawsuits, which have been continuing for some time, are costly and will continue to require the attention of some members of our management. Further, the existence of these suits may damage our reputation and cause customers or potential customers to question our ability to manufacture and deliver our products. The resulting liability from this litigation, if any, may have a material effect on our results of operations or cash flows. Many of our products are based on complex, rapidly-developing technologies. Although we try to identify all relevant third party patents, these products could be developed by us without knowledge of published or 15 17 unpublished patent applications that cover some aspect of these technologies. Our industry has experienced intensive enforcement of intellectual property rights by litigation and licensing. If we are found to be infringing the intellectual property of others, we could be required to stop the infringing activity, or we may be required to design around or license the intellectual property in question. If we are unable to obtain a required license on acceptable terms, or are unable to design around any third party patent, we may be unable to sell some of our products and services, which could result in reduced revenue. RISKS RELATED TO THIS OFFERING AND THE COMMON STOCK NYCOMED AMERSHAM AND PHARMACIA, OUR PRINCIPAL SHAREHOLDERS, WILL CONTINUE TO EXERT CONTROL OVER US AND MAY NOT MAKE DECISIONS THAT ARE IN THE BEST INTEREST OF OTHER SHAREHOLDERS. After the completion of this offering, our two principal shareholders, Nycomed Amersham and Pharmacia, will respectively control 49.5% and 41.8% of our capital stock and 46.8% and 45.0% of our voting rights. They also have subscription rights allowing them to maintain their ownership levels in the future. Nycomed Amersham also has the right to acquire shares of our common stock from Pharmacia beginning in July 2002, which could result in it holding more than a majority of our outstanding voting stock. Nycomed Amersham will continue to consolidate us in its group because of its control of our board of directors. Nycomed Amersham and Pharmacia will control the outcome of actions requiring the approval of our shareholders and each will also be able to block those actions, because our bylaws require shareholders voting two-thirds of our outstanding shares to approve activities requiring shareholder approval, including the approval of significant corporate transactions. Our bylaws also provide, subject to Nycomed Amersham and Pharmacia maintaining specified ownership levels, that the composition of our board of directors will consist of six directors appointed by Nycomed Amersham, two directors appointed by Pharmacia and three independent directors. This concentration of ownership may delay or prevent a change of control of ownership of our company, or a change in our management, even when the change may be in the best interest of our other shareholders. Our certificate of incorporation, by-laws and the shareholders agreement will allow our principal shareholders to retain control until they decide they no longer want to control us. Nycomed Amersham intends to continue to allow our current management to conduct our business and operations as we have done in the past, but could institute a new business plan in the future. Pharmacia also has a veto right on our ability to issue new equity securities until April 1, 2002 and over significant issuances of debt securities. In addition, through existing intra-group credit facilities and a letter of support, as well as a committed loan facility that we may enter into with Nycomed Amersham after the completion of this offering, Nycomed Amersham is our major creditor and will remain so after this offering. The interests of Nycomed Amersham and Pharmacia may conflict with our interests as a company or the interests of other shareholders. For additional information you should read "Relationship with Nycomed Amersham and Pharmacia--The Shareholders' Agreement." Our certificate of incorporation includes provisions relating to competition with us by Nycomed Amersham and Pharmacia, allocations of corporate opportunities and provisions limiting the liability of our directors. Our certificate of incorporation provides that any person purchasing or acquiring an interest in shares of our capital stock will be deemed to have consented to the provisions in the certificate of incorporation relating to competition with Nycomed Amersham and Pharmacia, conflicts of interest, corporate opportunities and intercompany agreements. This consent may restrict a shareholder's ability to challenge transactions carried out in compliance with these provisions. Our directors and/or officers who are also directors and/or officers of Nycomed Amersham and Pharmacia may choose to take action that might not be viewed as favorable to us in reliance on those provisions. 16 18 YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT IF THE MARKET PRICE OF OUR COMMON STOCK FALLS BELOW THE INITIAL PUBLIC OFFERING PRICE. Prior to this offering, there has been no public market for our common stock. We will negotiate the initial public offering price with the underwriters. The initial public offering price may bear no relationship to the price at which the common stock will trade after the completion of this offering. An active or liquid public market for our common stock may not develop or be sustained after this offering, and the market price could fall below the initial public offering price. As a result, you could lose all or part of your investment. The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including: -- actual or anticipated fluctuations in our operating results; -- changes in expectations as to our future financial performance or changes in financial estimates of market analysts; -- the operating and stock price performance of other comparable companies; -- conditions or trends in the biotechnology, pharmaceutical and genomics industries; -- our announcement of significant acquisitions, strategic partnerships, joint ventures or capital commitments; -- announcements of technological innovations or new commercial products by us or our competitors; -- developments concerning proprietary rights, including patents; -- regulatory developments in the United States and foreign countries; -- public concern as to the safety of biotechnology products; and -- additions or departures of key personnel. In addition, the stock market in general, the Nasdaq National Market and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may significantly affect the market price of our common stock, regardless of our operating performance. You should read the "Underwriters" section for a more complete discussion of the factors to be considered in determining the initial public offering price. YOU WILL SUSTAIN SUBSTANTIAL DILUTION OF THE NET TANGIBLE BOOK VALUE OF THE COMMON STOCK YOU PURCHASE IN THIS OFFERING. The initial public offering price is substantially higher than the net tangible book value per share of the outstanding common stock immediately after this offering. Accordingly, if you purchase common stock in this offering you will pay a price per share that substantially exceeds the value of our assets after subtracting our liabilities. You will also contribute 41.7% of the total amount to fund our company but will only own 8.7% of the common shares outstanding (or 10.0% if the underwriters exercise the over-allotment option). For additional information you should read "Dilution." ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO INVESTORS. Some investors favor companies that pay dividends, particularly during market downturns. We currently intend to retain any future earnings for funding growth and, therefore, we do not anticipate paying cash dividends on our common stock in the foreseeable future. Because we may not pay dividends, your return on this investment likely depends on your selling our stock at a profit. For additional information, you should read "Dividends." 17 19 FUTURE SALES BY OUR PRINCIPAL SHAREHOLDERS MAY DEPRESS THE PRICE OF OUR COMMON STOCK AND LIMIT OUR ABILITY TO RAISE FUNDS IN NEW EQUITY OFFERINGS. Sales of a substantial number of shares of our common stock in the public market following this offering could reduce the market price of our common stock. Any reduction in our share price may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable, or at all. We, Nycomed Amersham, Pharmacia and our directors and officers have agreed, pursuant to lock-up agreements, not to sell any shares of common stock for a period of 180 days after the date of this prospectus without the prior written consent of the underwriters. After the expiration of the lock-up agreements, the shares subject to lock-up agreements may be sold in the public market, subject to compliance with SEC rules. See "Shares Eligible For Future Sale." In addition, Nycomed Amersham and Pharmacia will be entitled to registration rights with respect to our common shares held by them, beginning 180 days after the date of the reorganization. Upon registration, these shares may be freely sold in the public market. You should read "Shares Eligible for Future Sale" for more information. 18 20 FORWARD-LOOKING STATEMENTS Some of the information in this prospectus, including the above "Risk Factors" section, contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," "project," and "continue" or similar words. You should read statements that contain these words carefully because they: -- discuss our future expectations; -- contain projections of our future results of operations or of our financial condition; or -- state other "forward-looking" information. We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risk factors listed above, as well as any cautionary language in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this prospectus could have a material adverse effect on our business, operating results and financial condition. Except as otherwise required by federal securities laws, we have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, changed circumstances or any other reason after the date of this prospectus. 19 21 USE OF PROCEEDS We will receive net proceeds from this offering of about $272.3 million, or about $313.1 million if the underwriters exercise their over-allotment option in full. If the over-allotment option is not exercised Nycomed Amesham will subscribe for those shares resulting in net proceeds of $316.0 million. We will use approximately $270.6 million to repay indebtedness owed to Nycomed Amersham, which had an average interest rate of 5.9% as of December 31, 2000. We will use the balance of the net proceeds for general corporate purposes. Except as otherwise disclosed in this prospectus, we currently do not have any material commitments or agreements for any acquisitions or investments. DIVIDENDS We have never declared or paid any cash dividends on our capital stock. We do not anticipate that our policy will change when our shares become publicly traded. We currently anticipate that we will retain all available funds for use in the operation and expansion of our business. 20 22 CAPITALIZATION The following table sets forth our historical short-term debt and total capitalization as of December 31, 2000. The pro forma column shows the effect of the following transactions which are part of the reorganization, as if they had taken place at December 31, 2000: -- conversion of APBiotech Ltd.'s redeemable preferred stock by our principal shareholders into APBiotech Ltd.'s common stock based on the mid-point of the range for our initial public offering. -- an additional capital contribution of approximately $149.0 million from our principal shareholders, the proceeds of which will be used to repay short-term debt due to Nycomed Amersham. -- the exchange by our principal shareholders of their capital stock in APBiotech Ltd. for our common shares and our issuance of three 20-year loan notes to Nycomed Amersham in an amount equal to the gross proceeds of this offering. The amount of the loan notes will be initially calculated based on the sale of 10% of the Company's common shares in this offering. The pro forma as adjusted column gives effect to the transactions described above as well as this offering and the use of the net proceeds we will receive as described under "Use of Proceeds." You should read this table in conjunction with the unaudited pro forma condensed financial statements and consolidated financial statements and notes to those consolidated financial statements appearing elsewhere in this prospectus.
AS OF DECEMBER 31, 2000 ---------------------------------- PRO FORMA AS ACTUAL PRO FORMA ADJUSTED(1) ------- --------- ------------ (IN MILLIONS, EXCEPT SHARE DATA) Short-term debt due to unrelated parties................... $ 1.0 $ 1.0 $ 1.0 Short-term debt due to Nycomed Amersham.................... 453.9 304.9 34.3 ------- ------- ------- Total short-term debt................................. $ 454.9 $ 305.9 $ 35.3 ======= ======= ======= Long-term debt due to unrelated parties.................... $ 4.8 $ 4.8 $ 4.8 Long-term debt due to Nycomed Amersham..................... -- 334.9 291.2 Redeemable preferred stock, $1.62 par value per share, 67,916,327 shares issued and outstanding................. 131.3 -- -- Stockholders' equity: Common stock, $1.62 par value per share, 1,000,000 shares authorized, issued and outstanding.................... 1.6 -- Common stock, $.01 par value per share, 300,000,000 shares authorized; 0 shares outstanding, actual; 100,413,689 shares outstanding, pro forma; 121,343,689 shares outstanding, pro forma as adjusted............. -- 1.0 1.2 Class B common stock, $.01 par value per share, 200,000,000 shares authorized; 0 shares outstanding, actual; 87,285,484 shares outstanding, pro forma; 87,285,484 shares outstanding pro forma as adjusted... -- 0.9 0.9 Additional paid-in capital............................... 448.8 361.0 676.8 Retained deficit........................................... (133.9) (133.9) (133.9) Unearned compensation expense.............................. (5.9) (5.9) (5.9) Accumulated other comprehensive (loss)..................... 14.6 14.6 14.6 ------- ------- ------- Total stockholders' equity............................ 325.2 237.7 553.7 ------- ------- ------- Total capitalization.................................. $ 461.3 $ 577.4 $ 849.7 ======= ======= =======
21 23 - ------------ (1)If the underwriters do not exercise their over-allotment option, Nycomed Amersham will purchase the over-allotment shares and the proceeds of $43.7 million will be used to pay down the loan notes. If the underwriters exercise their over-allotment option, long-term debt due to Nycomed Amersham will remain at $334.9 million. Additional paid-in capital will decrease to $674.0 million and stockholders' equity will decrease to $550.9 million. We, Nycomed Amersham and Pharmacia have entered into an agreement under which they have agreed to provide us with financial support of up to $500.0 million, which could be provided in the form of additional capital contributions or loans. This agreement expires on the effective date of the offering. Upon completion of this offering, we intend to enter into a committed long-term loan facility to replace our current short-term facility. Our new committed long-term loan facility may also be with Nycomed Amersham. 22 24 DILUTION Our net tangible book value (deficit) as of December 31, 2000 was $(161.7) million, or $(161.70) per common share (assuming one million common shares outstanding). Net tangible book value per share is determined by dividing our tangible net worth, total assets less goodwill, other intangibles, total liabilities and the redeemable preferred stock by the aggregate number of common shares outstanding. After giving effect to the reorganization our pro forma net tangible book value as of December 31, 2000 was $(249.2) million, or $(1.33) per common share (assuming 187,699,173 common shares outstanding). Following our sale of the 18,200,000 shares of common stock in this offering, and the purchase of shares reserved for the over-allotment option by Nycomed Amersham at an assumed initial public offering price of $16.00 per share, (the mid-point of our price range) and the receipt and application of the net proceeds from this offering, our pro forma net tangible book value as of December 31, 2000 would have been $66.8 million, or $0.32 per share. This represents an immediate increase in pro forma net tangible book value to existing shareholders of $1.65 per share and an immediate dilution to new investors of $15.68 per share. The following table illustrates this per share dilution: Initial public offering price per share..................... $ 16.00 Net tangible book value (deficit) per share as of December 31, 2000............................................... (161.70) Increase in net tangible book value per share following capital contribution and preferred stock conversion.... 270.87 Decrease in net tangible book value per share following adjustments for the remainder of the reorganization.... (110.50) -------- Pro forma net tangible book value per share after the reorganization......................................... (1.33) Increase in pro forma net tangible book value per share attributable to this offering.......................... 1.65 Pro forma net tangible book value per share after this offering.................................................. 0.32 -------- Dilution in the pro forma net tangible book value per share to new investors.......................................... $ 15.68 ========
The following table sets forth, on a pro forma basis as of December 31, 2000, giving effect to the reorganization and this offering, the number of shares of common stock purchased, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by our existing shareholders and by the new investors in this offering, at an assumed initial public offering price of $16.00 per share (the mid-point of our offering price range), before deducting estimated underwriting discounts and commissions and offering expenses payable by us. The following table assumes no exercise of the underwriters' over-allotment option and that Nycomed Amersham subscribes for these additional shares:
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE -------------------- --------------------- PRICE NUMBER % AMOUNT % PER SHARE ----------- ----- ------------ ----- --------- Existing shareholders.............. 190,429,173 91.3% $406,580,000 58.3% $ 2.14 New investors...................... 18,200,000 8.7 291,200,000 41.7 16.00 ----------- ----- ------------ ----- Total......................... 208,629,173 100.0% $697,780,000 100.0% 3.34 =========== ===== ============ =====
23 25 The following table is prepared on the same basis as the table above except for the assumption that the over-allotment option is exercised and therefore Nycomed Amersham does not purchase any additional shares.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE -------------------- --------------------- PRICE NUMBER % AMOUNT % PER SHARE ----------- ----- ------------ ----- --------- Existing shareholders.............. 187,699,173 90.0% $362,900,000 52.0% $ 1.93 New investors...................... 20,930,000 10.0 334,880,000 48.0 16.00 ----------- ----- ------------ ----- Total......................... 208,629,173 100.0% $697,780,000 100.0% 3.34 =========== ===== ============ =====
24 26 UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS The unaudited pro forma condensed financial statements set forth below consist of an unaudited pro forma condensed balance sheet as of December 31, 2000 and an unaudited pro forma condensed statement of operations for the year ended December 31, 2000. The unaudited pro forma condensed balance sheet has been prepared assuming that the following transactions occurred on December 31, 2000: -- Nycomed Amersham and Pharmacia made additional capital contributions in the aggregate to APBiotech Ltd. of approximately $149.0 million. APBiotech will use the proceeds from the capital contribution to repay a portion of the amounts due under the uncommitted credit facility with Nycomed Amersham; -- Nycomed Amersham and Pharmacia converted all of the 8% redeemable preferred stock of APBiotech Ltd. into shares of APBiotech Ltd. common stock; -- Nycomed Amersham exchanged its interest in APBiotech Ltd. for an equity interest in us plus three 20-year notes in an aggregate amount equivalent to the expected gross proceeds from this offering; The aggregate principal amount of the loan notes was determined based on the sale of 10% of the Company's common shares in this offering. If the underwriters do not exercise the over-allotment option, Nycomed Amersham will purchase the over-allotment shares and the proceeds of $43.7 million will be used to pay down the loan notes. and -- Pharmacia, except for its German subsidiary's retained interest in APBiotech Ltd., exchanged its interest in APBiotech Ltd. for an equity interest in us. The "Pro forma as Adjusted" amounts include the effects of this offering as follows: -- The receipt of $316.0 million in net proceeds from the offering, consisting the sale of 18,200,000 shares at $16.00 per share and the purchase of 2,730,000 over-allotment shares by Nycomed Amersham at $16.00 per share pursuant to its obligation to purchase those shares if the underwriters do not. -- The repayment of $270.6 million of short-term debt due to Nycomed Amersham with the net proceeds from the offering. -- The repayment of $43.7 million of the long-term debt issued in the reorganization with the proceeds from Nycomed Amersham's purchase of the over-allotment shares. The unaudited pro forma condensed statements of operations have been prepared assuming that the above transactions occurred on January 1, 2000. The unaudited pro forma condensed balance sheet is not necessarily indicative of our actual financial position had the transactions occurred on December 31, 2000, and is not intended to project our financial position for any future date. Similarly, the unaudited pro forma condensed statements of operations are not intended to represent what our operating results would actually have been for the periods indicated or to project our operating results for any future period. The pro forma adjustments are based on currently available information and assumptions that our management believes are reasonable. These unaudited pro forma condensed financial statements should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes to those financial statements appearing elsewhere in this prospectus. 25 27 UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 2000 ----------------------------------------------------------------------------- ADJUSTMENTS ADJUSTMENTS FOR FOR THE ADJUSTMENTS PREFERRED REMAINDER FOR CAPITAL STOCK REPAYMENT OF THE PRO ACTUAL CONTRIBUTION CONVERSION OF DEBT REORGANIZATION FORMA -------- ------------ ----------- --------- -------------- -------- (IN MILLIONS) ASSETS: Current assets: Cash and cash equivalents with third parties........ $ 20.7 $ 20.7 Cash and cash equivalents with related parties...... 21.5 149.0(A) (149.0)(A) 21.5 -------- ------ ------- ------- -------- Total cash and cash equivalents............... 42.2 149.0 (149.0) 42.2 Trade receivables........... 241.4 -- 241.4 Inventories................... 133.6 -- 133.6 Other current assets.......... 63.3 -- 63.3 Property, plant and equipment, net......................... 235.6 -- 235.6 Intangible assets, net........ 486.9 -- 486.9 Other non-current assets...... 65.8 -- 65.8 -------- ------ ------- ------- -------- Total assets.................. $1,268.8 $149.0 $1,268.8 ======== ====== ======= ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt with third parties................... $ 1.0 $ 1.0 Short-term debt with related parties................... 453.9 (149.0)(A) 304.9 -------- ------ ------- ------- -------- Total short-term debt....... 454.9 (149.0) 305.9 Accounts payable............ 62.9 62.9 Accrued liabilities......... 85.7 85.7 Other current liabilities... 70.4 70.4 -------- ------ ------- ------- -------- Total current liabilities..... 673.9 (149.0) 524.9 Long term debt with third parties................... 4.8 4.8 Long term debt to Nycomed Amersham.................. -- 334.9(C) 334.9 -------- ------ ------- ------- -------- Total long term debt........ 4.8 334.9 339.7 Employee benefit obligations............... 58.8 58.8 Other non-current liabilities............... 74.8 32.9(C) 107.7 -------- ------ ------- ------- -------- Total liabilities............. 812.3 (149.0) 379.0 1,031.1 -------- ------ ------- ------- -------- Redeemable preferred stock..................... 131.3 (131.3)(B) Stockholders' equity.......... Class A common stock/ Common stock..................... 0.9 0.1(C) 1.0 Class B common stock........ 0.7 0.2(C) 0.9 Additional paid-in capital.... 448.8 149.0(A) 131.3(B) (368.1)(C) 361.0 Retained deficit.............. (133.9) (133.9) Unearned compensation expense..................... (5.9) (5.9) Accumulated other comprehensive income (loss)...................... 14.6 14.6 -------- ------ ------- ------- -------- Total stockholders' equity.... 325.2 149.0 131.3 (367.8) 237.7 -------- ------ ------- ------- -------- Total liabilities and stockholders' equity........ $1,268.8 $149.0 -- $(149.0) -- $1,268.8 ======== ====== ======= ======= ======= ======== AS OF DECEMBER 31, 2000 ------------------------------- EFFECT PRO OF THE REPAYMENT FORMA AS OFFERING OF DEBT ADJUSTED -------- --------- -------- (IN MILLIONS) ASSETS: Current assets: Cash and cash equivalents with third parties........ $ 20.7 Cash and cash equivalents with related parties...... 316.0(I) (314.3)(5) 23.2 ------ ------- -------- Total cash and cash equivalents............... 316.0 (314.3) 43.9 Trade receivables........... 241.4 Inventories................... 133.6 Other current assets.......... 63.3 Property, plant and equipment, net......................... 235.6 Intangible assets, net........ 486.9 Other non-current assets...... 65.8 ------ ------- -------- Total assets.................. $316.0 $(314.3) $1,270.5 ====== ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt with third parties................... $ 1.0 Short-term debt with related parties................... (270.6)(J) 34.3 ------ ------- -------- Total short-term debt....... (270.6) 35.3 Accounts payable............ 62.9 Accrued liabilities......... 85.7 Other current liabilities... 70.4 ------ ------- -------- Total current liabilities..... (270.6) 254.3 Long term debt with third parties................... 4.8 Long term debt to Nycomed Amersham.................. (43.7)(J) 291.2 ------ ------- -------- Total long term debt........ 43.7 296.0 Employee benefit obligations............... 58.8 Other non-current liabilities............... 107.7 ------- -------- Total liabilities............. (314.3) 716.8 ------- -------- Redeemable preferred stock..................... Stockholders' equity.......... Class A common stock/ Common stock..................... 0.2(I) 1.2 Class B common stock........ 0.9 Additional paid-in capital.... 315.8(I) 676.8 Retained deficit.............. (133.9) Unearned compensation expense..................... (5.9) Accumulated other comprehensive income (loss)...................... 14.6 ------ ------- -------- Total stockholders' equity.... 316.0 553.7 ------ ------- -------- Total liabilities and stockholders' equity........ $316.0 $(314.3) $1,270.5 ====== ======= ========
26 28 UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------- ADJUSTMENTS ADJUSTMENTS FOR THE ADJUSTMENTS FOR PREFERRED REMAINDER FOR CAPITAL STOCK REPAYMENT OF THE ACTUAL CONTRIBUTION CONVERSION OF DEBT REORGANIZATION ------- ------------ ------------- --------- -------------- Net sales.............. $ 927.0 -- -- -- -- Cost of goods sold..... (425.1) -- -- -- -- Gross profit........... 501.9 -- -- -- -- Selling, general and administrative expenses............. (366.3) -- -- -- -- Purchased in-process research and development.......... (3.2) -- -- -- -- Research and development expenses............. (112.2) -- -- -- -- Other operating income............... 2.8 -- -- -- -- ------- ---- ---- ---- ------ Interest income with third parties........ 2.2 -- -- -- -- Interest income with related parties...... 0.9 -- -- -- -- ------- Total interest income............... 3.1 Interest expense with third parties........ (3.2) -- -- -- -- Interest expense with related parties...... (26.9) -- -- 8.8(D) (27.8) (F) ------- ---- ------ Total interest expense.............. (30.1) -- -- 8.8 (27.8) Income (loss) before taxes and minority interest............. (4.0) 8.8 (27.8) Minority interest, net of tax............... (0.3) 1.6(G) Benefit (provision) for income taxes......... (14.0) -- -- (3.3)(E) 10.6(H) ------- ---- ---- ---- ------ Net income (loss)...... (18.3) -- -- 5.5 (15.6) ======= ==== ==== ==== ====== Preferred stock dividend............. (9.4) 9.4 -- -- ------- ---- ---- ---- ------ Net income (loss) available to common stockholders......... $ (27.7) -- $9.4 $5.5 $(15.6) ------- ---- ---- ---- ------ Earnings per share basic and diluted.... $(27.70) -- -- -- -- ------- Weighted average shares outstanding.......... 1.0 FOR THE YEAR ENDED DECEMBER 31, 2000 -------------------------------------------- EFFECT PRO PRO OF THE REPAYMENT FORMA AS FORMA OFFERING OF DEBT ADJUSTED --------- -------- ---------- -------- Net sales.............. $ 927.0 -- -- $ 927.0 Cost of goods sold..... (425.1) -- -- (425.1) Gross profit........... 501.9 -- -- 501.9 Selling, general and administrative expenses............. (366.3) -- -- (366.3) Purchased in-process research and development.......... (3.2) -- -- (3.2) Research and development expenses............. (112.2) -- -- (112.2) Other operating income............... 2.8 -- -- 2.8 --------- ---- ---------- ------- Interest income with third parties........ 2.2 -- -- 2.2 Interest income with related parties...... 0.9 0.9 --------- ------- Total interest income............... 3.1 3.1 Interest expense with third parties........ (3.2) -- (3.2) Interest expense with related parties...... (45.9) -- 16.0(K) (26.3) 3.6(L) --------- ---------- ------- Total interest expense.............. (49.1) -- 19.6 (29.5) Income (loss) before taxes and minority interest............. (23.0) -- 19.6 (3.4) Minority interest, net of tax............... 1.3 -- -- 1.3 Benefit (provision) for income taxes......... (6.7) -- (7.4)(M) (14.1) --------- ---- ---------- ------- Net income (loss)...... (28.4) -- 12.2 (16.2) ========= ==== ========== ======= Preferred stock dividend............. -- -- -- -- --------- ---- ---------- ------- Net income (loss) available to common stockholders......... $ (28.4) -- $ 12.2 (16.2) --------- ---- ---------- ------- Earnings per share basic and diluted.... $ (0.15) -- -- $ (0.08) --------- ------- Weighted average shares outstanding.......... 187.7 208.6
27 29 NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS (A) Reflects an additional capital contribution of $149.0 million, representing 45,856 shares of APBiotech Ltd., from Nycomed Amersham ($82.0 million) and Pharmacia ($67.0 million) and the use of those proceeds to repay amounts due under the existing uncommitted credit facility with Nycomed Amersham. (B) Reflects the conversion of all outstanding 8% redeemable convertible preferred stock of APBiotech Ltd., including accrued dividends, which is held by Nycomed Amersham ($72.2 million) and Pharmacia ($59.1 million) into 40,531 shares of APBiotech Ltd., and the pro forma elimination of the preferred stock dividend, on the basis that the conversion occurred on January 1, 2000. (C) Reflects the exchange by Pharmacia of a 39.6% interest in APBiotech Ltd. for a 46.5% interest in APBiotech Inc, the exchange by Nycomed Amersham of a 55.0% interest in APBiotech Ltd. for a 53.5% interest in APBiotech Inc, the issuance by APBiotech Inc of three 20 year loan notes with a combined aggregate principal amount of $334.9 million to Nycomed Amersham, and the establishment of minority interest of $32.9 million for the 5.4% direct interest in APBiotech Ltd. retained by Pharmacia's German subsidiary. The aggregate principal amount of the loan notes was determined based on the sale of 10% of the Company's common shares in this offering. If the underwriters do not exercise their over-allotment option, Nycomed Amersham will purchase the over-allotment shares and the proceeds of $43.7 million will be used to pay down the loan notes. If the underwriters exercise the over-allotment option, the net proceeds of this offering will be $313.1 million, in which case Nycomed Amersham would not subscribe for any further shares as part of this transaction. The minority interest was determined using the 5.4% of APBiotech Ltd.'s stockholders' equity. (D) Reflects the reduction in interest on existing debt outstanding under the uncommitted credit facility with Nycomed Amersham as if the proceeds from the additional capital contribution in (A) above had been received on January 1, 2000. The interest savings were computed using the $149.0 million from the capital contribution at the average borrowing rate of 5.93% for the year ended December 31, 2000 under the Nycomed Amersham facility. The effect of a .125% change in the interest rate would be a change in the adjustment to interest expense of $.2 million. (E) Reflects incremental income tax on the higher pre-tax income as a result of the reduced interest expense in (D) above. The additional tax expense was computed using the interest savings of $8.8 million at the combined U.S. federal and state statutory tax rate of 38.0%. (F) Reflects interest expense on the long-term loan notes issued to Nycomed Amersham computed using the expected gross proceeds of $334.9 million, based on the mid-point of the offering range, and a blended average interest rate of 8.3%, based on the terms of the notes and APBiotech Inc's expected credit rating. The effect of a .125% change in the blended average interest rate would be a change in the adjustment to interest expense of $.4 million. (G) Reflects the minority interest for the 5.4% interest in APBiotech Ltd. held directly by Pharmacia's German subsidiary applied to the actual net loss and the interest savings, post-tax from the debt repayment in (D) and (E) above. (H) Reflects a reduction in income tax expense due to lower pre-tax income as a result of the additional interest expense in (F) above. The reduction in income tax expense was computed using the interest expense of $28.7 million at the combined U.S. federal and state statutory tax rate of 38.0%. (I) Reflects the completion of the offering and the purchase by Nycomed Amersham of the shares reserved for the over-allotment option, assuming the mid-point of the offering range. The net proceeds of $316.0 million are after the deduction of the underwriting discounts and commissions. (J) Reflects the use of the net proceeds from (I) above to prepay $43.7 million of the loan notes issued in the reorganization, the amount equal to the proceeds received from Nycomed Amersham purchasing 28 30 the shares reserved for the over-allotment option, and the use of the net proceeds from the offering to repay $270.6 million of the amounts due under the existing uncommitted credit facility from Nycomed Amersham. The remainder of the net proceeds of $1.7 million will be placed on deposit with Nycomed Amersham pending use for general corporate purposes. (K) Reflects the reduction in interest expense on existing debt outstanding under the uncommitted facility with Nycomed Amersham as if the net proceeds from the offering in (J) above had been received on January 1, 2000. The interest savings were computed using the debt repayment of $270.6 million at an average borrowing rate of 5.93% for the year ended December 31, 2000 under the Nycomed Amersham facility. The effect of a .125% change in the interest rate would be to change the adjustment to interest expense by $.3 million. (L) Reflects the reduction in interest expense on the loan notes issued in the reorganization as if the repayment in (J) above had been received on January 1, 2000. The interest savings were computed using the debt repayment of $43.7 million at a blended average interest rate of 8.3% based on the terms of the notes and APBiotech Inc's expected credit rating. The effect of a .125% change in the blended average interest rate would be a change in the adjustment to interest expense of $.3 million. (M) Reflects incremental tax on the higher pre-tax income as a result of the reduced net interest expense from (K), (L) and (M) above. The additional tax expense was computed using the interest savings of $19.6 million at the combined U.S. federal and state statutory tax rate of 38%. 29 31 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data of APBiotech Ltd. as of December 31, 1998, 1999 and 2000 and for the years ended December 31, 1998, 1999 and 2000 have been derived from the consolidated financial statements of APBiotech Ltd. included in this prospectus. The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, independent accountants. The selected consolidated financial data as of and for the nine months ended December 31, 1997 are derived from audited consolidated financial statements of APBiotech Ltd. The selected consolidated financial data of Amersham Life Science, a predecessor to APBiotech Ltd. as of and for the twelve months ended March 31, 1997, have been derived from unaudited consolidated financial statements. The financial data set forth below should be read together with "Unaudited Pro Forma Condensed Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes included in this prospectus.
TWELVE NINE MONTHS MONTHS ENDED ENDED YEAR ENDED DECEMBER 31, MARCH 31, DECEMBER 31, --------------------------------- 1997(1) 1997(2) 1998(3) 1999 2000 ------------ ------------ ------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE DATA) STATEMENTS OF OPERATIONS DATA: Net sales......................... $ 260.0 $ 374.2 $ 729.4 $ 864.1 $ 927.0 Cost of goods sold excluding inventory fair value adjustment...................... (113.6) (166.2) (322.3) (404.4) (425.1) Inventory fair value adjustment... -- (27.4)(4) (7.0)(5) -- -- Gross profit...................... 146.4 180.6 400.1 459.7 501.9 Selling, general and administrative expenses before integration costs, non-recurring charges and non-cash compensation expense............ (80.6) (145.5) (268.7) (306.0) (353.0) Integration costs and non-recurring charges........... -- (17.1)(6) (47.2)(7) (29.8)(8) (2.7)(9) Non-cash compensation expense..... (.9) (4.2) (2.0) (.9) (10.6) Purchased in-process research and development..................... -- (18.0)(10) -- -- (3.2)(12) Research and development.......... (20.5) (32.8) (67.9) (89.6) (112.2) Other operating income (loss), net............................. -- (1.3) (3.9) .7 2.8 ------- ------- ------- ------- ------- Operating income (loss)........... 44.4 (38.3) 10.4 34.1 23.0 Net income (loss)................. 25.8 (37.5) (15.8) (4.9) (18.3) ------- ------- ------- ------- ------- Preferred stock dividend.......... -- (3.7) (9.3) (9.9) (9.4) ------- ------- ------- ------- ------- Net income (loss) available to common stockholders............. $ 25.8 $ (41.2) $ (25.1) $ (14.8) $ (27.7) ======= ======= ======= ======= ======= Earnings per share, basic and diluted......................... $ 46.91 $(51.50) $(25.10) $(14.80) $(27.70) OTHER DATA: EBITDA(12)........................ $ 56.9 $ (10.8) $ 76.0 $ 113.9 $ 115.2 Adjusted EBITDA(13)............... 57.8 (6.6) 78.0 114.8 125.8 Depreciation and amortization..... 12.5 25.9 61.8 77.1 89.4
30 32
AS OF AS OF DECEMBER 31, MARCH 31, ------------------------------------------ 1997 1997 1998 1999 2000 --------- ------ -------- -------- -------- (IN MILLIONS) BALANCE SHEET DATA: Total assets.......................... $246.7 $906.5 $1,216.6 $1,241.6 $1,268.8 Total debt............................ 10.3 152.3 370.2 410.3 459.7 Redeemable preferred stock............ -- 115.7 125.7 132.5 131.3 Total stockholders' equity............ 165.4 364.9 334.3 330.0 325.2
- ------------ (1) Represents financial data of Amersham Life Science, which was a fully integrated division of Nycomed Amersham prior to the formation of APBiotech. (2) Includes results of operations of Pharmacia Biotech from the date of the merger (August 1997). (3) Includes results of operations of Molecular Dynamics from the date of acquisition (September 1998) (4)Inventory fair value adjustment and related write off of $27.4 million arising from the merger of Pharmacia Biotech. (5)Inventory fair value adjustment and related write off of $7.0 million arising from the acquisition of Molecular Dynamics. (6)Includes integration costs of $14.3 million and non-recurring charges of $2.8 million relating to the Pharmacia Biotech merger which did not qualify as integration costs. See note 7 to the Consolidated Financial Statements. (7)Integration costs of $47.2 million include $6.5 million and $40.7 million, respectively, relating to the Molecular Dynamics acquisition and Pharmacia Biotech merger. See note 7 to the Consolidated Financial Statements. (8)Integration costs of $29.8 million include $19.8 million and $10.0 million, respectively, relating to the Molecular Dynamics acquisition and Pharmacia Biotech merger. See note 7 to the Consolidated Financial Statements. (9)Integration costs of $2.7 million relate to the Pharmacia Biotech merger. See note 7 to the Consolidated Financial Statements. (10)The purchased in-process research and development is a non-recurring charge of $18.0 million related to the acquisition of Pharmacia Biotech. See note 6 to the Consolidated Financial Statements. (11)The purchased in-process research and development is a non-recurring charge of $3.2 million related to the acquisition of Praelux Inc. See note 6 to the Consolidated Financial Statements. (12) EBITDA is earnings before interest, taxes, depreciation and amortization. Due to the significant acquisitions we made in 1997 and 1998, which have resulted in high levels of goodwill, we believe EBITDA is an appropriate measure for investors to consider when analyzing our business. However, EBITDA should not be considered in isolation by investors as an alternative to operating income measures, as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. EBITDA measures presented in this prospectus may not be comparable to other similarly titled measures of other companies. EBITDA is not a measure of financial performance under generally accepted accounting principles. EBITDA may not be indicative of the historic operating results, nor is it meant to be predictive of potential future results. (13)Adjusted EBITDA consists of EBITDA as defined in (12) above, adjusted to remove non-cash compensation expense related to employee stock options included within selling, general and administrative expenses. Due to the high levels of non-cash expense related to employee stock options, we believe this measure is appropriate for investors to consider when analyzing our business. However, adjusted EBITDA should not be considered in isolation by investors as an alternative to operating income measures, as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. Adjusted EBITDA presented in this prospectus may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Adjusted EBITDA may not be indicative of the historic operating results, nor is it meant to be predictive of potential future results. 31 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis should be read with the "Selected Consolidated Financial Data" and our consolidated financial statements and related notes included elsewhere in this prospectus. The discussion in this prospectus contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as applying to all related forward-looking statements wherever they appear in this prospectus. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include those discussed in "Risk Factors," as well as those discussed elsewhere. OVERVIEW COMPANY BACKGROUND General. We are a leading global provider of biotechnology systems, products and services used in gene and protein research, drug discovery and development, and biopharmaceutical manufacturing. Operating segments. We manage our business along three principal business segments: drug discovery, separations and laboratory products. In addition to these principal segments we have service and agency businesses which we include in the service, agency and other segment. -- Drug discovery--this business provides products which improve the effectiveness of life science and pharmaceutical research and development, and speed to market for drugs. Principal products in this business are the MegaBACE(TM) DNA sequencing system, the LEADseeker(TM) drug screening system and the Ettan(TM) range of proteomics systems. -- Separations--this business provides products for use in the purification and production of biopharmaceuticals on a large scale and for separating proteins during the research stage in laboratories. Products in this business include Sepharose(TM), a leading brand of separations media and AKTA(TM) chromatography systems. -- Laboratory products--this business provides tools and technical knowledge for use in the purification, detection, and analysis of biological molecules by life science researchers. Our broad range of products include low throughput sequencing instruments and reagents, scanning and electrophoresis instruments, molecular biology products, reagents for protein analysis and radiochemicals. -- Service, agency and other--this business includes our service and agency businesses and other miscellaneous businesses. Our service business is responsible for the installation, where appropriate, of instruments and systems which are sold by the three principal businesses and provides servicing on the instruments and systems during the warranty period. The cost of these services is generally not recharged to the segments. The service business also generates income from contracts with customers to provide technical support for instruments and systems as well as scientific support to assist the customer in maximizing the effectiveness of the instruments and systems in research. In addition, we sell some products under agency agreements which complement our existing product range. Due to their relative sizes, we have aggregated the service and agency businesses with income from royalty agreements and charges to customers for product delivery, which are not attributed to the principal segments for management purposes. Prior to August 5, 1997, we operated as Amersham Life Science, a fully integrated division of Nycomed Amersham plc. On August 5, 1997, Amersham Life Science was established as a separate legal entity in the form of APBiotech Ltd., and we merged our operations with those of Pharmacia Biotech, when Pharmacia sold the capital stock of Pharmacia Biotech to us. The transaction was accounted for under the purchase method of accounting. See "-- Events Impacting Comparability." Prior to January 2000, we did not operate, manage our operations, or accumulate financial information based on the business segmentation described above. Therefore, we have presented the results of operations for 32 34 the businesses for 1998 and 1999 using our best estimates of the allocation of revenues and costs to the businesses in those years. We consider these allocations to be reasonable. However, the reported results of operations of the businesses may differ from those that may have been achieved had we managed the businesses in this manner in 1998 and 1999. REVENUE RECOGNITION We recognize revenue principally based on four types of transactions: - sales of consumable products; - sales of instruments; - agreements which provide access to or license certain of our proprietary technology and know-how; and - contracts for ongoing service and support of instruments sold to customers. We record revenues net of any estimated provisions for returns and allowances and other price adjustments. We recognize revenue on sales of instruments in the United States and on sales of consumable products in all markets upon transfer of title and risk of loss to the customer, which is generally upon delivery to the carrier. Prior to June of 2000, title and risk of loss for sales of instruments in the United States generally transferred upon payment in full by the customer. The impact of changing our sales terms for instruments sales in the United States was an increase in net sales for the year ended December 31, 2000 of $26.2 million, representing sales of equipment under the revised instrument terms for which payment had not been received at December 31, 2000 but for which collection was reasonably assured. In markets outside of the United States, sales of instruments are made with a reservation of title until payment in full by the customer for the equipment. For these sales, we recognize revenue upon transfer of risk of loss to the customer, which is generally upon delivery to the carrier, as the reservation of title is solely for credit protection purposes. We recognize revenues earned under agreements which provide access to or license the Company's proprietary technology and know-how on a straight line basis based on total fees received under the agreement over the period the access to the technology and know-how is provided. We recognize revenues earned under contracts for ongoing service on pro rata over the term of the service agreements. On December 3, 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin 101, or SAB 101, "Revenue Recognition in Financial Statements," which summarizes the staff's interpretations of the application of generally accepted accounting principles to revenue recognition. We have adopted SAB 101 for all periods presented. EVENTS IMPACTING COMPARABILITY Set out below are events which impact the comparability of reported financial information between the periods presented, primarily related to the impact of the Pharmacia Biotech merger on August 5, 1997 and our acquisition of Molecular Dynamics on September 11, 1998. ACQUISITIONS Pharmacia Biotech. On August 5, 1997, we merged our operations with those of Pharmacia Biotech when Pharmacia sold the capital stock of Pharmacia Biotech to us in exchange for common and redeemable preferred stock of APBiotech Ltd. valued at approximately $450.0 million. We accounted for the transaction under the purchase method of accounting and accordingly, we have included the results of Pharmacia Biotech in our financial statements beginning on August 5, 1997. Acquired intangibles of $22.8 million are being amortized on a straight-line basis over periods from 7 to 10 years and the residual goodwill of approximately $302.7 million is being amortized on a straight-line basis over 20 years. 33 35 Acquisition charges required by generally accepted accounting principles and recorded in 1997 include the step-up of inventory to fair value and related write-off on the sale of the inventory of $27.4 million, and a write-off of $18.0 million for purchased in-process research and development. Molecular Dynamics Inc. On September 11, 1998, we acquired the remaining 91% of the outstanding capital stock of Molecular Dynamics Inc. that we did not previously own for a total purchase price of $204.7 million. We accounted for the acquisition under the purchase method of accounting and accordingly, we have included the results of Molecular Dynamics in our financial statements beginning on September 11, 1998. Acquired intangibles of $120.0 million are being amortized on a straight-line basis over 10 years and the residual goodwill of approximately $98.6 million is being amortized on a straight-line basis over 15 years. Acquisition charges required by generally accepted accounting principles and recorded in 1998 include the step-up of inventory to fair value and related write-off on the sale of the inventory of $7.0 million. INTEGRATION COSTS Following the Pharmacia Biotech transaction in 1997, we adopted a restructuring plan to integrate the Pharmacia Biotech and Amersham Life Science businesses. The principal elements of the plan included: -- consolidating United States manufacturing and research at a single site in Piscataway, New Jersey, following the divestiture of manufacturing sites in Milwaukee and Cleveland; -- creating a single global commercial organization with a regional structure focused on North America, Europe, Japan, Asia Pacific and Rest of the World; and -- unifying management and administrative functions to support the business. The costs of the integration program totaled $80.3 million. Costs of $2.7 million, $19.8 million and $40.7 million were charged in 2000, 1999 and 1998, respectively. These costs related primarily to severance, workforce relocation, cancellation of a number of distributor agreements, fixed asset write-downs, professional and consulting fees, and the costs of terminating certain shared service arrangements with Nycomed Amersham. The restructuring plan was substantially completed by the end of 2000. We incurred $16.5 million of costs to integrate Molecular Dynamics. These costs comprised severance and other employee related costs as well as the costs of cancelling distributor contracts. Costs of $10.0 million were charged in 1999 and $6.5 million in 1998. PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT In February 2000, we incurred a charge of $3.2 million relating to purchased in-process research and development in connection with the acquisition of Praelux, Inc. The in-process research and development charge related to projects for which technological feasibility had not yet been established at the acquisition date. COMPARABLE SALES GROWTH IN 1999 COMPARED TO 1998 In the discussion and analysis of the year ended December 31, 1999 compared to the year ended December 31, 1998 we refer to "comparable sales growth" and growth "on a comparable basis" which is the growth in net sales for the year ended December 31, 1999 compared to a pro forma for the year ended December 31, 1998 prepared as if we had consolidated the results of Molecular Dynamics as of January 1, 1998. IMPACT OF REORGANIZATION ON COMPARABILITY OF RESULTS IN FUTURE PERIODS The reorganization will significantly impact our results in future periods. Due to the changes in our capital structure resulting from the reorganization, including the issuance of the loan notes to Nycomed Amersham, we anticipate higher interest expense than we recorded in prior years. See "Unaudited Pro Forma Condensed Financial Statements" and "The Reorganization." 34 36 QUARTERLY FINANCIAL DATA Our results for the years ended December 31, 2000, 1999 and 2000 by quarter are presented below.
1999 2000 ------------------------------------- ------------------------------------- FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- ------- ------- ------- ------- (UNAUDITED, IN MILLIONS, EXCEPT PER SHARE DATA) Net sales........................ $173.0 $202.9 $199.2 $ 289.0 $204.0 $245.2 $ 209.5 $268.3 Gross profit..................... 90.1 110.6 106.6 152.4 107.7 135.3 111.8 147.1 Operating income (loss).......... (13.0) 16.7 .5 29.9 (4.2) 16.5 (11.6) 22.3 Net income (loss)................ 5.8 (3.7) 1.5 (8.5) (6.6) .9 (12.3) (.3) Earnings per share basic and diluted...................... 3.30 (6.10) (1.00) (11.00) (9.10) (1.60) (14.20) (2.80)
Operating income in the second quarter of 1999 was favorably impacted by $5.5 million of license income related to a litigation settlement. Net income for the first quarter of 2000 included a $3.2 million non-recurring charge for in-process research and development in connection with our acquisition of Praelux in February 2000. Seasonality. As evidenced by the quarterly data above, our business is subject to seasonal trends. The fourth quarter is heavily affected by the annual purchasing patterns of our customers. 35 37 RESULTS OF OPERATIONS The following table sets forth certain items in our consolidated statement of operations as a percentage of net sales for the periods presented:
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1998 1999 2000 ---------------- ---------------- ---------------- (IN MILLIONS, EXCEPT PER SHARE DATA) Net sales............................ $ 729.4 100.0% $ 864.1 100.0% $ 927.0 100.0% Cost of goods sold................... (329.3) (45.1) (404.4) (46.8) (425.1) (45.9) ------- ----- ------- ----- ------- ----- Gross profit......................... 400.1 54.9 459.7 53.2 501.9 54.1 Selling, general and administrative expenses before integration costs, and non-recurring charges.......... (270.7) (37.1) (306.9) (35.5) (363.6) (39.2) Integration costs, and non-recurring charges............................ (47.2) (6.5) (29.8) (3.4) (2.7) (.3) ------- ----- ------- ----- ------- ----- Selling, general and administrative expenses, including integration costs, and non-recurring charges... (317.9) (43.6) (336.7) (39.0) (366.3) (39.5) Purchased in-process research and development........................ -- -- -- -- (3.2) (.3) Research and development expenses.... (67.9) (9.3) (89.6) (10.4) (112.2) (12.1) Other operating income (loss), net... (3.9) (0.6) .7 .1 2.8 .3 ------- ----- ------- ----- ------- ----- Operating income (loss).............. 10.4 1.4 34.1 3.9 23.0 2.5 Interest expense and other........... (12.0) (1.6) (20.9) (2.4) (27.0) (2.9) ------- ----- ------- ----- ------- ----- Income (loss) before income taxes and minority interest.................. (1.6) (0.2) 13.2 1.5 (4.0) (.4) Minority interest, net of tax........ (.7) (0.1) (.5) (.1) (.3) (0.1) Provision for income taxes........... (13.5) (1.9) (17.6) (2.0) (14.0) (1.5) ------- ----- ------- ----- ------- ----- Net loss............................. $ (15.8) (2.2)% $ (4.9) (0.6)% $ (18.3) (2.0)% ======= ===== ======= ===== ======= =====
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net sales. Net sales increased by $62.9 million, or 7.3%, to $927.0 million in 2000 compared to $864.1 million in 1999. Growth in net sales of our underlying business in 2000 was $105.1 million, or 12.2% of total net sales. The impact of the change in sales terms for certain sales made in the United States also increased sales by an additional $26.2 million. These increases were partially offset by the discontinuation of our Affymetrix agency business in the United States and Europe in 2000, which reduced sales by $32.2 million, and by the unfavorable impact of changes in exchange rates, which decreased net sales by $36.2 million. Sales grew in each of our major geographic regions, although United States sales experienced a slowdown during the third quarter of 2000. To address this, we implemented regional management changes and improvements to our IT systems, which we believe contributed to an improvement in United States sales at the end of 2000. 36 38 Net sales of our business segments for the following periods are stated below:
YEAR ENDED DECEMBER 31, ---------------- 1999 2000 ------ ------ (IN MILLIONS) NET SALES Drug discovery.............................................. $194.4 $224.8 Separations................................................. 294.4 342.7 Laboratory products......................................... 277.0 273.3 Service, agency and other................................... 98.3 86.2 ------ ------ $864.1 $927.0 ====== ======
Drug discovery. Net sales in the drug discovery segment increased by $30.4 million, or 15.6%, to $224.8 million in 2000 compared to $194.4 million in 1999. Excluding the unfavorable impact of changes in exchange rates, net sales in the drug discovery segment increased by 20.3%. This increase was principally due to increased sales of products and equipment in the areas of proteomics and genomics. In the proteomics field, our sales of protein analysis systems increased from $30.9 million in 1999 to $41.5 million in 2000, an increase of 34.3%. New product introductions, including our Ettan(TM) range of new proteomics platforms, accounted for a majority of this increase in sales. In genomics, sales increased by $19.8 million, or 21.1%, to $113.3 million in 2000, compared to $93.5 million in 1999. At December 31, 2000 we had an installed base of over 700 MegaBACE(TM) systems, and sales of sequencing reagents for these systems accounted for the majority of the sales increase in this area. However, drug discovery net sales in 2000 were also affected by the later than anticipated launches of our Ettan(TM) MALDI-TOF and SNiPer(TM) systems, which were launched in December 2000. Revenues from the sale of early access to and non-exclusive licenses of our proprietary technology know-how are included as part of drug discovery revenues. Revenues from these activities amounted to $4.4 million in 2000 and $6.2 million in 1999. Separations. Net sales in the separations segment increased by $48.3 million, or 16.4%, to $342.7 million in 2000 compared to $294.4 million in 1999. Excluding the unfavorable impact of changes in exchange rates, net sales in the separations segment increased by 22.9%. Net sales of both bioprocess and laboratory separations products increased in 2000. Bioprocess net sales increased by $33.4 million, or 18.4%, to $215.0 million in 2000 compared to $181.6 million in 1999. The increase was principally due to higher sales of process chromatography media driven by growth in the production of biopharmaceuticals. This business continues to grow as the number of registered biopharmaceuticals grows. The number of approved biopharmaceuticals increased to over 90 at the end of 2000. Our separations products are used in production processes for almost all of these products. Laboratory separations net sales increased by $14.9 million, or 13.2%, to $127.7 million in 2000 compared to $112.8 million in 1999. This increase resulted primarily from sales of AKTA(TM) protein purification systems, which increased by 20.0% to $59.4 million in 2000 from $49.5 in 1999, and increased sales of purification media. Laboratory products. Net sales of laboratory products decreased by $3.7 million, or 1.3%, to $273.3 million in 2000 compared to $277.0 million in 1999. Excluding the unfavorable impact of changes in exchange rates, net sales in the laboratory products segment increased by 3.5%. A decline in the more mature radiochemical products was partially offset by increased sales of our molecular biology products. Service, agency and other. Overall, service, agency and other net sales decreased by $12.1 million, or 12.3%, to $86.2 million in 2000 compared to $98.3 in 1999. Excluding the unfavorable impact of changes in exchange rates, service, agency and other net sales decreased by 10.1%. Agency sales decreased 44.3% to 37 39 $38.6 million in 2000 from $69.3 million in 1999. The loss of sales from the discontinued Affymetrix agency business in Europe and North America was partially offset by higher Affymetrix agency sales in Japan. Gross profit. Gross profit increased by $42.2 million, or 9.2%, to $501.9 million in 2000, compared to $459.7 million in 1999. Gross profit as a percentage of net sales, or gross margin, increased to 54.1% in 2000 compared to 53.2% in 1999. The increase in gross margin was due to an increase in sales of higher margin media products in the separations segment and the discontinuation of lower margin agency business in the United States and Europe. This increase was partially offset by lower margins from changes in product mix in laboratory products sales. Selling, general and administrative expenses. Selling, general and administrative expenses, or SG&A, increased by $29.6 million, or 8.8%, to $366.3 million in 2000 compared to $336.7 million in 1999. As a percentage of net sales SG&A increased to 39.5% in 2000 compared to 39.0% in 1999. Included in SG&A in 2000 and 1999 are expenses of $2.7 million and $29.8 million, respectively, related to integration costs in connection with the Pharmacia Biotech merger and the Molecular Dynamics acquisition. SG&A, exclusive of integration costs, increased from $306.9 million in 1999 to $363.6 million in 2000. This increase related primarily to amortization of non-cash compensation expense for performance-based stock option plans which was $10.6 million in 2000 and $0.9 million in 1999, and to an increase in selling and marketing costs of $20.6 million or 12.1%. The increase in selling and marketing costs is attributable to growth in sales, the launch of new products, including the Typhoon(TM) scanner in the laboratory products business, the investment in sales and service infrastructure in new markets and scale-up for anticipated new product introductions in 2001. Excluding integration costs, SG&A as a percentage of net sales increased to 39.2% in 2000 from 35.5% in 1999 primarily due to higher sales and marketing costs and the increase in amortization of non-cash compensation expense. Legal costs increased significantly relating to the litigation of patent suits with Applera Corporation, formerly PE Corporation, which increased to $9.8 million in 2000 from $3.6 million in 1999. See note 19 to the consolidated financial statements. Research and development expenses. Research and development expenses increased by $22.6 million, or 25.2%, to $112.2 million in 2000 compared to $89.6 million in 1999. As a percentage of net sales, research and development expenses increased to 12.1% in 2000 from 10.4% in 1999. In 2000, we also capitalized a net $4.8 million of software development costs primarily related to our drug discovery business segment in accordance with Statement of Financial Accounting Standards, or SFAS 86. See note 3 to the consolidated financial statements. Drug discovery research and development expenses increased by $15.9 million, or 32.1%, to $65.5 million in 2000 compared to $49.6 million in 1999. This increase was primarily due to expanded activities in each of the primary areas in our drug discovery segment. Separations research and development expenses increased by $3.4 million, or 14.3%, to $27.2 million in 2000 compared to $23.8 million in 1999. The increase related to several development programs such as biosafety products for virus clearance and new media for the purification of monoclonal antibodies. In laboratory products, research and development expenses increased by $4.6 million, or 43.0%, to $15.3 million in 2000 compared to $10.7 million in 1999, with the increase primarily related to the development of the Typhoon(TM) scanner and the Ready-To-Run(TM) product range. Service, agency and other research and development expenses decreased by $1.3 million, or 23.6% to $4.2 million in 2000 compared to $5.5 million in 1999. The expenses incurred in 2000 relate primarily to work carried out on non-strategic discovery projects, which were transferred to Nycomed Amersham at the end of 2000. See note 23 to the consolidated financial statements. Other operating income (expense), net. Other operating income (expense), net increased by $2.1 million to income of $2.8 million in 2000 compared to income of $0.7 million in 1999. 38 40 In 1999, other operating income related solely to foreign exchange gains calculated on forward foreign exchange contracts that have been deemed to be speculative contracts under SFAS 52. In 2000, these foreign exchange fluctuations gave rise to a charge of $1.5 million, a decrease of $2.2 million compared to 1999. The remainder of the increase principally relating to a $3.1 million gain arising on the sale of intellectual property to Gyros AB, and $1.7 million of income received as a termination fee related to an agreement with a third party. OPERATING INCOME
YEAR ENDED DECEMBER 31, --------------- 1999 2000 ------ ----- (IN MILLIONS) Operating income before non-recurring charges............... $ 63.9 $28.9 Purchased in-process research and development............. -- (3.2) Integration costs........................................... (29.8) (2.7) ------ ----- Operating income............................................ $ 34.1 $23.0 ====== =====
Operating income decreased by $11.1 million, or 32.6%, to $23.0 million in 2000 compared to $34.1 million in 1999. Including integration costs reported in 1999, and non-recurring charges reported in 2000, operating income decreased by 54.8% in 2000. Operating income as a percentage of net sales decreased to 3.1% before non-recurring charges in 2000 compared to 7.4% before integration costs in 1999. This decrease related primarily to an increase in the amortization of non-cash compensation expense for performance-based stock option plans which was $10.6 million in 2000 and $.9 million in 1999, and to increased research and development expenses which increased to $112.2 million in 2000 from $89.6 million in 1999, partially offset by growth in the underlying businesses, as discussed below. Changes in exchange rates did not have a material impact on operating income. Operating income for our business segments for the following periods are stated below:
YEAR ENDED DECEMBER 31, ---------------- 1999 2000 ------ ------ (IN MILLIONS) OPERATING INCOME (LOSS) Drug discovery.............................................. $(52.9) $(81.7) Separations................................................. 52.2 87.1 Laboratory products......................................... 24.0 5.9 Service, agency and other................................... 10.8 11.7 ------ ------ $ 34.1 $ 23.0 ====== ======
Drug discovery. The operating loss in the drug discovery segment increased by $28.8 million, or 54.4%, to $81.7 million in 2000 compared to $52.9 million in 1999. After excluding research and development expenses and integration costs, including the write-off of purchased in-process research and development, the segment had an operating loss of $12.3 million in 2000. In 1999, after excluding research and development expenses and integration costs, the segment had operating income of $9.1 million. The decrease in operating income was due to a decrease in gross margin resulting from changes in product mix and higher SG&A expenses related to building sales and marketing, service and customer support to launch new products in 2000 and 2001, including the Ettan(TM) range of new proteomics platforms and SNiPer(TM) for high throughput SNP analysis. Separations. Operating income in the separations segment increased by $34.9 million, or 66.9%, to $87.1 million in 2000 compared to $52.2 million in 1999. After excluding research and development expenses, 39 41 the segment had operating income of $114.3 million in 2000. In 1999, after excluding research and development expenses and integration costs, operating income was $84.5 million. This increase reflected volume growth and an increase in gross margin from sales of higher margin media products. Laboratory products. Operating income in the laboratory products segment decreased by $18.1 million, or 75.4%, to $5.9 million in 2000 compared to $24.0 million in 1999. After excluding research and development expenses and integration costs, the segment had operating income of $23.2 million in 2000. In 1999, after excluding research and development expenses and integration costs, operating income was $42.3 million. In 1999, we had $5.5 million of income related to a favorable patent infringement settlement. Excluding this settlement, operating income before research and development expenses and integration costs decreased by $13.6 million, primarily due to changes in product mix and increased investment in sales and marketing relating to new products and costs related to IT systems. Service, agency and other. Operating income from service, agency and other increased by $0.9 million, or 8.3%, to $11.7 million in 2000 compared to $10.8 million in 1999. Operating income benefited from the gain on the sale of intellectual property to Gyros and an increase in gross margin, primarily due to the discontinuation of lower margin Affymetrix agency business in the United States and Europe. Interest expense and other. Net interest expense and other income increased by $6.1 million, or 29.2%, to $27.0 million in 2000 compared to $20.9 million in 1999. The increase was primarily due to an increase in interest expense from $24.1 million in 1999 to $30.1 million in 2000 due to higher net debt resulting from cash outflows in 2000. Income taxes. Income tax provision decreased to $14.0 million in 2000 compared to $17.6 million in 1999. Our income tax rate on income before income taxes before non-tax deductible items, including goodwill amortization, was 38.7% in 1999 and 37.7% in 2000. Net loss. Net loss in 2000 was $18.3 million compared to a net loss of $4.9 million in 1999. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Net sales. Net sales increased by $134.7 million, or 18.5%, to $864.1 million in 1999 compared to $729.4 million in 1998. Growth in the net sales of our underlying businesses in 1999 was $62.7 million, or 8.6%. The impact of including Molecular Dynamics for a full year in 1999 compared to approximately three months in 1998 contributed $59.2 million to the increase. The remaining increase was due to the favorable impact of changes in exchange rates, which increased net sales by $12.8 million. Net sales of our business segments for the following periods are stated below:
YEAR ENDED DECEMBER 31, ---------------- 1998 1999 ------ ------ (IN MILLIONS) NET SALES Drug discovery.............................................. $123.7 $194.4 Separations................................................. 263.8 294.4 Laboratory products......................................... 277.2 277.0 Service, agency and other................................... 64.7 98.3 ------ ------ $729.4 $864.1 ====== ======
Drug discovery. Net sales in the drug discovery segment increased by $70.7 million, or 57.2%, to $194.4 million in 1999 compared to $123.7 million in 1998. Of this increase, $39.1 million, or 31.6%, was due to the inclusion of Molecular Dynamics for the full year 1999 compared to three months in 1998. Comparable sales growth including a full year of Molecular Dynamics sales for 1998 was 37.5%. This increase was principally due to improved sales of MegaBACE(TM) and increased sales of drug screening systems. Excluding the impact of changes in exchange rates, net sales in the drug discovery segment increased by 54.3%. 40 42 Sales of drug screening systems increased by $7.1 million, or 11.4%, to $69.5 million in 1999 compared to $62.4 million in 1998. LEADseeker(TM) sales, including new product introductions, accounted for a majority of the increase in sales. Revenues from the sale of early access to or non-exclusive licenses of our proprietary technology and know-how were included in drug discovery revenues. Revenues from these activities amounted to $6.2 million in 1999 and $7.0 million in 1998. Separations. Net sales in the separations segment increased by $30.6 million, or 11.6%, to $294.4 million in 1999 compared to $263.8 million in 1998. Net sales of both bioprocess and laboratory separations increased in 1999. Excluding the impact of changes in exchange rates, net sales in the separations segment increased by 11.4%. Bioprocess net sales increased by $24.6 million, or 15.7%, to $181.6 million in 1999 compared to $157.0 million in 1998. The principal increases were in sales of chromatography systems, which increased 38.1% to $18.5 million, and in chemical media which are used in the production of biopharmaceuticals by 8.0% to $122.8 million. The increase in net sales resulted from approvals of biologically-based products, or biopharmaceuticals, for sale to end-user customers. The number of approved biopharmaceuticals increased by 23.0% to 82 at the end of 1999. Our separations products are used in production processes for almost all of these products. Laboratory separations net sales increased by $6.0 million, or 5.6%, to $112.8 million in 1999 compared to $106.8 million in 1998. This reflected the continued market acceptance of AKTA(TM) protein purifier systems, and substantial growth of AKTA(TM)/FPLC(TM), a liquid chromatography system for protein separation, following its launch in 1998. Net sales of AKTA(TM)/FPLC(TM) increased by 76.1% to $12.5 million in 1999 compared to $7.1 million in 1998. Laboratory products. Net sales of laboratory products decreased by $.2 million to $277.0 million in 1999 compared to $277.2 million in 1998. The impact of including Molecular Dynamics' scanner products for a full year in 1999 compared to approximately three months in 1998 increased net sales by approximately $13.2 million. This increase was more than offset by a decline in the more mature radiochemical products business, and a decline of $11.0 million, or 45.3%, from discontinuing certain reagent products following the sale of our Cleveland facility in 1998. On a comparable basis, sales would have declined by 9.7%. Excluding the impact of changes in exchange rates, net sales in the laboratory products segment declined by 1.7%. Service, agency and other. Service, agency and other net sales increased by $33.6 million, or 51.9%, to $98.3 million in 1999 compared to $64.7 million in 1998. Revenue from service contracts grew by 28.3%, from $22.6 million to $29.0 million in 1999. Most of this increase related to service contracts associated with the increase in the installed base of drug discovery equipment. Agency sales increased 64.6% to $69.3 million, principally due to certain agency business in the United States and Europe which increased net sales in 1999 by $21.4 million. This business carried relatively low gross margin and was discontinued in 2000. Excluding the impact of changes in exchange rates, service, agency and other net sales increased by 46.1%. Gross profit. Gross profit increased by $59.6 million, or 14.9%, to $459.7 million in 1999 compared to $400.1 million in 1998 slightly less than sales growth. Gross profit was negatively impacted in 1998 by a $7.0 million write-off of the fair value adjustment to inventory purchased in the Molecular Dynamics acquisition. Excluding the inventory fair value adjustment, gross profit in 1998 would have been $407.1 million, and gross margin would have been 55.8%. Gross margin in 1999 was 53.2% compared to 55.8% in 1998, excluding fair value adjustments. The overall decrease in gross margin was impacted by several factors: -- the increase in sales of industrial systems in the separations segment, which carried lower overall margins; -- growth in the agency business in the United States and Europe which carried relatively low margins. As noted above, this business was discontinued in 2000; and -- a decline in sales of higher margin radiochemical products in the laboratory products segment. 41 43 Selling, general and administrative expenses. SG&A increased by $18.8 million, or 5.9%, to $336.7 million in 1999 compared to $317.9 million in 1998. Although SG&A increased by 6% compared to the prior year, as a percentage of net sales it decreased to 39.0% in 1999 compared to 43.6% in 1998. Included in SG&A in 1999 and 1998 are expenses of $29.8 million and $47.2 million, respectively, related to integration costs in connection with the Pharmacia Biotech merger and the Molecular Dynamics acquisition. See "--Events Impacting Comparability--Integration Costs." SG&A, exclusive of integration costs, increased from $270.7 million in 1998 to $306.9 million, an increase of $36.2 million, or 13.4%. Approximately $14.2 million of this increase was due to the full year impact of the amortization of goodwill and intangibles related to the Molecular Dynamics acquisition. The remainder of the increase reflected the inclusion of a full year of Molecular Dynamics' SG&A expenses in 1999 compared to approximately three months in 1998, and increased selling and marketing costs in drug discovery as a result of the significant growth in that business, principally in MegaBACE(TM) sales. Legal costs increased by approximately $9.6 million in 1999 due to ongoing patent litigation relating to patent suits with Applera Corporation, which was offset by $5.5 million of income related to a favorable patent infringement settlement. See "Business--Legal Proceedings." The overall increase in SG&A was partially offset by operating efficiencies from combining Amersham Life Science and Pharmacia Biotech. These efficiencies partially contributed to the decline in SG&A, excluding integration costs, as a percentage of net sales to 35.5% in 1999 compared to 37.1% in 1998. Research and development expenses. Research and development expenses increased by $21.7 million, or 32.0%, to $89.6 million in 1999 compared to $67.9 million in 1998. Research and development expenses as a percentage of net sales increased to 10.4% in 1999 compared to 9.3% in 1998. Drug discovery research and development expenses increased by $10.0 million, or 25.3%, to $49.6 million in 1999 compared to $39.6 million in 1998. This increase reflected accelerated development of new products. Separations research and development expenses increased by $3.3 million, or 16.1%, to $23.8 million in 1999 compared to $20.5 million in 1998. In laboratory products, research and development expenses increased by $2.9 million, or 37.2%, to $10.7 million in 1999. Other operating income (expense), net. Other operating income (expense), net increased by $4.6 million from an expense of $3.9 million in 1998 to income of $.7 million in 1999. This relates to foreign exchange gains on forward foreign exchange contracts that have been deemed to be speculative contracts under SFAS 52. OPERATING INCOME
YEAR ENDED DECEMBER 31, ---------------- 1998 1999 ------ ------ (IN MILLIONS) Operating income before integration costs and non-recurring charges................................................... $ 64.6 $ 63.9 Non-recurring charges: Inventory write-up to fair value............................ $ (7.0) -- Integration costs........................................... (47.2) (29.8) ------ ------ Operating income............................................ $ 10.4 $ 34.1 ====== ======
Operating income increased by $23.7 million, or 227.9%, to $34.1 million in 1999 compared to $10.4 million in 1998. Operating income as a percentage of net sales increased from 1.4% to 3.9%. Operating income before integration costs and non-recurring charges decreased by 1.1% to $63.9 million, partially due to increased research and development expenses. The inclusion of a full year of Molecular Dynamics' intangible 42 44 amortization in 1999 compared to three months in 1998 increased operating expenses by $14.2 million. Changes in exchange rates did not have a material impact on operating income. Operating income before integration costs and non-recurring charges as a percentage of net sales declined to 7.4% in 1999 from 8.9% in 1998. The decline was a result of lower overall gross margins, increased research and development expenses as a percentage of net sales, and higher levels of amortization due to the Molecular Dynamics acquisition. Operating income for our business segments for the following periods are stated below:
YEAR ENDED DECEMBER 31, ---------------- 1998 1999 ------ ------ (IN MILLIONS) OPERATING INCOME (LOSS) Drug discovery.............................................. $(54.7) $(52.9) Separations................................................. 36.1 52.2 Laboratory products......................................... 15.1 24.0 Service, agency and other................................... 13.9 10.8 ------ ------ $ 10.4 $ 34.1 ====== ======
Drug discovery. Operating loss in the drug discovery segment decreased by $1.8 million, or 3.3% to $52.9 million in 1999 compared to $54.7 million in 1998. Excluding research and development costs and integration costs, the segment had operating income of $9.1 million in 1999 compared to an operating loss of $0.4 million in 1998. The drug discovery business had a higher proportion of SG&A to net sales relative to the other businesses to support the high sales growth of the segment, particularly MegaBACE(TM). Separations. Operating income in the separations segment increased by $16.1 million, or 44.6%, to $52.2 million in 1999 compared to $36.1 million in 1998. Excluding research and development expenses and integration costs, the segment had operating income of $84.5 million in 1999 compared to $73.1 million in 1998, an increase of 15.6%, reflecting the increase in net sales. The operating margin before research and development and integration costs was 28.7% in 1999 and 27.7% in 1998, with the increase resulting from a reduction in SG&A, which was partially offset by the growth of certain systems sales which carried lower margins. Laboratory products. Operating income in the laboratory products segment increased by $8.9 million, or 58.9%, to $24.0 million in 1999 compared to $15.1 million in 1998. Excluding research and development costs and integration costs, the segment had operating income of $42.3 million in 1999 compared to $37.1 million in 1998. 1999 included $5.5 million of license income related to a settlement of litigation. Before this settlement, operating income before research and development and integration costs declined by $0.3 million, as gross profit was adversely affected by the reduction in sales of higher margin radiochemical products, which was only partially offset by a reduction in SG&A. Service, agency and other. Operating income in the service, agency and other segment decreased by $3.1 million, or 22.3%, in 1999 due primarily to a decrease in bonus receipts received under a distribution agreement that was discontinued at the end of 1998. In addition, research and development expenses of $5.5 million related to the development of microfluidic technology were incurred in 1999. We sold the intellectual property rights for this technology in January 2000. Interest expense and other. Net interest expense and other income increased from $12.0 million in 1998 to $20.9 million in 1999. The increase was primarily due to an increase in interest expense from $16.5 million in 1998 to $24.1 million in 1999 due to higher debt levels as a result of the acquisition of Molecular Dynamics, which was financed with borrowings from Nycomed Amersham. Interest on these borrowings was charged for a full year in 1999 compared to approximately three months in 1998. 43 45 Income taxes. Income tax increased to $17.6 million in 1999 from $13.5 million in 1998. Our income tax rate was affected in 1999 and 1998 by non-tax deductible expenses, principally goodwill related to the Pharmacia Biotech merger and the Molecular Dynamics acquisition. Net Loss. As a result of the above factors, net loss in 1999 was $4.9 million compared to a net loss of $15.8 million in 1998. FINANCIAL RESOURCES AND LIQUIDITY The following discussion of financial resources and liquidity focuses on our consolidated balance sheets and consolidated statements of cash flows. SOURCES OF FINANCING AND WORKING CAPITAL Prior to the Reorganization. Principal sources of financing prior to the reorganization have consisted of borrowings from Nycomed Amersham and the issuance of redeemable preferred stock, which is owned 55.0% by Nycomed Amersham and 45.0% by Pharmacia. At December 31, 2000, total stockholders' equity was $325.2 million, compared to $330.0 million at December 31, 1999 and $334.3 million at December 31, 1998. Long-term debt and redeemable preferred stock totaled $136.1 million at December 31, 2000 compared to, $145.6 at December 31, 1999. The decrease in stockholders' equity at December 31, 2000 was the result of the net loss and the dividend charge on the redeemable preferred stock, partially offset by the currency translation adjustment. The decrease in long-term debt and redeemable preferred stock at December 31, 2000 was the result of scheduled repayments of long-term debt, repayment of Industrial Revenue Bonds and currency translation, and was partially offset by interest accretion on the redeemable preferred stock. Borrowings from Nycomed Amersham at December 31, 2000 were repayable on demand, with the exception of $34.3 million which was repayable on 30 days' notice. Total borrowings from Nycomed Amersham were $453.9 million at December 31, 2000, $395.9 million at December 31, 1999 and $351.7 million at December 31, 1998. As these borrowings were repayable on demand, they were classified as current liabilities on our balance sheet. As a result of this classification, our working capital was a deficit of $193.4 at December 31, 2000, $154.3 million at December 31, 1999 and $168.7 million at December 31, 1998. Our current ratio was 0.71:1, 0.75:1 and 0.71:1 at December 31, 2000, December 31, 1999 and December 31, 1998 respectively. On September 28, 2000, our principal shareholders entered into a letter of support with us in which they agreed to make loans or capital contributions, if alternative sources of financing were unavailable, to enable us to pay our debts when due if we were otherwise unable to do so. It is our intention to enter into a committed long-term loan facility either with Nycomed Amersham or an unrelated third party subsequent to our completion of this offering to replace our existing facility with Nycomed Amersham which is currently payable on demand. We believe that the combination of cash flows from our operations and financing arrangements through Nycomed Amersham and the net proceeds of this offering will be sufficient to cover our currently planned operating needs and firm commitments through 2001. Post-Reorganization. We will issue to Nycomed Amersham three long-term loan notes, equal in total to the gross proceeds from this offering which will be repayable in 2021. The loan notes will allow Nycomed Amersham to defer the UK tax liability that would otherwise arise as a result of this offering, until either Nycomed Amersham sells the notes or these notes are repaid. You should refer to "The Reorganization" for a detailed discussion of the reorganization. On receipt of the net proceeds from this offering, we will use a substantial portion to repay existing borrowings from Nycomed Amersham, and the balance for general corporate purposes. On a pro forma basis, after giving effect to the reorganization and the offering, total stockholders' equity at December 31, 2000 would have been $553.7 million and long-term debt would have been $296.0. The pro 44 46 forma long-term debt includes the three loan notes issued to Nycomed Amersham in connection with the reorganization. CASH FLOWS Cash flows provided by operating activities were $48.8 million in 2000, $14.3 million in 1999 and $32.2 million in 1998. Cash flows provided by operating activities in 2000 increased over previous years primarily through improvement in the management of working capital items. During 1999, operating cash flows were affected by an increase in trade receivables and a build-up of inventory levels, offset by a reduction in net losses compared to 1998. Finished goods inventory, particularly of drug discovery products, accumulated at the end of 1999 and 2000, in anticipation of higher demand in the first half of 2000. Cash flows from operations included payments related to integration costs of $7.3 million in 2000, $33.8 million in 1999 and $58.2 million in 1998. Cash flows used in investing activities were $85.6 million in 2000, $67.7 million in 1999 and $232.1 million in 1998. In 2000, the increase in funding required was due to the acquisition of businesses, primarily the acquisition of Praelux for $8.5 million, an investment in Gyros of $3.0 million, and investment in InforMax for $10.0 million, offset by a receipt of $9.5 million from sale of intellectual property to Gyros. In 1999, the outflow related to capital expenditures on the expansion of the Piscataway, New Jersey facility into an integrated manufacturing and research and development facility and continuing improvement of our information technology systems. In 1998, the majority of the outflow related to the $184.3 million paid for the Molecular Dynamics acquisition. Cash flows provided by financing activities were $50.2 million in 2000, $48.6 million in 1999 and $211.8 million in 1998. The principal inflow during each period consisted of additional borrowings from Nycomed Amersham under committed intragroup loan facilities. In 1998, these borrowings amounted to $212.1 million, the majority of which was used to finance the acquisition of Molecular Dynamics. In 2000, the inflow included cash received from Nycomed Amersham of $7.7 million related to the sale of a non-strategic business, and was offset by a payment of $17.4 million to administer current year stock option programs with Nycomed Amersham shares. Also in August 2000, we entered into an agreement with Nycomed Amersham, under which we exchanged our non-participatory equity holding in Amersham Buchler AB, a subsidiary of Nycomed Amersham, for the assets of Buchler's life science business. This exchange also involved the net payment of $2.6 million from us to Nycomed Amersham. In April 2000, we entered into a license agreement with V.I. Technologies, Inc. which required an initial payment of $1.0 million and future payments of up to $1.5 million. At December 31, 2000, $1.5 million was charged to research and development expense for technology under license that had not reached commercial viability. In addition, we may, at our option, advance additional funds to V.I. Technologies upon V.I. Technologies' request. At December 31, 2000, we had $42.2 million in cash and cash equivalents and $329.8 million of availability under our revolving credit agreements with Nycomed Amersham. This debt is at variable interest rates ranging from .9% to 7.6% at December 31, 2000. At December 31, 1999, we had $30.9 million in cash and cash equivalents and $306.6 million of availability under our revolving credit agreements with Nycomed Amersham. This debt was at variable interest rates ranging from .8% to 8.5% at December 31, 1999. We currently do not enter into interest rate agreements to fix the interest rates on this debt, but we may consider entering into such agreements in the future to minimize the impact of future changes in interest rates. MARKET RISK AND RISK MANAGEMENT POLICIES Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. Our risk management practices include the selective use, on a limited basis, of forward foreign currency exchange contracts and interest rate agreements. These instruments are used for purposes other than trading. 45 47 Foreign currency exchange rate movements create fluctuations in United States dollar reported amounts of foreign subsidiaries whose local currencies are their respective functional currencies. We have not used foreign currency derivative instruments to manage translation fluctuations. We primarily use forward foreign currency contracts to manage exposure on estimated future cash flows denominated in currencies other than the subsidiaries functional currency. These cash flows are normally represented by actual and anticipated receivables and payables. At December 31, 2000, we had forward foreign currency contracts with Nycomed Amersham with an aggregate notional amount of $120.9 million. No foreign currency contracts were outstanding with counterparties other than Nycomed Amersham. The fair market value of these contracts is recorded on our balance sheet, as the contracts do not qualify for hedge accounting. These contracts expire through May 31, 2001. The cash flows expected from the contracts will generally offset the cash flows of related non-functional currency transactions. The change in value of the foreign currency forward contracts resulting from a 10% movement in foreign currency exchange rates would have been approximately $3.6 million at December 31, 2000. At December 31, 2000, we had no interest rate agreements outstanding. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133. is effective for APBiotech for all fiscal quarters and fiscal years beginning after January 1, 2001. SFAS 133. requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. SFAS 133. is not expected to have a material impact on our consolidated results of operations, balance sheet or cash flows. 46 48 BUSINESS We are a leading global provider of biotechnology systems, products and services used in gene and protein research, drug discovery and development and biopharmaceutical manufacturing. We offer a comprehensive product range that spans the entire drug discovery and development process, positioning us to capitalize on the new gene economy. We have a proven track record of providing high quality technology to our customers, who number approximately 50,000 in approximately 100 countries. We have a strong, global customer franchise, with pharmaceutical, biotechnology and agrochemical companies, research institutes, universities and medical research centers. Our customers include all of the top 20 pharmaceutical companies. We have a strong track record in innovation and research and development, spending a substantial amount on these activities. Our long-standing commitment to research and development has enabled us to develop a broad range of innovative technologies and products, including products for gene analysis, protein analysis, drug screening, toxicology studies, clinical drug development and drug manufacturing. Many of our products form the basis of what we call integrated systems. These are whole systems that enable our customers to efficiently meet their research and manufacturing objectives. These systems consist of equipment or instruments, reagents optimized for use with the instruments and software to analyze and link the research results. The following chart illustrates the breadth of our product range and identifies some of our branded products in these key areas. DRUG DISCOVERY THROUGH TO MANUFACTURING [DRUG TO MANUFACTURING GRAPH] 47 49 Our business includes three principal segments that share activities in research and development, sales and marketing, distribution, manufacturing and service. The following table sets forth our estimated market size, market share and market position in each of our principal business segments as of June 30, 2000 based on the preceding twelve month period. The information below is based on the markets in which we directly compete.
- --------------------------------------------------------------------------------------------------------------- ESTIMATED ESTIMATED ESTIMATED MARKET SIZE(1) MARKET MARKET BUSINESS SEGMENT TYPES OF PRODUCTS (IN MILLIONS) SHARE POSITION(1) - --------------------------------------------------------------------------------------------------------------- Drug discovery High throughput systems to $1,500 15% 2 improve the effectiveness of life science and pharmaceutical research and development through reducing the cost and/or increasing the speed to market for drugs, including: -- genetic analysis and sequencing -- protein analysis and characterization -- drug screening -- metabolism and toxicology studies -- single nucleotide polymorphism, or SNP analysis - --------------------------------------------------------------------------------------------------------------- Separations -- Bioprocess Systems for use in the $350 55% 1 purification and production of biopharmaceuticals, such as insulin and vaccines, on a large scale -- Laboratory Systems for use in the $400 30% 1 separations purification and separation of proteins during the laboratory research and development stages - --------------------------------------------------------------------------------------------------------------- Laboratory products Tools and technical $1,900 15% 1 knowledge for use in the purification, detection and analysis of biological molecules by life science researchers - ---------------------------------------------------------------------------------------------------------------
Our business segments serve overlapping customer bases, which allows us to enhance our operating efficiency through cross-selling and reduced administrative costs. We are also able to maximize our return on investment in the research and development of drug discovery and separations systems as the resulting technologies often evolve, through life cycle management, into standard laboratory research products. BUSINESS ENVIRONMENT The announcement of the completion of the draft sequence of the human genome in June 2000 marked a major scientific milestone which has far reaching implications for the development of new medicines and 48 50 diagnostics based upon genetic information. The unfolding "gene economy" has already given rise to a number of different business initiatives devised to accelerate the development of robust, advanced technologies which can convert genomic information into specific and useful end products such as new diagnostics and drugs. We have already made fundamental contributions to the development of the technologies which were vital to the mapping of the human genome. For example, we introduced certain advanced technologies in our gene sequencing system, MegaBACE(TM), which made high throughput sequencing a scientific possibility. We also developed highly specialized dyes and enzymes used to map the human genome. As the genomic revolution progresses, new initiatives in the field of protein studies, or proteomics, will allow scientists to better understand the function of genes and the proteins for which they code. This understanding will be of fundamental importance in the development of molecular medicine and the ability to correlate genetic differences to diseases and individual responses to different drugs. The long-term goal of these efforts is to create personalized medicine where companies can manufacture medicines cost-effectively and tailor them to an individual's DNA blueprint, or genotype. The effort to fully harness the vast amount of genetic information that is now being created and use it productively will require the creation of highly sophisticated, computer-based systems, which we refer to as bioinformatics tools, that can be used by scientists to build on knowledge gained through a multitude of different scientific and business initiatives. The development of these systems, and the ability to integrate and interpret information drawn from across the spectrum of gene and protein studies and drug screening, will be a key element in making large-scale advances in drug discovery and development and furthering the efforts to create personalized medicine. We are also now seeing rapid growth generated by a previous revolution in medicine--the introduction of biopharmaceuticals in the late 1970s which was marked particularly by the launch of the first genetically engineered drug in 1982. Since then, according to industry associations, regulatory bodies worldwide have approved over 90 of these life-saving medicines, and there are now over 370 more such drugs in clinical trial. These potential drugs represent a rapidly growing market for the manufacturing technologies we provide in our bioprocess business. OUR BUSINESS STRATEGY AND COMPETITIVE STRENGTHS Our vision is to enable the era of molecular medicine in which the genetic basis for disease will be understood, leading to earlier and more accurate diagnosis of disease, and more effective treatment. Our strategy is to build on our position as a leading provider of biotechnology systems to enable the molecular medicine revolution. Our drug discovery and separations segments operate in markets which we believe represent significant opportunities for growth. Our systems, products and services are critical components of research into genes and proteins, the discovery and development of drugs, and the manufacture of biopharmaceuticals. We believe that we are well positioned with both our commercial and academic customers as a result of the following set of competitive strengths: -- The breadth of our technologies and our comprehensive product lines which span the entire drug discovery, development and manufacturing processes. We offer well-recognized branded products such as our MegaBACE(TM) DNA sequencing system, our LEADseeker(TM) drug screening system and our Sepharose(TM) separations media used in biopharmaceutical manufacturing. -- Our commitment to research and development, our long-standing reputation for scientific excellence and our development of innovative products. We have a strong record in developing, and are continuing to develop, state-of-the-art technologies, both internally and in partnerships with others. This commitment to research and development is resulting in multiple new product introductions in 2001. Our strong intellectual property portfolio, which is a vital asset in our industry, supports our research and development. -- Our global market franchise with strong customer relationships. Our global strengths in sales, operations and research and development enable us to offer our customers a complete set of products 49 51 to meet their needs. We estimate that most of the top 50 pharmaceutical companies have entered into technology transfer agreements with us, under which they gain early access to developing technologies. We believe that our bioprocess products are used in the production of almost all licensed biopharmaceuticals. -- Strong management team. We have a strong management team with an average of over 15 years of experience in the life science industry. -- Our partnership approach. We have a history of strategic development through acquisitions, investments and research alliances, as well as through strategic partnerships with our customers. These alliances have resulted in some of our key products and have provided us with early access to new technologies. -- An integrated portfolio. The strong market position of our laboratory products business enables us to more effectively manage the life cycle of novel products from our drug discovery business once these products become widely accepted in the general research community. There is also a link between our laboratory separations products and our bioprocess business where we enable customers to scale up processes for the purification of biopharmaceuticals which they have developed in the laboratory. Specific plans for each principal business segment are as follows: -- Drug discovery. We plan to capitalize on the continuing growth in the drug discovery market by creating innovative technologies to develop systems to enable gene and protein studies and drug screening. We have demonstrated this by launching leading, innovative systems in each of these areas and will continue their development with extensions into second or third generation systems supported by bioinformatics. -- Separations. We are positioning ourselves to capitalize on the expanding pipeline of biopharmaceutical products and grow our separations business through the introduction of new products and technologies. -- Laboratory products. Our aim is to manage the product life cycle from our drug discovery business and focus on growing applications in the research community. -- Service, agency and other. We plan to capitalize on the growing demand for services that sophisticated systems require when working in production environments. We also expect to develop new opportunities as they arise in order to capitalize on the rapidly accelerating demand for products in the new gene economy. DRUG DISCOVERY We believe that we have a leading position in the market for systems that enable faster, more efficient drug discovery. This business segment covers the following areas: genomics, proteomics, drug screening and bioinformatics. GENOMICS Genomics is the study of the structure and function of the genetic material of living organisms. The human body is composed of trillions of cells, each containing deoxyribonucleic acid, or DNA, which encodes the basic instructions for cellular function. The complete set of an individual's DNA is called the genome, and is organized into 23 pairs of chromosomes, which are further divided into approximately 50,000 smaller regions called genes. Each cell uses, or expresses, only those genes required for its specific functions. Each gene is comprised of a string of four types of nucleotide bases, known as A, C, G and T. Human DNA has approximately three billion nucleotides and their precise order is known as the DNA sequence. When a gene is expressed, a copy of its DNA sequence, called messenger RNA, or mRNA, is used to direct the synthesis of a protein. Proteins direct cell function and ultimately the development of individual traits. A variation in any part of a gene, called a polymorphism, may result in a change in cell function leading to disease. In molecular 50 52 medicine, drug development is based on understanding this core process by which DNA ultimately translates into a protein and on understanding the function of proteins. Researchers using genomics techniques are generally investigating the change in gene activity and variation in disease through the sequencing of genes, the discovery of new genes and gene variants, and the identification of those genes which are responsible for certain physical or biochemical behaviors in living cells. They seek to understand how and when the activity of these genes is switched on or off in normal development and to investigate which gene variants occur most frequently. Therefore, researchers need tools to help them produce, label and analyze DNA fragments, to study the various steps of gene expression and to identify and measure the levels of various proteins produced. Interpreting the DNA sequence can lead to the identification of the proteins derived from it. In addition, comparison of DNA sequences between normal and affected individuals across a disease population can provide valuable information on the genetic changes giving rise to the disease, thereby facilitating the development of improved diagnostic and therapeutic techniques and the development of drugs targeted toward an individual's specific genotype. We provide a comprehensive range of instruments, reagents and software sold individually or, increasingly, as integrated systems to enable genetic analysis. Some of our products, in particular our MegaBACE(TM) high throughput sequencing systems have been critical to the sequencing of the human genome. Our microarray products will be crucial for comparative gene expression analysis that will occupy scientists for many years to come. 51 53 We summarize our principal genomics products below.
- ------------------------------------------------------------------------------------------------------------ PRODUCT GROUP TYPE OF PRODUCT PRIMARY AREA OF USE - ------------------------------------------------------------------------------------------------------------ PRODUCTS BEING MARKETED - ------------------------------------------------------------------------------------------------------------ MegaBACE 1000(TM) DNA High throughput sequencing system using Automated DNA sequencing Sequencer capillary electrophoresis in 96 capillaries - ------------------------------------------------------------------------------------------------------------ MegaBACE 1000(TM) Genotyper High throughput genotyping system using Automated microsatellite- based capillary electrophoresis genotyping - ------------------------------------------------------------------------------------------------------------ Generation III Microarray DNA microarray spotter and scanner Differential gene expression System - ------------------------------------------------------------------------------------------------------------ 4000A Microarray Scanner DNA microarray scanner sold together with Differential gene expression System our reagents - ------------------------------------------------------------------------------------------------------------ Thermo Sequenase(TM) DNA polymerase which is stable at high Automated DNA sequencing temperatures for use in sequencing reactions - ------------------------------------------------------------------------------------------------------------ DYEnamic(TM) Energy Transfer Fluorescently labeled primers and Automated DNA sequencing primers and terminators terminators for DNA sequencing giving highly sensitive detection - ------------------------------------------------------------------------------------------------------------ AutoSeq(TM) Sequencing sample clean-up DNA sample preparation for high throughput sequencing - ------------------------------------------------------------------------------------------------------------ PureSeq(TM) Template preparation system High throughput template preparation - ------------------------------------------------------------------------------------------------------------ MegaBACE(TM) 500 Flexible throughput capillary array Automated DNA sequencing sequencing system - ------------------------------------------------------------------------------------------------------------ PRODUCTS IN RESEARCH AND DEVELOPMENT - ------------------------------------------------------------------------------------------------------------ MegaBACE(TM) 4000 384 capillary DNA sequencer Automated DNA sequencing with very high throughput - ------------------------------------------------------------------------------------------------------------ Chip Sequencer Next generation microchip sequencing and Medium to ultra high throughput genotyping technology with unattended DNA sequencing and genotyping operation - ------------------------------------------------------------------------------------------------------------ TempliPhi(TM) Template preparation using novel enzyme Preparation of template for DNA sequencing - ------------------------------------------------------------------------------------------------------------ Direct Load DNA sequencing reagents Direct load of sequencing reactions unto instrumentation, eliminating the clean-up step - ------------------------------------------------------------------------------------------------------------ SNuPe(TM) reagents High throughput, single nucleotide primer Genotyping, SNP validation and extensions for MegaBACE scoring - ------------------------------------------------------------------------------------------------------------ Microarray system Pre-arrayed slides, automated slide Gene expression profiling using processor and scanner, Generation IV microarrays spotter - ------------------------------------------------------------------------------------------------------------
The MegaBACE(TM) 1000 DNA sequencer is an automated, fluorescent DNA sequencing system that consists of hardware, software and reagents designed for industrial-scale DNA analysis. It uses 96 capillaries, each about the size of a human hair, filled with a gel which acts as a separating filter during electrophoresis, the separation of particles using an electric field. Operating in parallel, the capillaries separate, detect and 52 54 analyze fluorescently-labeled DNA fragments. The MegaBACE(TM) system provides more genetic data than competing products, with sequenced lengths typically exceeding 550,000 base pairs per day, compared to 450,000 base pairs per day for the best of the competing products. The system automates gel preparation, sample injection, DNA separation and data analysis, allowing significant productivity gains compared to traditional slab gel systems. MegaBACE(TM) also provides customers with enhanced processing speed. The processing time for each DNA sample is approximately two hours, compared to three hours for competing products. We believe that MegaBACE(TM) is preferred by end users who require accuracy and reliability in DNA sequencing. MegaBACE(TM) has played a significant role in several public and private sector genome sequencing operations, and had a total installed base of over 700 systems worldwide as of December 31, 2000. The MegaBACE(TM) systems generate recurring revenues through sales of reagents and other consumables that are used with the system. We have also extended our MegaBACE(TM) brand to the wider sequencing market, introducing a flexible concept with the MegaBACE(TM) 500 system. The MegaBACE(TM) 500 enables users to move between 16, 32, 48 and 96 capillaries on the MegaBACE(TM) platform, meeting the lower throughput needs of many researchers at sequencing laboratories. In addition to DNA sequencing, the MegaBACE(TM) platform can support a range of drug discovery applications, including microsatellite genotyping, or identifying the genes possessed by individuals, and the study of inheritance patterns and variations in single base pairs of DNA. In 1999, we launched a second application on the MegaBACE(TM) 1000 platform to allow researchers to detect small differences in similar DNA samples. This application, known as the MegaBACE(TM) 1000 Genotyper, uses the same hardware as the MegaBACE(TM) sequencing system but employs different software and chemistries. We are developing another generation of MegaBACE(TM) sequencing systems which will use 384 capillaries instead of 96. We expect that this new system will be able to process four times the number of samples as the existing systems and routinely produce sequencing lengths up to double those of the current system. We estimate that these new systems will be tested by customers by the end of 2001. We are also in the early stages of developing a new chip technology, using thin glass chips with built-in channels to be used as an alternative to capillaries for the separation and analysis of DNA. In sequencing, for example, this technology has the potential to sequence DNA samples in half the time required by MegaBACE(TM). Microarrays are small arrays of biological material on an inert substance, typically genes on a glass slide, that can be used to test for functional criteria. They are powerful tools for scientists to monitor and analyze the expression levels of thousands of genes in a single experiment. Our microarray systems use our dyes and scanners and large sets of cloned DNA which we spot onto a glass surface to enable researchers to study how genes are expressed. In 1996, we created an early access program to fund development of microarray products and technologies called the Microarray Technology Access Program, or MTAP. GlaxoSmithKline Plc became the first pharmaceutical company to join the MTAP, and since then the program has expanded rapidly, now including more than 30 pharmaceutical, genomics, biotechnology, and academic organizations using the microarray systems primarily for gene expression research. In exchange for paying us an upfront membership fee, customers who are members of the MTAP receive non-exclusive licensing rights to microarray products and technologies, technical support for these products and discounts on the product prices. We have supplemented the MTAP with programs designed for the broader research market. We have designed these programs to supply non-MTAP customers with integrated microarray systems along with training and ongoing technical support. Over the course of 2000, we offered an increasing range of microarray products, such as microarray chip scanners, including the recently launched 4000A Microarray Scanner System, and prearrayed slides containing libraries of DNA molecules optimized for gene expression studies. Prearrayed slides provide gene content to customers who prefer not to produce slides in their own laboratories. We expect to continue to develop our microarray product range. 53 55 Pharmacogenomics. Pharmacogenomics is the study of the impact of genetic variation on the efficacy, uptake, distribution, and toxicity of a drug, known together as drug response. DNA sequences contain a variety of known polymorphisms, which are the existence of a gene in a population in at least two different forms, not attributable to mutation alone. Single nucleotide polymorphisms, or SNPs, act as signposts to the genes that play a role in susceptibility to disease as well as drug response. As a result, the biotechnology and pharmaceutical industries have recently focused attention on the discovery of SNPs. By comparing the analysis of SNPs in DNA samples taken from diseased and healthy populations, researchers will be able to indicate where genes associated with the disease are located and which SNPs are important in the process of regulating physiology. With the completion of the draft of the human genome, the number of identified SNPs is increasing. Scientists and researchers are conducting SNP association studies to find the potential relevance of identified SNPs to human health. As a result, we expect the demand for SNP scoring technology to increase significantly over the next few years. SNP scoring refers to the measurement of the presence or absence of a particular SNP in the genetic sequence of a particular individual. To find the subset of SNPs that occurs with the greatest frequency in human diseases or that are potentially responsible for variations in drug response, researchers must make hundreds of millions of SNP scores, and they must correlate those scores with health and other features of interest. Research and clinical laboratories will require highly accurate, high throughput SNP scoring technology that can be implemented at an affordable cost to find relevant SNPs. MegaBACE(TM) gives our customers the ability to perform SNP scoring, and we introduced our SNiPer(TM) SNP scoring platform into customer and collaborator sites in December 2000 to provide additional functionality in this area. SNiPer(TM) is technologically competitive in the existing SNP market, which uses pre-amplified genetic samples. We are collaborating with the University of Washington and The Institute of Physical and Chemical Research in Japan and have signed a technology access agreement with respect to SNiPer(TM) with Oxagen Limited in the UK. We continue to work towards developing more cost effective SNP scoring, using direct genomic DNA. In March 2000, we joined the SNP Consortium, a non-profit enterprise funded by the Wellcome Trust and 10 major pharmaceutical companies. Its mission is the construction of a high density SNP map that will be made publicly available by bringing together the key DNA sequencing centers, including the federal Human Genome Project, the Sanger Center, Washington University, Stanford University and Cold Spring Harbor, with major pharmaceutical companies in a two-year venture. This is expected to reduce the time, risk and cost to produce a SNP map and will enable other parties in the application of SNP data for research purposes. PROTEOMICS Proteomics is the study of protein content, structure and function in cells and is expected to lead to better understanding of essential biological processes in cells and aid the development of new drugs. We believe that the proteomics market has strong growth prospects. Proteins are formed by the many possible combinations of the 20 amino acids which are the protein building blocks for genes. The genes provide the code for proteins, but the proteins are critical in controlling all cellular function, either as enzymes, messengers or structural cell elements. Interest in proteomics research is growing rapidly as pharmaceutical and biotechnology companies seek to understand the role of proteins in diseases, and to generate new ideas for drugs or interventions in cellular processes. The complexity of this task and its potential in the drug discovery and development process create an opportunity to develop high throughput systems for protein analysis, involving the next generation of two dimensional gel electrophoresis, mass spectrometry and liquid chromatography technology. Two dimensional gel electrophoresis is a technique for the separation of proteins by electrical charge and by size. Mass spectrometry is a technique for identifying chemicals, including proteins, by their molecular weight. Liquid chromatography is the separation of proteins and peptides according to their physical properties. We currently market products using differential gel electrophoresis, mass spectrometry and liquid chromatography techniques. 54 56 Under the brand name Ettan(TM) we have built on our experience in protein analysis, separation and purification to develop high throughput analysis systems for proteomic research, and we believe we are well positioned to take advantage of this market opportunity. Over the next few years, we expect to launch a series of integrated protein analysis systems, also under the Ettan(TM) brand, based on linking two dimensional gel electrophoresis, imaging instruments, mass spectrometry and liquid chromatography. We launched our first mass spectrometry product, the Ettan(TM) MALDI-TOF in 2000. We summarize our principal proteomics products below.
- ----------------------------------------------------------------------------------------------- PRODUCT GROUP TYPE OF PRODUCT PRIMARY AREA OF USE - ----------------------------------------------------------------------------------------------- PRODUCTS BEING MARKETED - ----------------------------------------------------------------------------------------------- Two Dimensional Differential Fluorescent dyes for labeling Protein expression analysis, Imaging Gel Electrophoresis proteins, imaging instruments which is the process of system, or 2D DIGE and software detecting differences in protein populations found in normal and diseased cells - ----------------------------------------------------------------------------------------------- Ettan(TM) Dalt II Two dimensional gel Protein expression analysis electrophoresis system - ----------------------------------------------------------------------------------------------- ImageMaster(TM) Imaging analysis software Protein expression analysis - ----------------------------------------------------------------------------------------------- Smart(TM) System Small scale liquid Protein identification and chromatography system characterization, which is the process of determining the structure and function of a protein - ----------------------------------------------------------------------------------------------- GST recombinant fusion Vectors and reagents to Protein identification and products facilitate the production of characterization recombinant proteins - ----------------------------------------------------------------------------------------------- Ettan(TM) Spot Picker Accurate automatic spot Protein expression analysis picking and identification - ----------------------------------------------------------------------------------------------- Ettan(TM) MALDI-TOF Mass spectrometry Protein identification and characterization - ----------------------------------------------------------------------------------------------- PRODUCTS IN RESEARCH AND DEVELOPMENT - ----------------------------------------------------------------------------------------------- Spot Handling Platform Integrated spot picker, Protein expression analysis digester and spotter and identification - ----------------------------------------------------------------------------------------------- Ettan(TM) LC-MS Liquid chromatography-mass Protein identification and spectrometry integrated characterization system - ----------------------------------------------------------------------------------------------- P4--Parallel Purification High throughput protein Protein amplification and Protein Platform purification platform purification - -----------------------------------------------------------------------------------------------
DRUG SCREENING Scientists are discovering many new drug targets as a result of genomic and proteomic research efforts. These discoveries, coupled with the greater availability of large libraries of possible drug compounds, have resulted in demand from the pharmaceutical industry for higher throughput technology for drug screening to alleviate this major bottleneck in the drug discovery process. In addition, pharmaceutical companies are also seeking more sophisticated technology to enable them to understand the metabolism and toxicology of drug candidates earlier in the drug development process in order to eliminate drug candidates with high toxicity and reduce the need for expensive animal testing and clinical trials. Drugs with high toxicity are unsuitable for use in treating disease. 55 57 Once a target has been identified, many candidate chemicals are tested rapidly in a process termed high throughput screening in order to identify lead candidates which interact with the target. These lead candidates are then investigated intensively with respect to both their biochemical and chemical properties in order to optimize the lead candidates, through secondary drug screening, to a stage where they may perform adequately as a novel medicine for the treatment of disease. Typically, researchers will screen between 100,000 and two million candidates to identify the handful that may constitute lead candidates. These studies require the sensitive analysis of complex reactions involving a number of biochemicals, proteins and nucleic acids. The assays used require advanced technology for both labeling and detection of biomolecules and researchers must be able to perform the assays quickly. We established an early market leadership position in high throughput screening through the introduction of our Scintillation Proximity Assay in the early 1990s, sold through technology access contracts. Building on this success, we introduced the innovative LEADseeker(TM) system in 1998. During 1999, we launched the next generation LEADseeker(TM). This system is a fully automated, format free, multi-modality system which offers the choice of fluorescent, chemiluminescent and radioactive chemistries. It incorporates advanced, charge- coupled device detection technology and can support the screening of 750,000 compounds a day. The flexibility of our LEADseeker(TM) system is very important to our customers because it allows them to select the chemistry format that will produce the highest quality research results for their particular needs. Our acquisition of Praelux in February 2000 has provided us with access to advanced cell imaging technology to complement the LEADseeker(TM) high throughput screening platform. This will permit us to develop systems for cell-based secondary assays for drug screening. Our LEADseeker(TM) cell analysis system will enable real time tracking and measurement of the movement of molecules within a cell. This significant advance over existing technology will uniquely combine high throughput and high information content. In addition to the LEADseeker(TM) systems, we also provide customized assays for specific customers. We are also a major provider of services for the custom radioactive labeling of potential drug compounds for absorption, distribution, metabolism and excretion studies. We summarize our principal drug screening products below.
- -------------------------------------------------------------------------------------------- PRODUCT GROUP TYPE OF PRODUCT PRIMARY AREA OF USE - -------------------------------------------------------------------------------------------- PRODUCTS BEING MARKETED - -------------------------------------------------------------------------------------------- Scintillation Proximity Beads which emit light when a High throughput screening Assay, or SPA radioactive compound is bound close to the particle surface - -------------------------------------------------------------------------------------------- LEADseeker(TM) imaging High throughput systems for High throughput screening system automated multi-modality analysis of screening assays - -------------------------------------------------------------------------------------------- Cyanine Dye labels Fluorescent dyes optimized for Assay technology for screening labeling of proteins and and development assays nucleic acids - -------------------------------------------------------------------------------------------- Custom labeling Custom synthesis of molecules Toxicology, metabolism and with radio or stable isotope distribution studies labels - -------------------------------------------------------------------------------------------- PRODUCTS IN RESEARCH AND DEVELOPMENT - -------------------------------------------------------------------------------------------- FARcyte(TM) Automated multi-modality Medium throughout screening analysis of screening assays - -------------------------------------------------------------------------------------------- LEADseeker(TM) cellular Advanced imaging device and Cell-based system for analysis system biological assay reagents secondary screening in drug discovery process - --------------------------------------------------------------------------------------------
56 58 BIOINFORMATICS Bioinformatics enables researchers to capture and transform massive amounts of data from different systems into organized databases that researchers can analyze. As high throughput tools for drug discovery become established, we expect that the major bottleneck will no longer be hardware, but the ability of the customer to manage raw data generated from its laboratories and to transform that data into an organized body of information that can facilitate the drug discovery process. The market environment is now set to change as customers adopt bioinformatics products to capitalize on the ability of these high end systems to generate data. Customers are also recognizing the power of integrating their data across disciplines, other institutions and steps in the drug discovery process, which has created a market for analytical software packages and expert knowledge systems. We are introducing bioinformatics software in order to support our integrated systems and customers' laboratory workflow systems. These systems are designed to: -- design, automate and acquire data, such as gene sequences, from biological experiments; -- analyze and interpret experiment results; and -- enable the transfer of refined data into drug discovery databases. We expect these systems will further the goal of enabling molecular medicine by speeding up the drug discovery process through more efficient data handling. We are collaborating with Cimarron Software Services, Inc., in which we have a 20% equity investment, to develop a number of laboratory workflow software packages that we expect to commercialize. Although we will integrate these packages across our drug discovery technology platforms, including MegaBACE(TM), microarray systems, Ettan(TM) and SNiPer(TM), they will be based on open architecture, which means that these packages could be connected to other software packages. We expect to launch our first bioinformatics software products in 2001. SEPARATIONS Our separations business is built on our extensive experience in liquid chromatography and on our understanding of proteins. We have organized this business into two parts--bioprocess and laboratory separations. In bioprocess, we produce systems for the purification and production of biopharmaceuticals on a large scale. In laboratory separations, we produce smaller, laboratory-scale systems for the purification and separation of proteins. BIOPROCESS Our bioprocess business helps our customers manufacture modern, biomolecule-based medicines. We support biopharmaceutical manufacturers by providing them with scaleable and integrated technologies for purifying biopharmaceuticals. We also provide services that offer reduced process development time and cost efficient production of biopharmaceutical medicines, such as hormones, enzymes, blood clotting factors, vaccines, antibodies, growth factors and antisense nucleic acids sequences. Biopharmaceuticals are drugs based on active biomolecules, such as proteins, peptides or DNA. The first biopharmaceuticals were developed and produced using chromatography techniques in the late 1970s and early 1980s. The first drug produced by genetic engineering was launched in 1982. Now there are over 90 life-saving, biopharmaceuticals approved worldwide, and more than 370 new biopharmaceuticals are in clinical trials. Furthermore, we expect that as the relationship between genes and diseases is clarified, the number of biopharmaceuticals launched on the market will continue to grow. Chromatography is a leading technology for producing biopharmaceuticals on a large scale at the required purity and level of activity, while reducing the risk of potential contamination. Having our products designed-in to the biopharmaceutical purification process is the key to sustainable revenues in the biopharmaceutical manufacturing process. Design-in is facilitated through biotechnology and 57 59 pharmaceutical companies using our purification products successfully during their development phases. We ensure that methods using our products can be readily scaled-up, validated and registered in full scale manufacturing. Once the FDA or other regulatory body approves a manufacturing process, changing this process is time consuming and expensive for the manufacturer. Our chromatography media are used in the manufacture of 98% of approved biopharmaceuticals and are involved in the majority of biopharmaceuticals that are currently in clinical trials. Apart from demonstrated scalability, we believe our bioprocess business has a competitive advantage based on: -- the reputation we have built in the purification field since 1959; -- consistent quality assured by ISO 9001 certification; -- a large range of media, allowing choice, and in some cases, custom design; -- product lines with well-known brands, recognized by customers and regulatory organizations; -- the manufacturing capacity to ensure reliable supply of chromatography media; -- providing a complete solution, including equipment and regulatory support; -- documentation to support validation and registration; and -- a dedicated and experienced global sales force. A key strength of our bioprocess business is reliability and a proven record of results. We introduced one of our leading products, Sephadex(TM), which brought a new level of speed and simplicity to purification techniques, over 40 years ago, and it is still a leading brand in separations media today. Sephadex(TM) has had an important role in many scientific discoveries and has been instrumental in Nobel prize winning research. It is also widely used in industry, for example, in the production of highly purified gamma globulin used to treat a variety of diseases including Acquired Immune Deficiency Syndrome. We now produce a widely-used purification media based on Sepharose(TM), originally introduced in the 1980s. We also produce other products based on Sepharose(TM) for the purification of active proteins, as well as system and equipment components used in these processes. These products are able to address the challenges brought by new types of source materials and new types of biomolecules, such as those being tested for vaccines and antisense strategies. Biotechnology innovation continues to drive the bioprocess business. For example, our STREAMLINE(TM) product provides an efficient and cost effective alternative to membrane filtration in the initial stages of biopharmaceutical purification. Since its launch in 1999, sales revenues have grown substantially for our new synthetic separation media, Source(TM), that offers improved performance, particularly in the purification of smaller protein and peptide products. In addition to leadership in the protein purification field, we are the leading supplier of manufacturing systems and reagents for industrial DNA synthesis, both of which are used by the molecular diagnostic industry and the emerging antisense industry. Antisense drugs involve the use of nucleic acids which bind to other target nucleic acids producing a therapeutic effect. These drugs are also known as oligonucleotide pharmaceuticals because of their use of short DNA sequences, or oligonucleotides. Our leading patented product, OligoProcess(TM), enabled the antisense industry to manufacture the first antisense drugs at a commercially viable cost and scale. Our reputation, product offerings and support services in the bioprocess business create strong customer relationships. For example we provide Fast Trak(TM) services to aid customers in complying with FDA requirements by providing validation support and regulatory support information. Fast Trak(TM) also provides comprehensive training programs for people working in biopharmaceutical manufacturing and development. We continue to explore opportunities for the expansion of our bioprocess business. For example, we are developing a viral decontamination system through a strategic technology alliance with V.I. Technologies, Inc. 58 60 LABORATORY SEPARATIONS In laboratory separations, we provide systems for the purification of proteins, peptides and oligonucleotides. Our product range covers chromatography systems, which account for approximately 65.0% of our net sales in this business line, and chromatography media. We currently have over 20,000 liquid chromatography, or LC, systems installed. The FPLC(TM) system in the AKTA(TM) product range is the most widely-used chromatography system in our industry. Our customers include pharmaceutical and biotechnology companies and academic and research institutes. Apart from our media products, which are also available in laboratory scale formats, other brands include the AKTA(TM) system for laboratory scale purification and HiTrap(TM) prepacked chromatography columns. We continue to expand the AKTA(TM) platform, and during 2000 we introduced several upgrades and new products, including AKTAprime(TM), a chromatography system, and an advanced fraction collector. Our laboratory separations products are linked to our bioprocess businesses through the drug development design-in process. Researchers in industry often use our laboratory separations systems to develop small scale processes for the purification of biopharmaceuticals, which they later scale-up using our bioprocess products. 59 61 We summarize our principal bioprocess and laboratory separations products below.
- ------------------------------------------------------------------------------------------------------- PRODUCT GROUP TYPE OF PRODUCT PRIMARY AREAS OF USE - ------------------------------------------------------------------------------------------------------- PRODUCTS BEING MARKETED - ------------------------------------------------------------------------------------------------------- Sephadex(TM), Sepharose(TM), Chromatographic separation Purification of active proteins Source(TM) materials used in biopharmaceuticals - ------------------------------------------------------------------------------------------------------- STREAMLINE(TM) Expanded bed chromatography Primary chromatography step used system for purification of active proteins used in biopharmaceuticals - ------------------------------------------------------------------------------------------------------- Cytodex(TM) Beaded media for cell culture Research and vaccine production - ------------------------------------------------------------------------------------------------------- Ficoll(TM), Percoll(TM) Media for cell separation Research applications, in-vivo treatment - ------------------------------------------------------------------------------------------------------- Chromaflow(TM) Columns Production scale chromatography Purification of active proteins Bioprocess Systems columns and systems used in biopharmaceuticals - ------------------------------------------------------------------------------------------------------- MabSelect(TM) Separations media Purification of monoclonal antibodies - ------------------------------------------------------------------------------------------------------- HiTrap(TM) Laboratory scale prepacked Laboratory scale purification of chromatography column biological molecules - ------------------------------------------------------------------------------------------------------- OligoPilot(TM), Systems for oligonucleotide Synthesis of oligonucleotides for OligoProcess(TM) synthesis production of pharmaceuticals and diagnostic probes* - ------------------------------------------------------------------------------------------------------- PRIMER SUPPORT(TM) Solid phase support beads for Synthesis of oligonucleotides for oligonucleotides synthesis production of pharmaceuticals and diagnostic probes* - ------------------------------------------------------------------------------------------------------- Amidites Monomers for oligonucleotides Synthesis of oligonucleotides for synthesis production of pharmaceuticals and diagnostic probes* - ------------------------------------------------------------------------------------------------------- AKTA(TM)/FPLC(TM) Chromatography systems for Research and pharmaceutical preparative purification of methods development biomolecules - ------------------------------------------------------------------------------------------------------- High flow Protein A High productivity affinity medium Antibody purification - ------------------------------------------------------------------------------------------------------- PRODUCTS IN RESEARCH AND DEVELOPMENT - ------------------------------------------------------------------------------------------------------- STREAMLINE(TM) reactor/expanded Equipment and medium for expanded System for initial capture of bed absorption media bed absorption biopharmaceuticals from production medium - ------------------------------------------------------------------------------------------------------- New ion exchange media, Niex New chromatography media Novel ion exchange media with improved productivity - ------------------------------------------------------------------------------------------------------- AKTA(TM) pilot Laboratory chromatography system Small production scale protein purification under good manufacturing practices - ------------------------------------------------------------------------------------------------------- New primer support Solid phase support beads Synthesis of longer diagnostic probes - ------------------------------------------------------------------------------------------------------- Bioselect Customized affinity ligands Biopharmaceutical manufacturing - ------------------------------------------------------------------------------------------------------- Viral Inactine(TM) Viral inactivation chemical Purification of plasma and proteins produced from cell culture, virus clearance in biopharmaceutical manufacturing - ------------------------------------------------------------------------------------------------------- P4 High throughput protein Protein purification, structural purification genomics - -------------------------------------------------------------------------------------------------------
- ------------ * These products may also be used in the production of future antisense drugs. 60 62 LABORATORY PRODUCTS We provide a broad range of laboratory research tools and technology to purify, detect and analyze biological molecules. We focus our business by developing and grouping our products around experimental procedures that our customers use. We refer to this as application-based development. We also provide marketing and technical support. We invest in growing application areas, particularly gene expression and protein analysis. Our product range, reinforced by well-known brands, application-based development and extensive technical support, has enabled us to become a market leader in the provision of laboratory products for life science researchers in academia and industry. Our product range consists of over 5,500 products and covers the following application areas: -- gene expression; -- DNA differentiation analysis; -- protein analysis and expression; -- nucleic acid amplification and purification; -- nucleic acid analysis; -- low and medium throughput sequencing; and -- assays. Within these application areas we have well-known brands, such as Biotrak(TM), Redivue(TM), Storm(TM), and Ready-To-Go(TM). We tailor our laboratory products to meet the specific needs of our research customers for proven techniques and dependable products to produce quick and reliable research results. Because of this tailoring, our laboratory products technology follows the trends in life sciences research. We actively manage our product life cycles and are continually updating our product line. We are continuing to develop innovative laboratory products, such as the Typhoon(TM) fluorescence scanner used in many life sciences applications. Typhoon(TM), which we launched in early 2000, offers increased sensitivity and performance and we believe will help maintain our position as a leader in the imaging market. A key component of our strategy for laboratory products is to focus on customer service and support for over 100,000 life science researchers using our products worldwide. We are also expanding our customer base in laboratory products by targeting pharmaceutical and medical researchers, a customer base which grows at a faster rate than our traditional academic research market. Finally we are implementing an Internet-based marketing strategy for these products. See "--Marketing and Distribution--E-business." A further component of our strategy for laboratory products is to invest in new technology platforms within drug discovery by creating later generation laboratory products for the general research market. We refer to this as managing the technology life cycle. 61 63 We summarize our principal laboratory products below, with a variety of brand improvements and extensions under development.
- ------------------------------------------------------------------------------------------------- PRODUCT GROUP TYPE OF PRODUCT PRIMARY AREAS OF USE - ------------------------------------------------------------------------------------------------- PRODUCTS BEING MARKETED - ------------------------------------------------------------------------------------------------- Ready-To-Go(TM) Reagents and kits Molecular biology research - ------------------------------------------------------------------------------------------------- Redivue(TM) Colored, stabilized formulations DNA and protein labeling of a range of radioactive nucleotides and amino acids - ------------------------------------------------------------------------------------------------- Hoefer(TM) Electrophoresis and blotting Detection and analysis of proteins instruments - ------------------------------------------------------------------------------------------------- Biotrak(TM) Assays Assay kit Drug development and cell biology research - ------------------------------------------------------------------------------------------------- ALFexpress(TM) Medium throughput DNA sequencing Mapping DNA base pairs sequence system - ------------------------------------------------------------------------------------------------- SEQ4X4(TM) Bench-top DNA sequencing system Mapping DNA base pairs sequence - ------------------------------------------------------------------------------------------------- Hybond(TM) Membranes for blotting Detecting proteins or nucleic acids - ------------------------------------------------------------------------------------------------- Storm(TM) Fluorescent, chemiluminescent and Nucleic acid and protein gel radiography imaging systems analysis and blot analysis - ------------------------------------------------------------------------------------------------- Radiochemicals Biochemical compounds labeled with Study of cell biology and Carbon(14), Tritium and toxicology Iodine(125) - ------------------------------------------------------------------------------------------------- ECL(TM) Western Blotting Protein detection system for Protein detection and western blotting characterization - ------------------------------------------------------------------------------------------------- Typhoon(TM) Multi-color detection imager Laboratory detection applications - ------------------------------------------------------------------------------------------------- Ready-To-Run(TM) Electrophoresis system System for analyzing DNA, especially polymerase chain reaction, or PCR, products - -------------------------------------------------------------------------------------------------
SERVICE, AGENCY AND OTHER Our service business provides systems support for our instruments. The business is a global organization with over 300 employees providing installation, training, maintenance, software upgrade programs and application support. Our academic research, biotechnology and pharmaceutical customers have varied manufacturing and research requirements, and we seek to increase our customers' productivity by providing service packages tailored to each particular customer. Our primary customers in this business are pharmaceutical and biotechnology companies, who rely on support agreements for their instruments. Service agreements are already well established for our bioprocess, separations and laboratory systems and we expect sales for services for our drug discovery instruments to grow as the installed base for our systems increases. We plan to capitalize on growth opportunities in the service business by providing it with a separate management focus from our other business segments. We plan to take advantage of opportunities by expanding customer support, by providing training for customers and by providing support for software- intensive integrated systems. STRATEGIC ALLIANCES An element of our strategy is to seek strategic alliances to access technology. We will continue to seek alliances with major academic research centers and biotechnology and pharmaceutical companies. We believe 62 64 that this strategy will enable us to obtain new technologies and maximize our research and development expenditures. The table below lists some of our major strategic partners.
- ------------------------------------------------------------------------------------------------------------ STRATEGIC PARTNER TECHNOLOGY PRODUCT - ------------------------------------------------------------------------------------------------------------ Affibody Technology Sweden AB Ligands Ligands for protein purification - ------------------------------------------------------------------------------------------------------------ Analytica of Branford, Inc. Mass spectrometry Ettan(TM) range - ------------------------------------------------------------------------------------------------------------ Beckman Coulter Inc. Sequencing technology Separation matrices for capillary electrophoresis - ------------------------------------------------------------------------------------------------------------ BioImage AS Cell-based assays LEADseeker(TM) cellular analysis system - ------------------------------------------------------------------------------------------------------------ Cimarron Software Services, Inc. Bioinformatics Laboratory workflow system software - ------------------------------------------------------------------------------------------------------------ DNA Sciences Microfabrication technology Chip-based sequencing - ------------------------------------------------------------------------------------------------------------ Dyax Corp. Ligands Peptide ligands for protein purification - ------------------------------------------------------------------------------------------------------------ Gyros AB CD-based miniaturization Technology for various miniaturized drug discovery products which we refer to as lab on a chip - ------------------------------------------------------------------------------------------------------------ InforMax, Inc. Bioinformatics Customized software - ------------------------------------------------------------------------------------------------------------ Molecular Staging, Inc. SNP analysis and other SNiPer(TM) applications of rolling cycle amplifications - ------------------------------------------------------------------------------------------------------------ Proteometric LLC Mass spectroscopy Ettan(TM) range - ------------------------------------------------------------------------------------------------------------ Scientific Analysis Instruments Ltd. Mass spectroscopy Ettan(TM) range - ------------------------------------------------------------------------------------------------------------ Uppsala University, Sweden Surface interaction Technology development for separation biotechnology resins - ------------------------------------------------------------------------------------------------------------ V.I. Technologies, Inc. Bioprocess Virus inactivation compounds - ------------------------------------------------------------------------------------------------------------
We do not consider any of the agreements set forth in the table above material to our business. These agreements involve additional milestone or other payments that in the aggregate do not exceed $40 million, of which, assuming certain conditions are satisfied, approximately $31 million is expected to be made within the next five years. We review potential acquisition and investment opportunities in each of our business segments. Except as otherwise disclosed in this prospectus, we currently do not have any material commitments or agreements for any acquisition or investments. We may structure any acquisition or investment as an acquisition or joint venture or through licensing arrangements. We may make an acquisition or investment if we believe that a transaction will enhance our portfolio of offered products, particularly where the transaction is related to the identification and commercialization of innovative new technologies. MARKETING AND DISTRIBUTION MARKETING We have developed a worldwide sales and marketing network, with products sold in approximately 100 countries. We have an integrated sales and marketing organization of approximately 1,600 employees serving all three principal business segments, with direct sales offices in 31 countries. Our sales and marketing force is divided into four regional organizations: North America, Europe, Japan, and Rest of the World. Our broad customer base and integrated product offerings allow our sales and marketing force to generate sales across all 63 65 three business segments. We have also established direct marketing through catalog and brochure mailing, telemarketing and web-based marketing channels. Included in our Rest of the World region is a sales office in Cuba. We intend to promptly file an application for a license to continue operations in Cuba. We intend to close the office if the license is not granted. We also distribute products provided by external suppliers, including restriction enzymes supplied by Takara Shuzo Co. Ltd. and analytical instruments supplied by BioChrom Labs, Inc. We also distribute autoradiography film supplied under the Kodak brand name worldwide and Affymetrix's gene expression products in Japan. E-BUSINESS Given the large product range and number of customers in our laboratory products business, we are pursuing a strategy to market our products through the Internet. We expect the Internet to provide efficiency gains in the management of the market for our laboratory products business. We intend to complement the improved efficiency in order processing and invoicing offered by Internet marketing channels with the development of further e-business services that will offer technical support to customers. We are investing in new systems and procedures to improve our existing web presence to enable simpler on-line purchasing and provide technical information. In 1999, we entered into a partnership with SciQuest.com, Inc., a provider of electronic e-commerce services, to sell laboratory products through its electronic purchasing channels. The SciQuest e-commerce website has been operating in the United States since February 2000. E-commerce sales represented less than 2% of our net sales in 2000. DISTRIBUTION We have a worldwide distribution network consisting of two central warehouses and two regional warehouses employing over 100 people. We also have distributors in 54 countries. RESEARCH AND DEVELOPMENT The key objectives of our research and development strategy are to develop systems to enable our customers to understand the gene-function relationship and the molecular basis of diseases and to increase the efficiency of the drug discovery and drug manufacturing processes. Our research and development spending decisions are made based on a technology's commercial viability and its ability to meet our return on investment criteria. The following is a list of key systems and products which we have internally developed over the last three years: -- MegaBACE(TM) sequencer and genotyper; -- Microarray systems; -- Ettan(TM) series; -- Two dimensional gel electrophoresis system; -- LEADseeker(TM); -- Typhoon(TM); -- Ready-To-Run(TM); -- Source(TM); -- STREAMLINE(TM); 64 66 -- AKTA(TM)/FPLC(TM); and -- AKTAprime(TM). We employ approximately 800 scientists in research and development at the following facilities and specialize in the following scientific areas: -- Amersham, United Kingdom--Molecular biology; -- Cardiff, United Kingdom--High throughput drug screening and cell biology; -- Piscataway, New Jersey, United States--DNA chemistry and enzymology; -- Sunnyvale, California, United States--Genomics and imaging; -- San Francisco, California, United States--Small laboratory instrumentation and technologies; -- Tokyo, Japan--Material sciences; and -- Uppsala, Sweden--Protein and separation sciences. We divide our research and development process into three stages: the research stage, the development stage and commercial product support. In the research stage, we demonstrate technology feasibility, generate intellectual property and develop new systems or processes which form the basis for our technology platforms. The development stage is commercially driven and involves the development of novel or next generation products and the definition of product specifications. Commercial product support involves demonstration experiments for potential customers, providing technology training and consulting and collaborating with customers' laboratories both before sales and after product launch. We manage our research and development processes at different levels to enable better decisions on resource allocation and prioritization. Project teams report through a formal structure to an executive team to monitor milestones and resources, to obtain approval to commence projects and to recommend ending a project if it is not meeting our objectives. Our executive management is responsible for devising research and development strategy, licensing activities, realizing operating efficiencies and setting priorities. Eminent life scientists on our scientific advisory board evaluate our research and development processes and advise on trends and related matters. In 2000, we spent $112.2 million on research and development, or 12.1% of our net sales. In 1999, we spent $89.6 million on research and development, or 10.4% of our net sales and in 1998, we spent $67.9 million, or 9.3% of our net sales on research and development. None of our customers sponsored our research and development expenditures. MANUFACTURING We have an established global manufacturing base with six primary facilities in Piscataway, New Jersey, San Francisco and Sunnyvale, California in the United States, Uppsala and Umea in Sweden, and Cardiff in the United Kingdom. We believe we have sufficient manufacturing capacity to meet commercial demand for our products for the foreseeable future. We manage our non-radiochemical reagents operations at Cardiff on the Nycomed Amersham site, and Nycomed Amersham manufactures radiochemical reagents used in our radio-labeling assays and kits under a contract manufacture agreement. See "Relationship with Nycomed Amersham and Pharmacia--Contract Manufacture Agreements." Our skilled manufacturing staff of over 1,000 employees have technological expertise, significant interaction with our research and development teams, direct customer contact and flexible skills. Our manufacturing facilities are co-located with research and development and focus on the same technologies. Our primary manufacturing facilities optimize material flow and personnel movement with integrated manufacturing and quality control operations. We design access and safety features to meet federal, state and local health ordinances. Except for Piscataway, all our manufacturing facilities are accredited to ISO 9001 international standards. 65 67 We rely on outside vendors to manufacture a number of components of our instruments and some reagents which we provide in our systems. We regularly audit these vendors. We are implementing a resource planning system to manage and control our material and product inventories. This system encompasses product costing, materials procurement, production planning and scheduling, inventory tracking and control and batch records, with links to document control for all manufacturing, quality assurance and regulatory compliance procedures. RAW MATERIALS Our manufacturing operations require a wide variety of raw materials, electronic and mechanical components, chemical and biochemical materials, and other supplies some of which we occasionally find to be in short supply. We have dual sourcing for most components and supplies, but where we are dependent on single sources for a limited number of these items we normally secure long-term supply contracts. COMPETITION The industry segments in which we operate are highly competitive and are characterized by the application of advanced technology and advanced tools to sell and support products. Numerous companies specialize in, and a number of larger companies devote a significant portion of their resources to, the development, manufacture, and sale of products which compete with those that we manufacture or sell. Many of our competitors are well-known manufacturers with a high degree of technical proficiency. In addition, the ever-changing nature of the technologies in the industries in which we are engaged intensifies competition. The markets for our products are characterized by specialized manufacturers that often have strength in narrow segments of these markets. We believe we are one of the principal manufacturers in our field, marketing a broad range of products. In addition to competing in terms of the technology that we offer, enabling products for the biotechnology industry and research, we compete in terms of price, service, reliability, quality and customer channel management. DRUG DISCOVERY Competitors in the drug discovery business include one company which competes across the range of drug discovery activities and a range of niche competitors for specific offerings. Our significant competitors in drug discovery include: -- Applied Biosystems Inc--A range of instruments, consumables and informatics in the genomics, proteomics and drug screening areas; -- Waters Corporation--Mass spectrometry instruments; -- Aurora Biosciences Corporation--Products and services for drug screening; -- Packard BioScience Company--Instruments for drug screening; and -- Affymetrix, Inc.--Systems for gene expression analysis. SEPARATIONS Major competitors in the separations business include Tosoh Corporation of Japan, which makes various types of chromatography media, Millipore Corporation, which manufactures large-scale chromatography equipment and Bio-Rad Laboratories, Inc., which has a competing range of laboratory scale products. A number of other small and large life science companies have some media products in their portfolios or specialize in certain types of media. 66 68 LABORATORY PRODUCTS The total market for laboratory products covers instruments, reagents and consumables for all laboratory analytical procedures and experiments. We focus on specific ranges of research products for selected life ]science applications and have an estimated 15.0% share of that market, making us a market leader. Some suppliers, such as Fisher Scientific International Inc., Merck KGaA, and Sigma-Aldrich Corporation serve the total laboratory products market and offer many types of products, often including many outsourced products, for life science markets. A large number of competitors, such as Qiagen N.V. and Promega Biosciences Inc. focus on specific niche life science applications. Recent consolidation has also created competitors, including Invitrogen Corp. and Perkin Elmer Inc., who offer a broader range of research products than niche competitors. INTELLECTUAL PROPERTY We consider the protection of our proprietary technologies and products to be important to the success of our business. We rely on a combination of patents, licenses and trademarks to establish and protect our proprietary rights to our technologies and products. We also rely on unpatented proprietary technologies. We have obtained patents in many countries covering significant products developed through our research and development activities. We currently own 238 issued patents in the United States and 189 issued patents in other major industrialized nations, and we have 701 patent applications pending. We believe that we continue to have patent protection for our most important existing products in our major markets, and, in addition, we have obtained patents, or anticipate that the appropriate regulatory bodies will grant patents to us for a majority of the new products and technologies which we are developing. We intend to continue to file patent applications as we develop new products and technologies. U.S. patents normally have a term of 17 years from the date of issue for patents issued from applications filed prior to June 8, 1995 and 20 years from the date of filing of the application in the case of patents issued from applications filed on or after June 8, 1995. Patents in most other countries have a term of 20 years from the date of filing the patent application. We are party to various exclusive and non-exclusive licensing agreements with third parties that grant us rights to use key components within our technologies. We believe that the licensing agreements listed below are important to our business. Each of these agreements terminates upon the expiration of the related patents. -- University of California--exclusive license to patents relating to our MegaBACE(TM) sequencing systems and energy transfer dyes; -- Harvard University--exclusive license to patents relating to our Thermo Sequenase(TM) DNA Polymerase; -- California Institute of Technology--non-exclusive license to patents relating to our fluorescent sequencing technology; and -- Molecular Staging, Inc.--exclusive license to patents relating to our SNiPer(TM) product. We rely in part on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Employees and consultants also sign agreements to assign to us their interests in patents and copyrights arising from their work for us. Employees also agree not to use confidential information after their employment. However, these agreements can be breached and an adequate remedy may not be available to us. Also, a third party may learn our trade secrets through means other than by breach of our confidentiality agreements, or our competitors could independently develop them. BACKLOG Our backlog at December 31, 2000 was approximately $50.0 million. We do not consider backlog to be a key measure of future sales. We anticipate that all products included in the backlog will be delivered before 67 69 the end of 2001. It is our policy to include in backlog only purchase orders or production releases that have firm delivery dates within one year. However, recorded backlog may not result in sales because of cancellation of orders or other factors. GOVERNMENT REGULATION We are not subject to direct governmental regulation other than the laws and regulations generally applicable to businesses in the jurisdictions in which we operate, including those governing the handling and disposal of hazardous wastes and other environmental matters. See "--Environmental and Other Regulatory Matters." Our research and development activities as well as our manufacturing activities involve the controlled use of small amounts of hazardous materials, chemicals and radioactive compounds. However, we use significantly larger quantities of hazardous materials and chemicals at two of our manufacturing facilities. Although we believe that our safety procedures for handling, using and disposing of such materials comply with applicable regulations, we cannot eliminate completely the risk of accidental contamination or injury from these materials. ENVIRONMENTAL AND OTHER REGULATORY MATTERS We are subject to various environmental protection and occupational health and safety laws and regulations in the countries in which we operate. In addition, in our current operations and over the years, we have handled, manufactured, used and disposed, and will continue to deal in or otherwise handle, manufacture, use and dispose of materials and wastes classified as hazardous or toxic by one or more regulatory agencies. We have developed a worldwide program of health, safety and environmental policies and standards. Specifically, the policy commits us to regard health, safety and the environment as integral to the management of the businesses. The standards are performance based and clarify management's intent in key areas. These standards require the sites to develop their own processes and procedures for achieving compliance and delivering continuous improvement in environmental and occupational safety and health performance throughout all of our worldwide operations. There are inherent risks in handling hazardous or toxic materials and wastes, and we incur costs to comply with the health, safety and environmental regulations applicable to our operations. We have no reason to believe that current and expected expenditures and risks occasioned by these circumstances are likely to have a material adverse effect on our financial condition or results of operations; however a change in regulation or other circumstances could result in such a material adverse effect. The manufacture, handling, storage, sale and disposal of our products are subject to various environmental laws and regulations. Although we continue to make capital expenditures for environmental protection, we do not anticipate being obliged as a result of current laws and regulations to incur costs which would have a material impact upon our financial condition or results of operations. In the United States, the possession, use and distribution of reactor byproduct radioactive materials are regulated by the Nuclear Regulatory Commission, or NRC. In states that have entered into an agreement with the NRC to regulate byproduct material, these so-called Agreement States have jurisdiction. Individual states, more than half of which are Agreement States, regulate naturally occurring and accelerator produced materials. Regulation is administered through regulations and licenses issued by both the NRC and these states. Regulatory compliance is monitored and enforced by inspection and investigation as a result of reported incidents. The U.S. Environmental Protection Agency also has regulations concerning disposal of radioactive materials mixed with hazardous waste. The U.S. Department of Transportation regulates transportation of radioactive material. You should read "Relationship with Nycomed Amersham and Pharmacia--Ongoing Arrangements between APBiotech, Nycomed Amersham and Pharmacia--Contract Manufacture Agreements" for a discussion of our potential environmental liability relating to a Nycomed Amersham site. 68 70 EMPLOYEES As of December 31, 2000, our employees numbered approximately 4,300; we employed 4,150 on a full time basis. We have approximately 2,700 employees in Europe, 1,200 in North America, 190 in Asia Pacific, 240 in Japan and 50 in the rest of the world. Many of our employees are represented by trade unions. We consider our employee relations to be good and have not experienced any material work stoppages in recent years. PROPERTY Our principal executive offices are located in Piscataway, New Jersey. Listed below are the location of our principal facilities, together with the form of title, approximate floor space and the principal activities conducted at such facilities. We consider all the facilities listed below to be reasonably appropriate for the purposes for which they are used, including manufacturing, research and development, and administrative purposes. We maintain all properties in good working order and, in the case of those used for manufacturing purposes, we utilize them substantially on the basis of at least one shift.
SQUARE (L) LEASED LOCATION PRINCIPAL ACTIVITIES METERS (O) OWNED - ----------------------------------- ----------------------------------- ------- ---------- United States (Piscataway, New Jersey)............................ Executive offices, commercial, 25,000 O research and development and manufacturing United States (Sunnyvale, California--two sites)............. Executive offices, commercial, 13,126 L research and development and manufacturing United States (San Francisco)...... Commercial, research and 6,038 O development and manufacturing England (Buckinghamshire--Amersham Place)............................. Executive offices and commercial 4,903 (1) England (Buckinghamshire--Amersham Laboratories)...................... Research and development and 4,200 (2) manufacturing Wales (Cardiff).................... Commercial, research and 121,551 (2) development and manufacturing Sweden (Uppsala)................... Executive offices, commercial 105,000 O research and development and manufacturing Sweden (Umea)...................... Manufacturing 13,400 O Germany (Freiburg)................. Commercial 5,700 L Japan (Tokyo)...................... Commercial and research and 3,700 L development
- ------------ (1) Property owned or leased by Nycomed Amersham, but used by APBiotech pursuant to the general services agreement. (2) Property owned by Nycomed Amersham, but used for contract manufacturing of APBiotech's products pursuant to contract manufacture agreements. LEGAL PROCEEDINGS We have various actions pending against Perkin-Elmer Corporation, PE Applied Biosystems Division, now known as Applied Biosystems, in the U.S. district court for the northern district of California. In November 1997, we sued ABI for infringement by ABI of U.S. Patent No. 5,688,648 referred to as the '648 patent, entitled "Probes Labeled with Energy Transfer Coupled Dyes", exclusive rights to which are licensed to us. In October 1998, we also sued Celera Genomics Corporation, a business unit of Applera Corporation, for infringement of the '648 patent. This action was consolidated with the action against ABI for 69 71 infringement of the '648 patent. On December 22, 2000, the court granted our motion for summary adjudication of infringement of the '648 patent. We expect trial in this case to begin sometime this year. The trial will be limited solely to the issues of contributory and indirect infringement and validity of the '648 patent. In 1998, ABI sued us for infringing U.S. Patent No. 4,811,218 (the '218 patent) entitled "Real Time Scanning Electrophoresis Apparatus for DNA Sequencing," and U.S. Patent No. 5,207,866 (the '886 patent), entitled "Capillary Electrophoresis." ABI later withdrew its claim regarding the '886 patent. We filed a counterclaim against ABI in these proceedings alleging infringement by ABI of U.S. Patent No. 5,091,652 (the '652 patent), entitled "Laser Excited Confocal Microscope Fluorescence Scanner and Method" (assigned to University of California and exclusively licensed to us) and of U.S. Patent No. 5,449,325 (the '325 patent), entitled "High-speed Fluorescence Scanner." In 1998, we also sued ABI for infringement of U.S. Patent No. 4,707,235 (the '235 patent), entitled "Electrophoresis Method and Apparatus Having Continuous Detection Means," in an action that has been consolidated with the foregoing. We have also counterclaimed against ABI, alleging antitrust damage because of fraud by ABI in obtaining the '886 patent, although this counterclaim has been stayed. On December 22, 2000, the Court (1) granted ABI's motion for summary adjudication of non-infringement of '652 patent; (2) denied ABI's motion for summary adjudication of non-infringement of '325 patent; (3) granted ABI's motion for summary adjudication of non-infringement of '235 patent; and (4) granted our motion for summary adjudication that our MegaBASE(TM) product does not literally infringe certain claims of the '218 patent and left for decision by the jury at trial whether or not there is infringement under the doctrine of equivalents. In December 2000 we sued ABI for further infringement of the '235 patent by ABI by sale of other instruments. In May 2000, ABI filed suit against us for infringing U.S. Patent No. 5,945,526, entitled "Energy Transfer Dyes with Enhanced Fluorescence" by making, using, selling and/or offering for sale DYAnamic ET Terminator Cycle Sequencing kits. We are also involved in various other disputes of a nature considered typical for our businesses. We are vigorously contesting the claims described above. However, we cannot predict with certainty the outcome of these litigations and while we do not believe an adverse result would have a material effect on our consolidated financial position, it could be material to our results of operations or cash flows for a fiscal year. These lawsuits are costly and will continue to require the attention of some members of our management. Further, the existence of these suits may damage our reputation and cause customers or potential customers to question our ability to manufacture and deliver our products. In defending our own intellectual property, the risk always exists that a court may find our patents invalid or unenforceable. We make provisions for potential liabilities when we deem them probable and reasonably estimable, including expenses that may arise. These provisions are based on current information and legal advice, and are adjusted from time to time according to developments. 70 72 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information regarding our executive officers and directors, as of February 26, 2001:
NAME AGE POSITION - ------------------------------------- --- ------------------------------------------------------ Sir William M. Castell............... 53 Chairman Ronald Long.......................... 53 Director Dr. Andrew Carr...................... 41 Director, Chief Executive Officer Sandra Cartie........................ 41 Director, Chief Financial Officer Dr. Michael Hayes.................... 49 Vice President, Research and Development Dr. Peter Coggins.................... 51 Vice President, Sales and Marketing Per-Erik Sandlund.................... 48 Vice President, Operations Peter von Ehrenheim.................. 45 Vice President, Separations Julian Cooper........................ 43 Vice President, Human Resources William J. Sulinski.................. 59 Vice President, Corporate Development Lars Eric Utterman................... 57 Vice President, Europe Nicola Smith......................... 46 Vice President, Corporate Affairs Andrew Rackear....................... 46 Secretary, General Counsel Giles Kerr........................... 41 Director Christopher J. Coughlin.............. 48 Director Stephen P. MacMillan................. 37 Director
William M. Castell, our Chairman, joined Amersham International in 1989 as Chief Executive, a position he continues to hold in the merged Nycomed Amersham plc. Sir William Castell has been Chairman of APBiotech Ltd. since its formation in 1997. Prior to joining Amersham International, Sir William Castell was Commercial Director of Wellcome plc. He holds a bachelor's degree in Business Studies, is a chartered accountant and a non-executive director of Marconi plc. Ronald Long, our Deputy Chairman, joined Amersham International in 1990 and, after holding a variety of positions, was APBiotech Ltd.'s Chief Executive Officer until August 1, 2000. Prior to joining Amersham International, Mr. Long was a director of Coopers Animal Health and then Managing Director of Calmic International in the United Kingdom. He holds a bachelor's degree in Economics and is a member of the Institute of Personnel & Development. Andrew Carr, our Chief Executive Officer, joined Amersham International in 1987 and spent eight years in a variety of research and development positions in the United Kingdom. Dr. Carr gained further experience in Amersham's Cleveland, Ohio facility, first as Manufacturing Director and then as Site Director, before moving into the commercial function as Vice President of the Cell Biology business in 1997. He was Vice President of Sales and Marketing with global responsibility for our sales from 1998 until his appointment as Chief Executive Officer on August 1, 2000. Dr. Carr holds a first class bachelor's degree in Biology and a Ph.D. in Zoology. Sandra Cartie, our Chief Financial Officer, joined us in October 2000 from Applera Corporation, where she had been Vice President, Strategic Initiatives since 1998 and Vice President, Finance, Analytical Instruments Division, from 1996 to 1998. Ms. Cartie has considerable experience in the Life Sciences and healthcare fields, including with Baxter International, where she held several roles in Business Development and Planning and Corporate Development. She also previously worked at Ernst & Young and is a certified public accountant. Ms. Cartie holds an MBA from the University of Chicago. 71 73 Michael Hayes, our Vice President, Research & Development, joined APBiotech Ltd. in April 2000 following a 19 year career with Glaxo Wellcome. From 1995 to April 2000, Dr. Hayes was Divisional Director, Discovery Technology at Glaxo Wellcome. He holds a bachelor's degree in Biochemistry and a Ph.D. in Microbial Biochemistry. He is a former Chairman of the Centre for Natural Products Research in Singapore and is a non-executive director of Biotica Technology Ltd. Peter Coggins, our Vice President, Sales & Marketing, rejoined Amersham International in the United Kingdom in 1994 as Vice President, Marketing, following a 10-year period working for biotechnology companies in North America and Finland. Dr. Coggins has served as the Regional Sales President for both Europe and North America and as Vice President, Drug Discovery based in Sunnyvale, California. He holds both a bachelor's degree and a Ph.D. in Zoology. Per-Erik Sandlund, our Vice President, Operations, joined Pharmacia Biotech in 1991 as Chief Financial Officer, a position he held until the appointment of Sandra Cartie in October 2000. Since January 2001, Mr. Sandlund has been our Vice President, Operations. Mr. Sandlund had previously been President of System 3R International AB and had earlier held a variety of financial positions in Sweden and Latin America. He has a bachelor's degree in Economics and Business. Peter von Ehrenheim, our Vice President, Separations, joined Pharmacia Biotech in 1983. Mr. Ehrenheim returned to Sweden from Milwaukee, Wisconsin to take up this position in 1999 following three years as the U.S. head of manufacturing and head of the industrial molecular biology business. He holds a master of science and engineering degree from the Royal Institute of Technology in Stockholm. Julian Cooper, our Vice President, Human Resources, joined Amersham International in the United Kingdom in 1984 and held a variety of positions prior to being appointed Director of Human Resources in 1994. Mr. Cooper was responsible for the Pharmacia Biotech merger integration process in 1997. He holds a bachelor's degree in Geography and is a fellow of the Chartered Institute of Management Accountants. Lars Eric Utterman, our Vice President, Europe joined LKB, a predessor of APBiotech, in 1967. Apart from four years in the 1970s when he worked for Boehringer Mannheim, he has worked for us predominantly in Europe. He has a master of science degree in Chemical Technology and a bachelor of arts degree in Business Administration. William J. Sulinski, our Vice President, Corporate Development, joined APBiotech Ltd. in 1998 from Pharmacia & Upjohn, where during his 21-year career there he held a variety of positions in finance and business development. Mr. Sulinski has a bachelor's degree in Business Administration and has qualified as a Certified Public Accountant. Nicola Smith, our Vice President, Corporate Affairs, joined APBiotech Ltd. in 1997 from Staveley Industries, where she was head of corporate affairs for three years, following a career in corporate communications business development, and journalism. She has a bachelor's degree in Mathematics and Biology and a master's degree in Business Administration. Andrew Rackear, our Secretary and General Counsel, joined Pharmacia Biotech in 1994 as General Counsel, having previously held the position of Counsel at Pharmacia U.S. Inc. from 1993 to 1994, and Associate General Counsel with Sharp Electronics Corporation from 1985 to 1988. From 1980 to 1985 and 1988 to 1993, Mr. Rackear was in private practice with Marks & Murase in New York City. He holds a bachelor's degree in history and earned his J.D. at New York University School of Law in 1980. He is admitted to the bar in New York and New Jersey. Giles Kerr was a founding member of APBiotech Ltd.'s board of directors in 1997 and is Chief Financial Officer of Nycomed Amersham, where he has been employed since 1991. He was previously a partner with Arthur Andersen. Christopher J. Coughlin was elected to our board of directors in July 2000, and is Executive Vice President and Chief Financial Officer of Pharmacia, where he has been employed since 1998. He was previously President of Nabisco International, for a period of one year, Executive Vice President and Chief Financial Officer of Nabisco Holdings, and Chief Financial Officer of Sterling Winthrop. 72 74 Stephen P. MacMillan was elected to our board of directors in 2001 and is Sector Vice President, Global Speciality Operations for Pharmacia, where he has been employed since 1999. Previously he worked for Johnson & Johnson and prior to that Proctor and Gamble. He has a bachelor of arts degree from Davidson College. BOARD COMPOSITION Our board currently consists of seven directors, five appointed by Nycomed Amersham and two appointed by Pharmacia. As part of the reorganization and upon consummation of this offering, our board will consist of 11 members: six Nycomed Amersham nominated directors, two Pharmacia nominated directors and three independent directors. We expect the independent directors to be appointed within 90 days of the completion of the offering. BOARD COMMITTEES AUDIT COMMITTEE The audit committee will consist of the three independent directors. The audit committee reviews and makes recommendations to the board of directors regarding our internal accounting and financial controls and our accounting principles and auditing practices and procedures to be employed in preparation and review of our financial statements. The audit committee also makes recommendations to the board concerning the engagement of independent public auditors and the scope of the audit to be undertaken by these auditors. DISCUSSION COMMITTEE For a description of this committee, please see "Relationship with Nycomed Amersham and Pharmacia--The Shareholders' Agreement--Discussion Committee". COMPENSATION COMMITTEE The compensation committee will consist of one director nominated by Pharmacia, one director nominated by Nycomed Amersham and one independent director. The compensation committee reviews and recommends to the board of directors policies, practices and procedures relating to the compensation of the officers and other managerial employees and the establishment and administration of employee benefit plans. The compensation committee also exercises all authority under our employee equity incentive plans and advises and consults with our officers as may be requested regarding managerial personnel policies. NOMINATING COMMITTEE The nominating committee will consist of two directors nominated by Pharmacia and two directors nominated by Nycomed Amersham. The nominating committee will nominate the three independent directors. Decisions of the nominating committee require approval of a majority of its members. EXECUTIVE COMMITTEE The executive committee will consist of three members. The executive committee will have the authority to act as a liaison between the board and executive management and will exercise such powers as the board shall delegate to it. DIRECTOR COMPENSATION Our directors who are not also our officers or employees will be paid an annual retainer of $ and a fee of $ for each meeting attended of the board of directors or of a committee of the board. 73 75 EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation paid to our Chief Executive Officer and our five other most highly compensated executive officers during our fiscal years ended December 31, 2000, 1999 and 1998. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ------------ ANNUAL COMPENSATION PAYOUTS --------------------------------------- ------------ OTHER ANNUAL LTIP NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION PAYOUTS - -------------------------------------- ---- ------- ------- ------------ ------------ Andrew Carr........................... 2000 337,443 25,277 15,958 0 Chief Executive Officer 1999 171,720 25,194 11,029 0 1998 149,193 31,540 11,818 0 Peter Coggins......................... 2000 294,038 39,978 47,347 0 Vice President, Sales and Marketing 1999 224,774 164,134 142,021 0 1998 212,827 51,500 7,794 0 Lars Eric Utterman.................... 2000 257,882 56,835 0 0 Vice President, Europe 1999 250,388 49,484 0 0 1998 240,779 42,036 120,109 0 Andrew Rackear........................ 2000 201,267 27,563 8,487 0 General Counsel 1999 162,781 44,508 19,394 0 1998 158,789 32,876 9,054 0 Arne Forsell(1)....................... 2000 222,238 28,190 5,804 0 formerly Vice President, Operations 1999 258,570 123,832 6,058 0 1998 239,080 236,820 6,655 0
- ------------ (1) Mr. Forsell resigned as Vice President Operations, of APBiotech Inc in February 2001. STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table sets forth information concerning grants of stock options and stock appreciation rights, or SARs, made to the executive officers named in the Summary Compensation Table during our fiscal year ended December 31, 2000. All options detailed below are in shares in Nycomed Amersham. OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION GRANT DATE INDIVIDUAL GRANT FOR OPTION TERM VALUE - -------------------------------------------------------------------------- ------------------------ ------------- NUMBER OF % OF TOTAL EXERCISE SECURITIES OPTIONS/SARS OR UNDERLYING GRANTED TO BASE GRANT DATE OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10% VALUE - --------------------- ------------ ------------ -------- ---------- ---------- ------------ ------------- Andrew Carr.......... 31,153 0.55 5.20 March 2010 153,836.03 365,389.35 $ 244,613.36 Peter Coggins........ 108,520 1.90 6.19 March 2010 637,903.91 1,515,141.20 1,014,325.59 Lars Eric Utterman... 50,578 0.89 5.20 March 2010 249,758.24 593,222.57 397,138.46 Andrew Rackear....... 48,492 0.85 6.19 March 2010 285,046.41 677,038.58 453,249.87 Arne Forsell......... 38,461 0.67 5.20 Sept. 2003 47,602.08 69,761.02 301,995.77
74 76 AGGREGATED OPTION AND SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table sets forth information concerning option and SAR exercises by the executive officers named in the Summary Compensation Table during our fiscal year ended December 31, 2000. All options detailed below are in shares in Nycomed Amersham. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT OPTIONS/SARS AT SHARES ACQUIRED FISCAL YEAR END (#) FISCAL YEAR END ($) ON EXERCISE VALUE REALIZED EXERCISABLE(E)/ EXERCISABLE(E)/ NAME (#) ($) UNEXERCISABLE(U) UNEXERCISABLE(U) - --------------------- --------------- -------------- ---------------------- -------------------- Andrew Carr.......... 35,238 189,301 83,654(U) 599,903(U) Peter Coggins........ 34,628 143,605 160,854(U) 297,832(U) Lars Eric Utterman... 0 0 106,642(U) 736,870(U) Andrew Rackear....... 0 0 81,756(U) 206,197(U) 102,123(E) 603,996(E) Arne Forsell......... 0 0 84,123(U) 3,321,995(U)
Prior to the completion of this offering, our employees that have unvested options in Nycomed Amersham stock will have the opportunity to exchange their unvested options in for options in our shares, preserving the same vesting dates and the same embedded gains (or losses) that exist at the date of this offering. LONG-TERM INCENTIVE PLAN The following table sets forth information concerning long-term incentive awards made to the executive officers named in the Summary Compensation Table during our fiscal year ended December 31, 2000. LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER PERFORMANCE OR NON-STOCK PRICE-BASED PLANS NUMBER OF SHARES, OTHER PERIOD UNTIL ------------------------------- UNITS OR OTHER MATURATION IN THRESHOLD TARGET MAXIMUM NAME RIGHTS PAYOUT ($ OR #) ($ OR #) ($ OR #) - ------------------------ ----------------- ------------------ --------- -------- -------- Andrew Carr............. 8,383 March 2003 N/A N/A N/A Peter Coggins........... 0 N/A N/A N/A N/A Lars Eric Utterman...... 0 N/A N/A N/A N/A Andrew Rackear.......... 0 N/A N/A N/A N/A Arne Forsell............ 15,521 March 2003 N/A N/A N/A
Awards of performance shares in Nycomed Amersham have been made to executives under two plans. Vesting of performance shares under the Nycomed Amersham Long-term Incentive Plan, or LTIP, depends upon the performance of Nycomed Amersham over a three-year period as measured by the growth in its total shareholder return relative to the United Kingdom FTSE 100 index of companies. No shares will vest in the participants unless Nycomed Amersham's total shareholder return would place it in at least position number 60 among the FTSE 100 companies ranked by total shareholder return and the maximum number of shares will vest only if the performance would rank it at position number 20 or better. If the performance conditions are not satisfied in full and an award does not vest, the performance period may be extended by up to a maximum of two years. 75 77 The vesting of performance shares under the Nycomed Amersham Merger LTIP is dependent on achieving various financial targets by December 31, 2000 (with respect to 75% of each award) and December 31, 2001 (with respect to the balance of the award). At December 31, 2000, the value of awards of performance shares in Nycomed Amersham under the two LTIP plans held by our executives were as follows:
NYCOMED NYCOMED AMERSHAM AMERSHAM MERGER LTIP -------- ---------------- Andrew Carr................................................ $65,231 $ 0 Peter Coggins.............................................. 0 0 Lars Eric Utterman......................................... 0 0 Andrew Rackear............................................. 0 0 Arne Forsell............................................... 241,605 301,716
PENSION PLANS The following paragraphs set out the retirement benefits applicable to the employees specified. Andrew Carr Dr. Carr participates in our U.K. pension plan, which has a retirement age of 63. Dr. Carr's annual benefit will be a combination of a defined benefit of 1.66% of his salary at retirement for each year of employment and a contribution by us of 7.5% of his salary for each year he is employed. If Dr. Carr retires after age 60, the benefit that we will pay to him is his accrued pension. If he retires between ages 50 and 60, the benefit that we will pay is the accrued pension reduced by 4% for each year that he is under age 60. Lars Eric Utterman Mr. Utterman participates in the German State Pension Scheme, which has a normal retirement age of 65. Our contribution is determined by the State each year and in 2000 was 8.55% of base pay up to a maximum of 104,400 German Marks. In addition, he has an additional defined contribution pension arrangement with Swiss Life in the Netherlands, to which we contribute 20% of his base pay. In 2000, this amounted to 123,645 Guilders. We also provide Mr. Utterman with a Disability pension through Basle Life Insurance, which would provide him with an annual disability pension up to age 65. Our contributions for this are 20,219.20 Swiss Francs per year. Peter Coggins and Andrew Rackear Dr. Coggins and Mr. Rackear participate in our U.S. defined benefit pension plan, which has a retirement age of 65. Dr. Coggins and Mr. Rackear's annual benefit under this plan will be 1.25% of their final average pay for each year of credited service, not to exceed 35, plus .4% of their of their final average pay in excess of covered compensation. Final average pay is based on the highest 60 consecutive months of earnings out of the last 120 months preceding retirement. Covered compensation is a 35-year average of the social security wage bases. If Dr. Coggins and Mr. Rackear elect to receive early retirement, then 4% per year is deducted from the pension amount for each year under age 62. In addition, we have a "Rabbi Trust" Restoration plan under which benefits are provided in excess of the salary cap on the same basis as the defined benefits plan. In addition, Dr. Coggins and Mr. Rackear participate in our U.S. defined contributions plan, which allows employees to save up to 16% of their compensation on either a before or after-tax basis and which provides a match of 100% on the first 3% of their elected savings percentage plus a match of 50% on the next 2% of their savings percentage. 76 78 Arne Forsell Mr. Forsell's retirement age is 60. His retirement benefits will be provided in Sweden. Mr. Forsell is entitled to an early retirement pension payable from age 60-65 and a retirement pension payable after age 65. The early retirement pension is 70% of pensionable earnings defined as base pay and average bonus over a three year period up to a maximum which is currently 1,865,000 Swedish Kronor per year. Any social security benefits are offset. The retirement pension is 40% of pensionable earnings as defined above, less the social security benefits payable. EMPLOYMENT AGREEMENTS Ms. Cartie and Mr. Sandlund have employment agreements with us dated October 17, 2000 and August 5, 1997, respectively. Mr. Rackear has an employment agreement with our subsidiary, Pharmacia Biotech, Inc., dated November 20, 1996. Mr. Sulinski has an employment agreement with us dated August 1, 2000, Mr. Ehrenheim has an agreement dated January 1, 2000, and Mr. Utterman has an agreement dated July 1, 1994. Each of the agreements is terminable by either party, except for Mr. Sulinski's, which expires on September 30, 2002. Mr. Sandlund, Mr. Utterman and Mr. Ehrenheim's agreements require each party to give six months' prior notice of termination. Ms. Cartie must give 60 days' prior notice of her resignation. If we terminate the employees without cause, Ms. Cartie and Mr. Sandlund are entitled to receive their base salaries for 12 months, Mr. Utterman is entitled to receive his base salary for 18 months and Mr. Ehrenheim is entitled to receive his base salary for 12 to 24 months, depending on the date of his termination, and Mr. Rackear is entitled to the highest annual rate of his base salary and annual bonus paid in any year during the 2 years before his termination for 18 months and 100% of his annual bonus potential for any month for which he was employed up to the date of termination. The employment agreements entitle Ms. Cartie to $300,000 per year, Mr. Rackear to $240,000 per year, Mr. Sulinski to $15,813 per month, Mr. Sandlund to 1,250,000 Swedish Kronor per year, Mr. Ehrenheim to 960,000 Swedish Kronor per year, and Mr. Utterman to 475,000 German Marks per year. All of the employment agreements provide that a bonus may be paid at the sole discretion of the company. The employment agreements provide for, among other things, each of the individuals to render their services to us on a full time basis. In addition, Ms. Cartie, Mr. Sandlund, Mr. Utterman, and Mr. Ehrenheim's employment agreements contain an express obligation of confidentiality in respect of our trade secrets and confidential information and provide that we will own any intellectual property rights created by them in the course of their employment. Ms. Cartie, Mr. Sandlund, and Mr. Sulinski's agreements also contain restrictive covenants which prevent them from competing with us and soliciting key customers and employees of ours for a period of 12 months following the termination of employment. We intend to enter into an employment agreement with Dr. Carr before the completion of this offering. STOCK OPTION PLANS EXECUTIVE STOCK OPTION PLAN Prior to consummation of this offering, we will obtain shareholder approval for and adopt an executive stock option plan. We have reserved a total of 14,000,000 shares of common stock for issuance under the executive stock option plan. The executive stock option plan will provide for grants of incentive stock options to our senior executives which can qualify as incentive stock options for U.S. taxation purposes. The purpose of our stock plan will be to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our senior executives and to promote the success of our business. At the request of the board of directors, the compensation committee administers our stock plan and determines the participants and the terms of options granted, including the exercise price, number of shares subject to the option and exercisability. 77 79 Options granted under the executive stock option plan will vest over four years, 25% in each year. The executive stock option plan will terminate in 2010, unless our board of directors terminates it sooner. We have not yet issued any options pursuant to the executive stock option plan. We will grant the first options under this plan to executives on or about the date of this offering. Options that we have granted under the executive stock option plan will have an exercise price of not less than the fair market value of the underlying shares on the grant date, and a term of not more than 10 years. Our senior executives globally, including our officers and employee directors, are eligible to participate if they devote substantially the whole of their working time to their duties with us. We may also grant cash awards in jurisdictions where it is not possible to grant stock options. The compensation committee will determine the terms of a cash award and these terms will, as far as possible, be similar to the terms of executive stock options. Unvested options that we have granted under the executive stock option plan terminate immediately upon the termination of the participant's status as an employee of our company, except for the participant's disability or death or a change in our control. In these circumstances the participant may exercise his option for a limited period which may not, in any case, exceed 12 months from the date of his ceasing to be an employee. Unvested and vested options will terminate immediately if the participant is dismissed for cause. Federal Income Tax Consequences. The stock option plan is not subject to any provision of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and is not qualified under Section 401(a) of the Code. There will be no federal income tax consequences to a participant or us upon the granting of options under the stock option plan. Upon the exercise of an incentive stock option, a participant recognizes no immediate taxable income. Income recognition is deferred until a participant sells the shares so acquired. Generally, if a participant does not dispose of the shares acquired under an incentive stock option within two years from the date the incentive stock option was granted and within one year after its exercise, the gain on the sale will be treated as long-term capital gain. We are generally not entitled to any tax deduction with respect to the grant or exercise of incentive stock options. However, if the shares are not held for the full term of the holding periods described above, a portion of the gain on the sale of such shares will be taxed to a participant as ordinary income, and we will generally be entitled to a deduction in the same amount. STOCK OPTION PLAN Prior to consummation of this offering, we will obtain shareholder approval for and a stock option plan called "Options for All". We have reserved a total of 4,500,000 shares of common stock for issuance under this plan. This plan will provide for the grant of stock options to all employees working for us at the date of this offering. These options are intended to qualify as incentive stock options. In certain circumstances, however, the options will be treated for federal income tax purposes as non-qualified stock options. Our Compensation Committee will administer this plan. No options have yet been issued pursuant to the stock option plan. We will grant the first options under this plan to our employees on or about the date of this offering. At present we have no intention to make further grants under this plan. Options that we have granted under the stock option plan will normally vest three years from the date of option grant, provided that the employee remains employed by us. Unvested options that we have granted under the stock option plan terminate immediately upon the termination of the participant's status as an employee of APBiotech, unless the employee leaves by reason of injury, disability, redundancy, the sale of the part of the business in which he is employed or retirement in which case options will terminate at the later of six months after the employee leaves employment or 42 months from the date of grant. If a participant dies, his personal representatives can exercise an option within one year of death. Only one-sixth of a participant's options may be exercised for each full period of six months from the date of grant during which the participant was our employee. The stock option plan will terminate in 2010, unless our board of directors terminates it sooner. Our board of directors may also amend the plan in the future. We may also grant cash awards in jurisdictions where it is 78 80 not possible to grant stock options. The Compensation Committee shall determine the terms of a cash award, which, as far as possible, will be similar to the terms of the stock options. Federal Income Tax Consequences. The executive stock option plan is not subject to any provision of ERISA and is not qualified under Section 401(a) of the Code. There will be no federal income tax consequences to a participant or us upon the granting of options under the stock option plan. Upon the exercise of an incentive stock option, a participant recognizes no immediate taxable income. Income recognition is deferred until a participant sells the shares so acquired. Generally, if a participant does not dispose of the shares acquired under an incentive stock option within two years from the date the incentive stock option was granted and within one year after its exercise, the gain on the sale will be treated as long-term capital gain. We are generally not entitled to any tax deduction with respect to the grant or exercise of incentive stock options. However, if the shares are not held for the full term of the holding periods described above, a portion of the gain on the sale of such shares will be taxed to a participant as ordinary income, and we will generally be entitled to a deduction in the same amount. Upon exercise of a nonqualified stock option, a participant generally will recognize ordinary income in an amount equal to the fair market value, on the date of exercise, of the acquired shares less the exercise price of the nonqualified stock option. We will generally be entitled to a tax deduction in the same amount. EMPLOYEE STOCK PURCHASE PLAN Prior to the closing of this offering, we will obtain shareholder approval for and adopt an employee stock purchase plan. We have reserved a total of 600,000 shares of common stock for issuance under the employee stock purchase plan. The board of directors administers our employee stock purchase plan, which is intended to qualify under Section 423 of the Internal Revenue Code. Our U.S. employees, including our officers and employee directors but excluding our five percent or greater stockholders, are eligible to participate if they are customarily employed for at least 20 hours per week and we have employed them for a continuous period of at least three months. Our employee stock purchase plan permits eligible U.S. employees to purchase common stock through payroll deductions, which may not exceed $25,000 per year. We will implement our employee stock purchase plan in six month purchase periods. The initial purchase period under our employee stock purchase plan will begin in July 2001, and the subsequent purchase periods will begin on the first trading day on or after January 1 and July 1 of each year. The purchase price of our common stock under our employee stock purchase plan will be 85% of the lesser of the fair market value per share on either the first day of the purchase period or on the last day of the purchase period, which is the purchase date. We will grant each participant the option to purchase shares of our common stock on the first day of the purchase period and the option will continue in effect until the purchase date. The option will be automatically exercised on each purchase date, unless the employee notifies us that she or he does not wish to purchase the shares. Employees may end their participation in a purchase period at any time, and their participation ends automatically on termination of employment with our company. Our employee stock purchase plan will terminate in 2010, unless our board of directors terminates it sooner. Federal Income Tax Consequences. The stock purchase plan is not subject to any provision of ERISA, and is not qualified under Section 401(a) of the Code. A participant will not realize taxable income upon the grant of a purchase right relating to shares of common stock or upon the purchase of shares under the stock purchase plan. If a participant disposes of shares acquired under the stock purchase plan, the amount of ordinary income, capital gains or capital loss realized will depend on the holding period of the shares. Under current federal law, the applicable capital gain rate is determined by the amount of time the shares were held by the participant. 79 81 If a participant disposes of shares acquired under the employee stock purchase plan more than one year after the shares have been transferred and more than two years after the date of grant, any gain from the sale generally will be long-term capital gain. However, if the shares are not held for the full term of the holding periods described above, a portion of the gain on the sales of such shares will be taxed to the participant as ordinary income. We are generally not entitled to an income tax deduction when any participant exercises an option to purchase shares under the stock purchase plan or upon the subsequent disposition of any such share. However, if the disposition results in ordinary income to a participant, we will generally be entitled to an income tax deduction in the year of such disposition in an amount equal to the amount of such ordinary income. U.K. SHARESAVE PLAN Prior to consummation of this offering, we will adopt a U.K. Revenue Approved Sharesave (SAYE) share option plan. We have reserved a total of 800,000 shares of common stock for issuance under the U.K. Sharesave plan. All of our U.K. employees will be eligible to participate in the SAYE. The plan is subject to a cumulative maximum investment of L250 per month for each individual. The share options run for five or seven years. At the end of the chosen option period the shares may be purchased by the employee at a 15% discount to the share price at the start of the period. SHARES AVAILABLE FOR STOCK PLANS The maximum number of shares which may be subscribed under all the stock plans described above that are capable of vesting on or before June 2002 is limited to a maximum of 3% of our total issued share capital. Over a rolling 10 year period, the maximum number of shares which may be issued under all the stock plans described above is limited to a maximum of 10% of our total issued share capital. SCIENTIFIC ADVISORY BOARD We share a scientific advisory board with Nycomed Amersham made up of eminent scientists with a wide range of experience in life sciences or imaging. Members of the advisory board evaluate our research program, recommend personnel to us and advise us on technology trends and related matters. We list the current members of the scientific advisory board in the following table:
ADVISOR INSTITUTION - --------------------------------------------- --------------------------------------------- Sir Keith Peters, Chairman of the Scientific Advisory Board............................. Regius Professor of Physic, University of Cambridge, UK Dr. Scott E. Fraser.......................... Director, Biological Imaging Center, Beckman Institute, California Institute of Technology, USA Dr. David J. Lomas........................... Lecturer/Honorary Consultant Radiologist, University of Cambridge, UK Professor Richard A. Mathies................. Professor of Chemistry, University of California, Berkeley, USA Professor James E. Rothman................... Vice Chairman, Sloane-Kettering Institute, New York, USA Dr. George R. Stark.......................... Chairman, Lerner Research Institute, The Cleveland Clinic Foundation, Cleveland, USA Professor John A. Todd....................... Professor of Medical Genetics, University of Cambridge, UK
80 82 PRINCIPAL STOCKHOLDERS The following table sets forth information about the beneficial ownership of our common stock and Class B common stock (giving pro forma effect to the reorganization) as of February 26, 2001 and as adjusted to give effect to this offering. In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities and includes shares issuable pursuant to stock options that are exercisable within 60 days of February 26, 2001. The following table is based on 100,413,689 shares of common stock and 87,285,484 shares of Class B common stock outstanding as of February 26, 2001, and 121,343,689 shares of common stock and 87,285,484 shares of Class B common stock outstanding after the completion of this offering. The entities named in the table have sole voting and investment power with respect to all shares of common stock owned by them.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED BEFORE THE OWNED AFTER THE OFFERING OFFERING ------------------- --------------------- NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER % NUMBER % - ------------------------------------------------- ----------- ---- ------------- ---- Nycomed Amersham plc(1) Amersham Place, Little Chalfont Buckinghamshire England HP7 9NA................................ 100,413,689 53.5% 103,143,689(3) 49.5% Pharmacia Corporation(2) 100 Route 206 North Peapack, New Jersey 07977...................... 87,285,484 46.5% 87,285,484 41.8%
- ------------ (1) Represents ownership of common stock. Nycomed Amersham will own some of its shares through a wholly-owned subsidiary. (2) Represents ownership of Class B common stock. Class B common stock will be entitled to 1.14 votes per share. As a result, Pharmacia's share ownership will represent 45% of our voting rights. Pharmacia holds some of its shares through a wholly-owned subsidiary. (3)Assumes that the underwriters do not exercise the over-allotment option and Nycomed Amersham subscribes for an additional 2,730,000 shares of common stock at the offering price in accordance with the reorganization agreement. If the over-allotment option is exercised by the underwriters, Nycomed Amersham will own 48.2% of our common stock and control approximately 45.5% of voting rights. 81 83 THE REORGANIZATION In order to facilitate our initial public offering, our principal shareholders have agreed to reorganize their existing shareholdings in APBiotech Ltd. by organizing us to become the holding company for APBiotech Ltd. and exchanging their shares in APBiotech Ltd. for our shares, although Pharmacia will retain 5.4% of APBiotech Ltd.'s common stock. Our principal shareholders have also agreed to revised governance arrangements and other arrangements with us more fully described under "Relationship with Nycomed Amersham and Pharmacia." To facilitate our initial public offering, our principal shareholders are taking the following steps: -- Converting redeemable preferred shares. Nycomed Amersham and Pharmacia, as holders of APBiotech Ltd.'s 8% redeemable preferred stock, will convert all of the outstanding redeemable preferred stock into shares of common stock of APBiotech Ltd. -- Contributing additional capital. Nycomed Amersham and Pharmacia will make an additional capital contribution of approximately $149.0 million, to be contributed 55.0% by Nycomed Amersham and 45.0% by Pharmacia. Nycomed Amersham and Pharmacia will receive shares of APBiotech Ltd's common stock in exchange for their contributions. -- Receiving shares and debt in exchange for APBiotech Ltd.'s equity securities. Nycomed Amersham will exchange its 55.0% ownership in APBiotech Ltd. for 53.5% of our total common shares and three long-term notes which will equal in total the gross proceeds of this offering. The notes will mature in 20 years. One note representing a principal amount of $83.0 million will carry a fixed market interest rate. The other two notes will have an aggregate principal amount equal to the balance of the gross proceeds of this offering and carry a fixed market interest rate and the other a floating market interest rate. The aggregate principal amount of the loan notes was determined based on the sale of 10% of the Company's common shares in this offering. If the underwriters do not exercise their over-allotment option, Nycomed Amersham will purchase the over-allotment shares and the proceeds of $43.7 million will be used to pay down the loan notes. Pharmacia will exchange 39.6% of its ownership in APBiotech Ltd. for our Class B common stock representing approximately 46.5% of our outstanding common shares. Pharmacia will continue to hold directly a 5.5% interest in APBiotech Ltd. Each of the foregoing steps will be implemented just prior to the closing of this offering. If the over-allotment option is not exercised by the underwriters, Nycomed Amersham has unconditionally agreed to subscribe for those shares at the IPO price, and we will use those proceeds to repay in part the loan notes issued to Nycomed Amersham. If the underwriters do not exercise the over-allotment option, Nycomed Amersham will own approximately 49.5% of our total common shares, representing approximately 46.8% of our total voting rights. Pharmacia will hold Class B common stock equaling approximately 41.8% of our outstanding common shares, representing 45.0% of our total voting rights. The 8.7% of our common shares that will be sold in this offering will represent 8.2% of our total voting rights. The common stock will carry 1 vote per share, and the Class B common stock will carry approximately 1.14 votes per share. If the underwriters exercise their over-allotment option, Nycomed Amersham will hold approximately 48.2% of our total common shares, representing 45.5% of the total voting rights in APBiotech Inc. Pharmacia's voting rights will remain unchanged and the public shareholders will own 10.0%, representing 9.5% of our total voting rights. 82 84 The following charts illustrate the reorganization steps: CURRENT OWNERSHIP [Current Ownership Flow Chart] AFTER GIVING EFFECT TO THE REORGANIZATION [Reorganization Flow Chart] AFTER GIVING EFFECT TO THE OFFERING(1) [The Offering Flow Chart] Key: # Common Stock -- 1 vote per share * Class B Common Stock -- 1.1374 votes per share + Non voting stock (1) If the over-allotment option is exercised by the underwriters, Nycomed Amersham will own 48.2% and public shareholders will own 10% For a description of our capital structure subsequent to the reorganization, you should read "Capitalization" and "Unaudited Pro Forma Condensed Financial Statements." 83 85 RELATIONSHIP WITH NYCOMED AMERSHAM AND PHARMACIA FORMATION OF APBIOTECH On August 5, 1997, Nycomed Amersham (formerly Amersham International) renamed its Life Science division as Amersham Pharmacia Biotech and its operations were transferred to various legal entities owned by APBiotech Ltd., a newly formed holding company and a subsidiary of Nycomed Amersham under the terms of a contribution agreement. APBiotech Ltd. then merged with Pharmacia Biotech, a Swedish-based biotechnology supply business previously owned by Pharmacia (formerly Pharmacia & Upjohn). The merger was accounted for under the purchase method of accounting. In addition, Nycomed Amersham and Pharmacia entered into a number of other agreements, including a shareholders' agreement relating to the corporate governance and operation of our business, a general services agreement and contract manufacture agreements. Nycomed Amersham and Pharmacia also entered into trademark license agreements with us permitting the use of the Nycomed Amersham names and corporate logos. In accordance with certain of these agreements, Nycomed Amersham and Pharmacia each agreed to indemnify us in relation to defined environmental and patent matters. As part of this transaction, the shareholder arrangements between Nycomed Amersham and Pharmacia will be changed, the corporate logos will be transferred, and a corporate reorganization will be implemented. Since our formation, we have been run as a separate legal entity. Prior to the closing of the reorganization and this offering, Nycomed Amersham controlled 55% and Pharmacia controlled 45% of our issued share capital and we were consolidated as a subsidiary of Nycomed Amersham. For regulatory reasons, various assets of Nycomed Amersham's Life Science division have not been transferred to us as specified in the contribution agreement. As a result, Nycomed Amersham will continue to supply products and carry out research and development for us at cost in accordance with the contract manufacture agreements. These agreements effectively transfer the financial benefits and risks of those operations to us. Nycomed Amersham will also continue to supply services to us, and continue to distribute products on our behalf. CREATION OF DELAWARE HOLDING COMPANY APBiotech Inc, a recently formed Delaware corporation, was created in connection with this offering to issue the shares in this offering and become the holding company for our operating businesses. The formation of APBiotech Inc, the restructuring of the shareholder arrangements and share ownership, revisions to our existing capital structure, including the issuance of two classes of stock, and changes to certain other existing arrangements with Nycomed Amersham are all part of the reorganization. The reorganization will be completed just prior to the closing of this offering. You should read "The Reorganization" for a discussion of the steps in the reorganization. After completion of the reorganization and this offering, Nycomed Amersham's voting power will be reduced from 55% to approximately 46.8%, assuming the underwriters do not exercise their over-allotment option and Pharmacia's voting power will remain at 45.0%. Due to arrangements under the shareholders' agreement and Nycomed Amersham's voting position, Nycomed Amersham will control our board of directors, and we will continue to be consolidated as its subsidiary. Nycomed Amersham and Pharmacia have structured the reorganization in this manner in order to accomplish their goals of enabling our future growth and development by creating a public company. ONGOING ARRANGEMENTS BETWEEN APBIOTECH, NYCOMED AMERSHAM AND PHARMACIA GENERAL SERVICES AGREEMENT Under this agreement, Nycomed Amersham has agreed to provide us with certain services which are necessary to run our business in the current manner, including warehousing, freight and other transportation services, computer systems and software, professional and accounting staff and insurance. 84 86 Nycomed Amersham has also agreed under the terms of the general services agreement, subject to some limitations, to indemnify us if we incur any liability arising out of its negligence in providing the services. We have agreed to indemnify Nycomed Amersham against third party claims, other than those arising from Nycomed Amersham's negligent acts or omissions. There is no limit to the amount of our indemnification. The general services agreement contains customary termination events. Additionally, Nycomed Amersham may terminate the agreement upon three months' notice if Nycomed Amersham ceases to have the right to nominate the majority of our board of directors. Following termination of the general services agreement, we have an obligation to pay Nycomed Amersham an amount which decreases over a number of months in respect of the continuing costs of the terminated services. CONTRACT MANUFACTURE AGREEMENTS Under the contribution agreement, Nycomed Amersham retained ownership manufacturing sites at Cardiff and Amersham Laboratories until we obtained Nuclear Site Licenses for the sites. We have decided not to apply for such a licenses and Nycomed Amersham will continue to perform contract manufacturing for us at both Cardiff and Amersham Laboratories. Nycomed Amersham has agreed under the terms of the contract manufacture agreements, subject to some limitations, to indemnify us if we incur any liability arising out of its negligence in performing its obligations. We have agreed to indemnify Nycomed Amersham against third party claims, other than those arising from Nycomed Amersham's negligent acts or omissions. There is no limit to the amount of our indemnification. The August 4, 1997 agreement for the Cardiff site was for an initial term of one year, and continues until the Nuclear Installations Inspectorate, or NII, grants a license to us under the Nuclear Installations Act 1965 for the Cardiff site and Nycomed Amersham is able to transfer title to the site to us. The agreement for the Amersham Laboratories site has separate termination clauses for manufacturing services and for research and development services. The manufacturing provisions for the Amersham Laboratories site have an initial term of seven years (through August 4, 2004), renewable for one or more further terms of five years. Notice of renewal must be given two years before the end of the initial term. The initial term of the research and development provisions ran until December 31, 2000, and thereafter may be renewed for further periods of 12 months, each on six months' prior notice. The agreement has been renewed until December 31, 2001. Following termination of the agreement, we have agreed to pay Nycomed Amersham an amount which decreases over 18 months with respect to the costs of the terminated services. Nycomed Amersham retains any liability relating to decommissioning of the Cardiff site for the period prior to August 4, 1997. In the event that we terminate the contract manufacture agreement relating to the Cardiff site, we have the obligation to reimburse Nycomed Amersham for decommissioning and waste disposal costs relating to the period after August 4, 1997. THE SHAREHOLDERS' AGREEMENT OVERVIEW In connection with this offering and the reorganization, we, Nycomed Amersham and Pharmacia will execute a new shareholders' agreement to govern our and their rights. This agreement will have a significant impact on our corporate governance. In addition to the shareholders' agreement, our certificate of incorporation and bylaws will also contain provisions relating to corporate governance and rights relating to directors and shareholders. See "Description of Capital Stock." Our certificate of incorporation provides that any corporate actions which require shareholders' approval must be approved by a 66.67% vote of our shareholders. This means that no shareholders' resolution can be approved unless both of our principal shareholders approve it. Our new shareholders will have little influence, therefore, over resolutions or events that require shareholder approval under Delaware law. See "Description of Capital Stock." 85 87 We set out the material terms of the shareholders' agreement below. COMPOSITION OF BOARD OF DIRECTORS The shareholders' agreement governs the composition of our board of directors. Pharmacia has the right to nominate two directors to our board of directors so long as Pharmacia beneficially owns Class B common stock representing an interest in our outstanding common shares that is more than 10.0% of our total outstanding common shares. Nycomed Amersham has the right to nominate six directors to our board of directors, including the Chairman, for so long as Nycomed Amersham beneficially owns an interest in our outstanding common shares that is more than 35.0%. In addition, at all times, our board will include three independent directors nominated by the nominating committee. At any time that Pharmacia's ownership of Class B common stock represents an interest that is less than 10.0% of our total outstanding common shares, Pharmacia will cause its designees to resign from our board of directors. After the conversion of all its outstanding shares of our Class B common stock into common stock in accordance with our certificate of incorporation, Pharmacia will no longer have the right to nominate or elect our directors and we will reduce our board from eleven to nine directors. From and after that time, our directors will be elected by a plurality vote of the holders of common stock. Each Pharmacia nominated director serving on the board at that time shall continue to hold office for the unexpired portion of that director's term. Directors will be elected to serve one year terms or until their successors are elected. Nycomed Amersham and Pharmacia have agreed to vote their shares in favor of the other's nominees to our board of directors and have given irrevocable proxies to each other to ensure that this vote is enforced. PHARMACIA APPROVAL REQUIRED FOR CERTAIN ACTIONS Except as otherwise provided in our certificate of incorporation or by-laws, a simple majority of the board of directors will approve all board resolutions. In accordance with the terms of the shareholders' agreement and our certificate of incorporation we will need the approval of at least one of the directors elected by Pharmacia to approve: -- acquisitions or divestitures of securities or assets having a fair market value, or for consideration having a fair market value, in excess of the protection value, as described below; -- the issuance of securities having a fair market value, or for consideration having a fair market value, in excess of the protection value; -- dividends and distributions of securities or assets having a fair market value in excess of the protection value; -- a material change in our line of business; -- the dissolution or liquidation of our company or APBiotech Ltd.; or -- the issuance of equity securities after the time that our reorganization and this offering are completed until April 1, 2002. We refer to each of the above events as a "protective matter." For purposes of the above, "protection value" means an amount in cash equal to 25.0% of our "aggregate notional market capitalization." Aggregate notional market capitalization means the product of: -- the average of the closing bid prices for our common stock for the 20 consecutive trading days prior to the date on which the protective matter is voted on by our board, referred to as the determination date, multiplied by -- the sum of (A) the number of shares of our common stock issued and outstanding as of the determination date, plus (B) the number of shares of our common stock issuable at any time upon 86 88 conversion of the Class B ordinary shares of APBiotech Ltd. and shares of our Class B common stock issued and outstanding as of the determination date. The provisions of the shareholders' agreement described in this section terminate upon Pharmacia owning less than 10.0% of our stock. DISCUSSION COMMITTEE In accordance with the terms of the shareholders' agreement, we have agreed to establish a discussion committee. The discussion committee will consist of seven members: two independent directors, two directors nominated by Pharmacia and three directors nominated by Nycomed Amersham. The quorum for the discussion committee will be three directors: one nominated by Pharmacia, one nominated by Nycomed Amersham and one independent director. If a quorum cannot be formed, a subsequent committee meeting will be held with a minimum notice of seven calendar days, at which meeting the quorum will be directors constituting at least one third of the members of the committee. Before we take any action with respect to any discussion matter, the discussion committee shall make recommendations to the board concerning this discussion matter. In this instance, "action" means a final decision, final commitment, or public statement by the board. Management may take preliminary steps with regard to a discussion matter prior to review by the discussion committee. Recommendations by the discussion committee will be confidential and will not be binding on the board. A majority of all our directors must authorize or approve discussion matters. A discussion matter is any action that we take with respect to: -- acquisitions or divestitures of securities or assets having a fair market value, or for consideration having a fair market value, in excess of $200 million; -- the issuance of securities having a fair market value, or for consideration having a fair market value, in excess of $200 million; -- dividends on and distributions of securities or assets having a fair market value in excess of $200 million; or -- incurrence of indebtedness (other than indebtedness incurred pursuant to any credit facility that has been the subject of a previous report of the discussion committee) that would cause our aggregate consolidated indebtedness (excluding the loan notes to be issued by us to Nycomed Amersham in connection with the reorganization) to exceed $200 million. Unless the directors nominated by Pharmacia agree on a shorter period of time, we will have an obligation to furnish the members of the discussion committee with all documents, papers and information relating to a particular discussion matter no less than 15 calendar days before the meeting of the discussion committee at which this discussion matter is being considered. The discussion committee's recommendation must be made on the day of the discussion committee's meeting, after which the board may take any action regarding the discussion matter as it deems appropriate, so long as a majority of our directors approve any action. NOMINATION OF DIRECTORS The shareholders' agreement provides that the nomination of any person not designated by Nycomed Amersham or Pharmacia for director requires the approval of a majority of the nominating committee. NYCOMED AMERSHAM AND PHARMACIA--RIGHT TO MAINTAIN PERCENTAGE OWNERSHIP IN OUR STOCK We are now and expect to continue to be a subsidiary of Nycomed Amersham's consolidated group. In order to preserve our status as a subsidiary of this consolidated group, the shareholders' agreement contains provisions which permit Nycomed Amersham and Pharmacia to subscribe for new shares in order to maintain ownership thresholds in our stock. Nycomed Amersham will have subscription rights in the event we issue equity securities, other than upon exercise of executive and employee stock options not in excess of 3.0% of our common shares outstanding immediately following the reorganization, which will permit Nycomed Amer- 87 89 sham to maintain ownership at its then existing share ownership level. Pharmacia will have subscription rights in the event we issue equity securities, other than upon exercise of executive and employee stock options not in excess of 3.0% of our common shares outstanding immediately following reorganization, to the extent necessary to permit Pharmacia to retain at least a 20.0% equity interest in us. These provisions of the shareholders' agreement may have the effect of limiting our ability to use our capital stock as consideration for acquisitions or otherwise. The shareholders' agreement also contains provisions which give Nycomed Amersham the option to purchase our shares from Pharmacia. Between July 1, 2002 and December 31, 2002, Nycomed Amersham has the option to purchase shares from Pharmacia equal to at least 33.33% of the shares held by Pharmacia immediately following the reorganization, but not more than 44.44%. During the same period, Pharmacia must retain at least 33.33% of its shares held immediately following the reorganization. Between January 1, 2004 and June 30, 2004, Nycomed Amersham has the option to purchase all, but not less than all, of the shares then held by Pharmacia. REGISTRATION RIGHTS We have agreed in the shareholders' agreement that, at the request of Nycomed Amersham or Pharmacia, we will file one or more registration statements under the Securities Act in order to permit Nycomed Amersham and Pharmacia to offer and sell our shares. Each of Nycomed Amersham and Pharmacia are entitled to demand registration rights and will be permitted to "piggyback" on any registration statement to sell our shares that we file, including due to a demand registration. The initial demand right may not be exercised until 180 days after the date of the reorganization. We have agreed to use our best efforts to facilitate the registration and offering of those shares that Nycomed Amersham and/or Pharmacia designate for sale. We have the right to postpone the filing or effectiveness of a registration statement for a period of up to 45 days in any nine-month period if: -- we have filed a registration statement with respect to securities to be distributed in an underwritten public offering and we have been advised by the lead or managing underwriter that an offering by Nycomed Amersham or Pharmacia would materially and adversely affect the offering of our securities, or -- we are in possession of material non-public information concerning a business combination transaction, the disclosure of which would not be in our best interest. Generally, we will pay all expenses related to the performance by us of our obligations with respect to the registration of our shares held by Nycomed Amersham and Pharmacia. In addition, we are only required to pay for one registration within any six-month period. We, Nycomed Amersham and Pharmacia each have agreed to customary indemnification and contribution provisions with respect to liability incurred in connection with these registrations. FINANCING ARRANGEMENTS Since our formation, Nycomed Amersham has provided most of our financing through uncommitted intra-group loan facilities with our operating companies. These uncommitted arrangements will continue on a smaller scale after the reorganization and this offering. Our core financing needs, however, will be met by a committed long-term credit facility, which we intend to enter into subsequent to the completion of this offering. UNCOMMITTED INTRA-GROUP FACILITY AGREEMENTS Our subsidiaries hold accounts in a variety of currencies with Nycomed Amersham's Treasury department. Debit balances on accounts are charged at one month LIBOR rates plus a margin. Credit balances on accounts will earn a one month LIBID rate for the currency of that account less a margin of .5% 88 90 for local currencies and 1.00% for all other currencies. The interest rate is established with reference to the relevant LIBOR and LIBID rates available on the first working day of the calendar month. We may agree to change these interest rates to another benchmark rate, provided that the new rate will reflect interest rates of the relevant currency. Interest is calculated each month and is applied in arrears to the relevant accounts on the first working day of the calendar month, or at other intervals as agreed. Any application of interest to the accounts is made net of withholding tax at the rate applicable under the relevant treaty. RELATED PARTY TRANSACTIONS Under a bill of sale, an assignment of patents and a purchase agreement each dated December 29, 2000, we transferred to subsidiaries of Nycomed Amersham the intellectual property and tangible assets associated with our non-strategic genomics and proteomics discovery projects. We received $7.4 million and 16.4 million Swedish Kronor in cash consideration for the genomics and proteomics assets respectively. We intend to enter into a supply agreement and a distribution agreement with Nycomed Amersham to be an exclusive supplier to and a distributor for products we transferred to Nycomed Amersham. On December 29, 2000, we also entered into contract research and development agreements with each of Nycomed Amersham and its subsidiary, Goldartist Limited to continue conducting research and development services for these projects on behalf of Nycomed Amersham. We will provide the research and development services on a cost plus 7.0% basis, with all future intellectual property being owned by Nycomed Amersham. Each agreement is for an initial term ending June 30, 2001, and continues until either party terminates it by giving at least six months' written notice after June 30, 2001. 89 91 DESCRIPTION OF CAPITAL STOCK The following descriptions are summaries of the material terms of our certificate of incorporation and bylaws which will be in effect after implementation of the reorganization. Reference is made to the more detailed provisions of, and these descriptions are qualified in their entirety by reference to, the certificate of incorporation and bylaws, copies of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part, and applicable law. GENERAL Our authorized capital stock consists of 300,000,000 shares of common stock, 200,000,000 shares of Class B common stock and 100,000 shares of preferred stock. We collectively refer to the common stock and Class B common stock as common shares in this document. Pharmacia will hold all of our Class B common stock. COMMON STOCK After the completion of the offering there will be 121,629,173 shares of common stock outstanding. The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the shareholders, except that upon giving the legally required notice, shareholders may cumulate their votes in the election of directors. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive any pro rata dividends, which the board of directors declares out of funds legally available for the payment of dividends. We do not expect to pay dividends on our common stock in the foreseeable future. See "Dividends." In the event of liquidation, dissolution or winding up of our company, the holders of common stock are entitled to share pro rata in all assets remaining after payment of liabilities, subject to prior distribution rights of any outstanding preferred stock. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and non-assessable. CLASS B COMMON STOCK After the completion of the offering there will be 87,285,484 shares of Class B common stock outstanding. Pharmacia, as the sole holder of Class B common stock, is entitled to approximately 1.1374 votes per share on all matters to be voted upon by the shareholders. Our shareholders' agreement provides that APBiotech Ltd. common stock may be exchanged for our Class B common stock. After the first exchange, the voting rights of the Class B common stock will be reduced from 1.14 votes per share to one vote per share. Any time after the voting rights of Class B common stock have been reduced to one vote per share, the holders of a majority of the outstanding shares of Class B common stock may request that each of the outstanding shares of Class B common stock be converted into the same number of shares of common stock. Upon any sale or other disposition of shares of Class B common stock by Pharmacia or its affiliates, except for transfers to affiliates, the shares will automatically be converted into shares of common stock on a share for share basis. In addition, all the outstanding shares of Class B common stock will automatically convert into shares of common stock on a share for share basis when the holders of Class B common stock own less than 10% of all our outstanding common shares. Pursuant to our shareholders' agreement, only Pharmacia or one of its affiliates may hold Class B common stock. PREFERRED STOCK The board of directors has the authority to issue the preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of a series, without further vote or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change 90 92 in control of our company without further action by the shareholders and may adversely affect the voting and other rights of the holders of common shares. We currently have no plans to issue any preferred stock. The outstanding redeemable preferred stock of APBiotech Ltd. will be converted into common stock of APBiotech Ltd. before it is exchanged for our common stock as described above. This redeemable preferred stock will be converted into common stock based on the mid-point of our price range as set forth on the cover page of the preliminary prospectus. ANTI-TAKEOVER EFFECTS OF DELAWARE LAW Following consummation of this offering, we will be subject to the "business combination" provisions of Section 203 of the General Corporation Law of the State of Delaware. In general, this provision prohibits a publicly held Delaware corporation from engaging in various "business combination" transactions with any interested stockholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless -- the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; -- upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or -- on or subsequent to the date the stockholder became an interested stockholder, the business combination is approved by the board of directors and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 66.67% of the outstanding voting stock which is not owned by the interested shareholder. A "business combination" is defined to include mergers, asset sales and other transactions resulting in financial benefit to a shareholder. In general, an "interested shareholder" is a person who, together with affiliates and associates, owns or within the past three years owned 15% or more of a corporation's voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to our company and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our shareholders the opportunity to sell their stock at a price above the prevailing market price. PROVISIONS OF APBIOTECH'S CERTIFICATE OF INCORPORATION AND BYLAWS Our certificate of incorporation provides that any person purchasing or acquiring an interest in shares of our capital stock is deemed to have consented to the provisions relating to intercompany agreements and transactions with interested parties and corporate opportunities described below. The following provisions of our certificate of incorporation may only be repealed or amended by a 66.67% vote of our shareholders. For purposes of the following description, we, us or our company includes, all corporations and other entities in which we own 50.0% or more of the outstanding voting interests, and Nycomed Amersham or Pharmacia includes all corporations and other entities that are "affiliates" of Nycomed Amersham or Pharmacia within the meaning of Rule 12b-2 under the Exchange Act. COMPETITION BY NYCOMED AMERSHAM OR PHARMACIA WITH US; CORPORATE OPPORTUNITIES Our certificate of incorporation provides that Nycomed Amersham and Pharmacia have no duty to refrain from engaging in the same or similar activities or lines of business as we engage in. If either Nycomed Amersham or Pharmacia learns of a potential matter that may be a corporate opportunity for both Nycomed Amersham or Pharmacia and us, Nycomed Amersham and Pharmacia have no duty to communicate or offer this opportunity to us. In addition, Nycomed Amersham and Pharmacia will not be liable to us or our shareholders for breach of any fiduciary duty if Nycomed Amersham and Pharmacia pursue or acquire the corporate opportunity or do not communicate it to us. 91 93 In the event that a director, officer or employee of our company who is also a director, officer or employee of Nycomed Amersham or Pharmacia acquires knowledge of a corporate opportunity, such director, officer or employee shall act in good faith in a manner consistent with the following policy: -- a corporate opportunity conceived by or offered to any person who is a director but not an officer of ours and who is also an officer (whether or not a director) of Nycomed Amersham or Pharmacia shall belong to Nycomed Amersham or Pharmacia, unless the opportunity is expressly offered in writing, to this person primarily in his or her capacity as a director of our company, in which case the opportunity shall belong to us; -- a corporate opportunity offered to, or conceived by, any person who is an officer of our company (whether or not a director of our company) and who is also a director but not an officer of Nycomed Amersham or Pharmacia shall belong to us, unless the opportunity is expressly offered in writing, to this person primarily in his or her capacity as a director of Nycomed Amersham or Pharmacia, in which case the opportunity shall belong to Nycomed Amersham or Pharmacia and -- a corporate opportunity offered to any other person who is either an officer of both our company and Nycomed Amersham or Pharmacia or a director of both our company and Nycomed Amersham or Pharmacia and not an officer of either company, shall belong to that company or to us if the opportunity is expressly offered to, in writing, or conceived of by, this person primarily in his or her capacity as an officer or director of our company or of Nycomed Amersham or Pharmacia, respectively; otherwise, the opportunity shall belong to us. Our certificate of incorporation also provides that any corporate opportunity that belongs to Nycomed Amersham or Pharmacia or to us shall not be pursued by the other party. If the corporate opportunity is not pursued diligently and in good faith within a reasonable period of time, the other party may pursue such corporate opportunity. Certain of the foregoing provisions of our certificate of incorporation, as they relate to Pharmacia, expire on the date that Pharmacia ceases to own at least 10% of our outstanding common shares and no person who is a director or officer of our company is also a director or officer of Pharmacia. LIMITATION ON DIRECTORS' LIABILITIES Our certificate of incorporation limits, to the fullest extent permitted by Delaware corporate law, the personal liability of directors for monetary damages for breach of their fiduciary duties. Section 145 of the General Corporation Law of the State of Delaware permits us to indemnify officers, directors or employees against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with legal proceedings if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the corporation, and, with respect to any criminal act or proceeding, had no reasonable cause to believe his or her conduct was unlawful, provided that with respect to actions by, or in the right of the corporation against, those individuals, indemnification is not permitted as to any matter as to which that person is adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation, unless, and only to the extent that, the court in which the action or suit was brought determines upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Individuals who are successful in the defense of any action are entitled to indemnification against expenses reasonably incurred in connection therewith. Our board of directors will provide similar indemnification to our officers, employees and agents as they deem appropriate and as authorized by Delaware law. We plan to purchase insurance on behalf of any director, officer, employee or agent against any expense incurred in his or her capacity. 92 94 LISTING We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol "APBI." TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the common stock will be EquiServe. 93 95 SHARES ELIGIBLE FOR FUTURE SALE The 18,200,000 shares of our common stock sold in this offering, or 20,930,000 shares if the underwriters exercise their over-allotment option in full, will be freely tradable without restriction under the Securities Act of 1933, as amended, or the Securities Act, except for any shares which may be acquired by our affiliates, as that term is defined in Rule 144 under the Securities Act. These shares will remain subject to the resale limitations of Rule 144. The shares of our common stock and class B common stock that will continue to be held by Nycomed Amersham and Pharmacia after the offering constitute "restricted securities" within the meaning of Rule 144, and will be eligible for sale by Nycomed Amersham and Pharmacia in the open market after the offering, subject to contractual lock-up provisions and the applicable requirements of Rule 144, both of which are described below. The sale of shares of common stock and Class B common stock by Nycomed Amersham and Pharmacia are subject to certain limitations agreed in the shareholders' agreement, including the obligation of Pharmacia to retain certain shares subject to the Nycomed Amersham option exercisable in 2002 and certain tag-along rights and rights of first refusal. We have granted registration rights to Nycomed Amersham and Pharmacia. See "--Registration Rights Agreement" below. Generally, Rule 144 provides that a person who has beneficially owned restricted shares for at least one year will be entitled to sell on the open market in brokers' transactions within any three-month period a number of shares that does not exceed the greater of: -- 1% of the then outstanding shares of common stock; and -- the average weekly trading volume in the common stock on the open market during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to post-sale notice requirements and the availability of current public information about the company. In the event that any person, other than Nycomed Amersham and Pharmacia, who is deemed to be an affiliate purchases shares of our common stock in the offering or acquires shares of our common stock pursuant to an employee benefit plan, the shares held by that person are required under Rule 144 to be sold in brokers' transactions, subject to the volume limitations described above. Shares properly sold in reliance upon Rule 144 to persons who are not affiliates are freely tradable without restriction. Sales of substantial amounts of our common stock in the open market, or the availability of shares for sale, could adversely affect the price of our common stock. Any shares distributed by Nycomed Amersham or Pharmacia will be eligible for immediate resale in the public market without restrictions by persons other than our affiliates. Our affiliates would be subject to the restrictions of Rule 144 described above other than the one-year holding period requirement. We, Nycomed Amersham, Pharmacia and our directors and executive officers have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we will not, during the period ending 180 days after the date of this prospectus, sell or otherwise dispose of any shares of our common stock, subject to limited exceptions. Nycomed Amersham and Pharmacia have also agreed not to exercise or make a request to exercise any registration right until the end of the 180 day period. See "Underwriters." An aggregate of 19,900,000 shares of our common stock are reserved for issuance under our stock option plans. We intend to file registration statements on Form S-8 covering the issuance of shares of our common stock pursuant to our stock option plans. Accordingly, the shares issued pursuant to our stock option plans will be freely tradable, subject to the restrictions on resale by affiliates under Rule 144. REGISTRATION RIGHTS AGREEMENT As part of the shareholders' agreement, we have granted Nycomed Amersham and Pharmacia registration rights. The demand registration rights provide Nycomed Amersham and Pharmacia with the right, 94 96 subject to some conditions and limitations, to request that we affect a registration of all or a portion of their shares. The initial demand right may not be exercised until 180 days after the date of the reorganization. The piggyback registration rights provide Nycomed Amersham and Pharmacia with the right, subject to some exceptions, to include common shares owned by them in any registration of common shares made by us for our own account or for the account of other shareholders. We do not currently have any other registration rights outstanding. See "Relationship With Nycomed Amersham and Pharmacia." 95 97 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES STOCKHOLDERS This is a general summary of certain United States federal income and estate tax considerations with respect to your acquisition, ownership and disposition of APBiotech common stock if you are a holder other than: -- a citizen or resident alien individual of the United States; -- a corporation, partnership or other entity created or organized in, or under the laws of, the United States or of any political subdivision of the United States; -- an estate, the income of which is subject to United States federal income taxation regardless of its source; -- a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust; or -- a trust that existed on August 20, 1996 and elected to be treated as a domestic trust as of that date. This summary does not address all of the United States federal income and estate tax considerations that may be relevant to you in light of your particular circumstances. This summary does not discuss any aspects of state, local or non-United States taxation. This summary is based on current provisions of the Internal Revenue Code, Treasury regulations, judicial opinions, published positions of the Internal Revenue Service, or IRS, and all other applicable authorities, all of which are subject to change, possibly with retroactive effect. WE URGE PROSPECTIVE NON-UNITED STATES INVESTORS TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSIDERATIONS OF ACQUIRING, HOLDING AND DISPOSING OF YOUR SHARES OF THE COMMON STOCK. DIVIDENDS We do not currently anticipate paying dividends for the foreseeable future. However, any dividends we do pay to you generally will be subject to United States withholding tax at a rate of 30%, or a lower rate prescribed by an applicable income tax treaty, of the gross amount of the dividends unless the dividends are effectively connected with your conduct of a trade or business within the United States (and, if certain tax treaties apply, are attributable to a United States permanent establishment maintained by you) and you file the appropriate documentation with us. Dividends effectively connected with a United States trade or business generally will be subject to United States federal income tax on a net income tax basis in the same manner as generally applied to United States persons. If you are a corporation, your "effectively connected earnings and profits," within the meaning of the Internal Revenue Code, subject to adjustments, may also be subject to the branch profits tax at a rate of 30%, or a lower rate as may be specified by an applicable income tax treaty. You should consult any applicable income tax treaties that may provide for a lower rate of tax or other rules different from those described above. You may be required to satisfy certification requirements in order to claim treaty benefits or otherwise claim a reduction of, or exemption from, withholding under these rules. SALE OR OTHER DISPOSITION OF THE COMMON STOCK You generally will not be subject to United States federal income tax on any gain realized upon the sale or other disposition of your shares of the common stock unless: -- the gain is effectively connected with the conduct of a trade or business within the United States, and, if some tax treaties apply, is attributable to a United States permanent establishment you maintain; -- you are an individual, you hold shares of the common stock as a capital asset, you are present in the United States for 183 days or more in the taxable year of disposition and you meet other requirements; 96 98 -- you are subject to tax pursuant to the provisions of the Internal Revenue Code regarding the taxation of some U.S. expatriates; or -- we are or have been a "United States real property holding corporation" for United States federal income tax purposes (which we do not believe that we are or will become) and you hold or have held, directly or indirectly, at any time within the shorter of the five-year period preceding disposition or your holding period for the shares of the common stock, more than 5% of the common stock. Gain that is effectively connected with your conduct of a trade or business within the United States generally will be subject to United States federal income tax on a net income basis, in the same manner as generally applied to United States persons (and if you are a corporation, the branch profits tax may also apply in some circumstances), but you will not be subject to withholding. If you are described in the second bullet point above, you generally will be subject to tax at a rate of 30% on the gain realized, although the gain may be offset by some United States capital losses. You should consult any applicable income tax treaties that may provide for a lower rate of tax or other rules different from those described above. INFORMATION REPORTING AND BACKUP WITHHOLDING We must report annually to the IRS and to you the amount of dividends we pay to you, and any tax we withhold. These reporting requirements apply regardless of whether withholding is reduced by an applicable income tax treaty. Pursuant to applicable tax treaties or other agreements, this information also may be made available to the tax authorities in the country in which you are a resident. Under current Treasury regulations, United States information reporting requirements and backup withholding tax at a rate of 31% will generally apply to dividends paid to you on the common stock at an address inside the United States and to payments to you of the proceeds of a sale of the common stock by a United States office of a broker unless you certify, under penalties of perjury, that you are not a U.S. holder or otherwise establish an exemption. Some holders, including all corporations, are exempt from backup withholding. Information reporting (but not backup withholding) generally will also apply to payments of the proceeds of sales of the common stock by foreign offices of United States brokers, or foreign brokers with some types of relationships with the United States, unless the broker has documentary evidence in its records that you are not a U.S. holder and some other conditions are met, or you otherwise establish an exemption. The IRS has issued Treasury regulations generally effective for payments made after December 31, 2000 that will affect the procedures to be followed by you in establishing that you are not a U.S. holder for purposes of the backup withholding and information reporting requirements. Among other things, if you are not currently required to furnish certification of foreign status, you may be required to furnish certification of foreign status in the future. You should consult your tax advisor concerning the effect of these regulations on an investment in the common stock. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to you can be refunded or credited against your United States federal income tax liability, if any, if the required information is timely furnished to the IRS. ESTATE TAX Common stock owned or treated as owned by an individual who is not a citizen or resident (as defined for United States federal estate tax purposes) of the United States at the time of his or her death will be includible in the individual's gross estate for United States federal estate tax purposes (unless an applicable estate tax treaty provides otherwise) and therefore may be subject to United States federal estate tax. 97 99 UNDERWRITERS Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them severally, the number of shares indicated below:
NUMBER OF NAME SHARES ---- ---------- Morgan Stanley & Co. Incorporated........................... Goldman, Sachs & Co......................................... J.P. Morgan Securities Inc. ................................ Salomon Smith Barney Inc. .................................. ---------- Total.................................................. 18,200,000 ==========
The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below. The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. Any underwriter may allow, and such dealers may reallow, a concession not in excess of $ a share to other underwriters or to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 2,730,000 additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter's name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table. If the underwriters' option is exercised in full, the total price to the public would be $ million, the total underwriters' discounts and commissions would be $ million and total proceeds to us would be $ million. The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them. We have applied for quotation of the common stock on the Nasdaq National Market under the symbol "APBI." We, our directors, executive officers and existing shareholders have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we will not, during the period ending 180 days after the date of this prospectus: -- offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of 98 100 directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or -- enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock; whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to: -- the sale of the shares to the underwriters; -- the issuance by us of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; or -- transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters of this offering. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make internet distributions on the same basis as other allocations. In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is "covered" if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, amount other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. In addition, to stabilize the price of the common stock, the underwriters may bid for, and purchase, shares of common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering if the syndicate repurchases previously distributed common stock to cover syndicate short positions or to stabilize the price of the common stock. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time. From time to time, Morgan Stanley & Co. Incorporated has provided, and continues to provide, investment banking services to Nycomed Amersham and us. We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. We have not taken any action to permit a public offering of the common stock outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who have come into possession of this prospectus must inform themselves about and observe restrictions relating to the offering of the common stock and the distribution of this prospectus outside the United States. 99 101 PRICING OF THE OFFERING Prior to this offering, there has been no public market for the shares of common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. Among the factors to be considered in determining the initial public offering price will be our future prospects and our industry in general; sales, earnings and certain other of our financial operating information in recent periods; and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those of ours. The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors. LEGAL MATTERS The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Davis Polk & Wardwell, New York, New York. Various legal matters relating to this offering will be passed upon for the underwriters by Shearman & Sterling, New York, New York. EXPERTS The consolidated financial statements of Amersham Pharmacia Biotech Ltd. as of December 31, 1999 and 2000 and for the years ended December 31, 1998, 1999 and 2000, included in this registration statement and prospectus, have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The balance sheet of APBiotech Inc as of December 31, 2000, included in this registration statement and prospectus, has been included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC, Washington, D.C. 20549, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Certain items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and our common stock, reference is made to the registration statement and the exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits and schedules thereto, may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at http://www.sec.gov, from which interested persons can electronically access the registration statement, including the exhibits and any schedules thereto. As a result of the offering, we will become subject to the full informational requirements of the Securities Exchange Act of 1934, as amended. We will fulfill our obligations with respect to those requirements by filing periodic reports and other information with the SEC. We intend to furnish our shareholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. 100 102 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Audited Consolidated Financial Statements for Amersham Pharmacia Biotech Ltd: Report of Independent Accountants......................... F-2 Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000....................... F-3 Consolidated Balance Sheets as of December 31, 1999 and 2000................................................... F-4 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000....................... F-5 Consolidated Statements of Changes in Stockholders' Equity................................................. F-6 Notes to Consolidated Financial Statements................ F-7 Audited Financial Statements for APBiotech Inc: Report of Independent Accountants......................... F-37 Balance Sheet as of December 31, 2000..................... F-38
F-1 103 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Amersham Pharmacia Biotech Ltd.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows, after the restatement described in note 2A, present fairly, in all material respects, the financial position of Amersham Pharmacia Biotech Ltd. and Subsidiaries (the "Company") at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP Florham Park, New Jersey February 23, 2001 F-2 104 AMERSHAM PHARMACIA BIOTECH LTD. CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 (RESTATED) (RESTATED) 2000 ------------ ------------ ------------ (IN MILLIONS EXCEPT FOR PER SHARE AMOUNTS) Net sales (including $13.9, $14.1 and $1.2 to related parties--see note 23)................ $ 729.4 $ 864.1 $ 927.0 Cost of goods sold (including $96.0, $118.6 and $106.8 from/to related parties-- see note 23).......................................... (329.3) (404.4) (425.1) ------- ------- ------- Gross profit................................... 400.1 459.7 501.9 ------- ------- ------- Selling, general and administrative expenses (including $24.6, $20.8 and $23.2 to related parties--see note 23)........................ (317.9) (336.7) (366.3) Purchased in-process research and development.................................. -- -- (3.2) Research and development expenses (including $17.2, $15.0 and $17.8 to related parties--see note 23)........................ (67.9) (89.6) (112.2) Other operating income (expense), net.......... (3.9) 0.7 2.8 ------- ------- ------- Total operating expenses....................... (389.7) (425.6) (478.9) ------- ------- ------- Operating income............................... 10.4 34.1 23.0 Interest income and other income, net (including $2.3, $1.5 and $0.9 to related parties--see note 23)........................ 4.5 3.2 3.1 Interest expense (including $13.3, $21.1 and $26.9 to related parties--see note 23)....... (16.5) (24.1) (30.1) ------- ------- ------- Income (loss) before income taxes and minority interest..................................... (1.6) 13.2 (4.0) ------- ------- ------- Minority interest, net of tax.................. (0.7) (0.5) (0.3) Provision for income taxes..................... (13.5) (17.6) (14.0) ------- ------- ------- Net loss....................................... $ (15.8) $ (4.9) $ (18.3) Preferred stock dividend....................... (9.3) (9.9) (9.4) ------- ------- ------- Net loss available to common stockholders...... $ (25.1) $ (14.8) $ (27.7) ======= ======= ======= Basic and diluted net loss per share........... $(25.10) $(14.80) $(27.70) ======= ======= ======= Weighted average shares outstanding............ 1.0 1.0 1.0 ======= ======= =======
The accompanying notes are an integral part of these financial statements. F-3 105 AMERSHAM PHARMACIA BIOTECH LTD. CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, ---------------------------- 1999 (RESTATED) 2000 ------------ ------------ (IN MILLIONS) ASSETS CURRENT ASSETS: Cash and cash equivalents (including $6.8 and $21.5 on deposit with related parties--see note 23).............. $ 30.9 $ 42.2 Trade receivables, less allowances of $5.5 in 2000 and $4.9 in 1999............................................ 236.7 241.4 Inventories............................................... 114.4 133.6 Deferred income taxes..................................... 40.0 27.3 Other current assets (including $6.6 and $2.1 from related parties--see note 23)................................... 41.9 36.0 -------- -------- Total current assets............................... 463.9 480.5 -------- -------- Property, plant and equipment, net........................ 227.8 235.6 Goodwill.................................................. 374.3 361.0 Other intangible assets................................... 152.3 125.9 Other non-current assets.................................. 23.3 65.8 -------- -------- Total assets....................................... $1,241.6 $1,268.8 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt (including current maturities on long-term debt and $395.9 and $453.9 due to related parties--see note 23)................................................ $ 397.2 $ 454.9 Accounts payable.......................................... 62.4 62.9 Accrued liabilities....................................... 84.9 85.7 Income taxes payable...................................... 20.7 22.8 Other current liabilities (including $21.5 and $20.6 to related parties--see note 23)........................... 53.0 47.6 -------- -------- Total current liabilities.......................... 618.2 673.9 -------- -------- Long-term debt............................................ 13.1 4.8 Deferred income taxes..................................... 76.6 63.1 Employee benefit obligations.............................. 60.9 58.8 Other liabilities......................................... 10.3 11.7 -------- -------- Total liabilities.................................. 779.1 812.3 -------- -------- COMMITMENTS AND CONTINGENCIES (NOTE 19) Redeemable preferred, stock $1.62 par value 67,916,327 shares issued and outstanding, at redemption value and held by related parties................................... 132.5 131.3 -------- -------- STOCKHOLDERS' EQUITY: Common stock, $1.62 par value 1,000,000 shares authorized and issued.............................................. 1.6 1.6 Additional paid-in capital................................ 426.3 448.8 Retained deficit.......................................... (101.5) (133.9) Unearned compensation expense............................. (2.2) (5.9) Accumulated other comprehensive income.................... 5.8 14.6 -------- -------- Total stockholders' equity......................... 330.0 325.2 -------- -------- Total liabilities and stockholders' equity......... $1,241.6 $1,268.8 ======== ========
The accompanying notes are an integral part of these financial statements. F-4 106 AMERSHAM PHARMACIA BIOTECH LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1998 1999 (RESTATED) (RESTATED) 2000 ------------ ------------ ------------ (IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................... $(15.8) $ (4.9) $(18.3) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.................... 61.8 77.1 89.4 Amortization of unearned compensation............ 2.0 0.9 10.6 Gain (loss) on asset disposals................... 8.1 1.0 (2.7) Deferred income taxes............................ (9.2) (3.3) (8.7) Capital contribution - services provided by Nycomed Amersham.............................. 2.5 3.8 4.7 Write-off of purchased in-process research and development................................... -- -- 3.2 ------ ------ ------ 49.4 74.6 78.2 Changes in operating assets and liabilities: (Increase) in trade receivables.................. (55.1) (30.8) (28.6) (Increase) decrease in inventories payables...... 12.2 (24.8) (28.5) Increase in accounts payable..................... 22.9 -- 16.7 (Decrease) increase in accruals and other creditors..................................... 13.8 (24.5) 9.0 Increase (decrease) in income taxes payable...... (1.4) 8.2 0.3 (Decrease) increase in other assets and liabilities................................... (9.6) 11.6 1.7 ------ ------ ------ Net cash provided by operating activities.......... 32.2 14.3 48.8 ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment....... (48.8) (64.4) (70.9) Acquisition of businesses, net of cash acquired...................................... (184.3) -- (11.8) Purchases of investments......................... -- (3.9) (14.1) Proceeds from asset disposals.................... 1.0 0.6 11.2 ------ ------ ------ Net cash used by investing activities.............. (232.1) (67.7) (85.6) ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term debt...................... 212.1 42.7 68.8 Repayment of long-term debt...................... (0.3) (2.8) (7.7) Parent company option trust payment (see note 23)........................................... -- -- (17.4) Dividend to Nycomed Amersham (see note 23)....... -- -- (2.6) Capital contribution from Nycomed Amersham (see notes 6 and 23)............................... -- 8.7 9.1 ------ ------ ------ Net cash provided by financing activities.......... 211.8 48.6 50.2 ------ ------ ------ Effect of exchange rates on cash................... (3.0) (4.0) (2.1) ------ ------ ------ Net change in cash and cash equivalents............ 8.9 (8.8) 11.3 Cash and cash equivalents at beginning of year..... 30.8 39.7 30.9 ------ ------ ------ Cash and cash equivalents at end of year........... $ 39.7 $ 30.9 $ 42.2 ====== ====== ======
The accompanying notes are an integral part of these financial statements. F-5 107 AMERSHAM PHARMACIA BIOTECH LTD. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL UNEARNED ACCUMULATED TOTAL COMMON PAID-IN COMPENSATION RETAINED COMPREHENSIVE COMPREHENSIVE STOCKHOLDERS STOCK CAPITAL EXPENSE DEFICIT INCOME (LOSS) INCOME EQUITY ------ ---------- ------------ -------- ------------- ------------- ------------ (IN MILLIONS) BALANCE DECEMBER 31, 1997 (RESTATED)....................... $1.6 $408.8 $(2.6) $ (61.6) $18.7 $364.9 Net loss........................... -- -- -- (15.8) -- $(15.8) (15.8) Amortization of unearned compensation expense............. -- -- 2.0 -- -- 2.0 Accretion of preferred stock dividend......................... -- -- -- (9.3) -- (9.3) Currency translation adjustment.... -- -- -- -- (0.7) (0.7) (0.7) Unrealized gain on investments..... -- -- -- -- (9.3) (9.3) (9.3) ------ Total comprehensive loss........... -- -- -- -- -- $(25.8) ====== Capital contribution--services provided by Nycomed Amersham..... -- 2.5 -- -- -- 2.5 Unearned compensation expense...... -- 2.0 (2.0) -- -- -- ---- ------ ----- ------- ----- ------ BALANCE DECEMBER 31, 1998 (RESTATED)....................... 1.6 413.3 (2.6) (86.7) 8.7 334.3 Net loss........................... -- -- -- (4.9) -- $ (4.9) (4.9) Amortization of unearned compensation expense............. -- -- 0.9 -- -- -- 0.9 Accretion of preferred stock dividend......................... -- -- -- (9.9) -- -- (9.9) Currency translation adjustment.... -- -- -- -- (2.9) (2.9) (2.9) ------ Total comprehensive loss........... -- -- -- -- -- $ (7.8) ====== Capital contribution--net debt settlement related to Pharmacia Biotech acquisition.............. -- 8.7 -- -- -- 8.7 Capital contribution--services provided by Nycomed Amersham..... -- 3.8 -- -- -- 3.8 Unearned compensation expense...... -- 0.5 (0.5) -- -- -- ---- ------ ----- ------- ----- ------ BALANCE DECEMBER 31, 1999 (RESTATED)....................... 1.6 426.3 (2.2) (101.5) 5.8 330.0 Net loss........................... -- -- -- (18.3) -- $(18.3) (18.3) Amortization of unearned compensation expense............. -- -- 10.6 -- -- 10.6 Accretion of preferred stock dividend......................... -- -- -- (9.4) -- (9.4) Currency translation adjustment.... -- -- -- -- 8.8 8.8 8.8 ------ Total comprehensive loss........... -- -- -- -- -- $ (9.5) -- ====== Dividend--net transfer of Buchler from Nycomed Amersham (see note 23).............................. -- -- -- (4.7) -- (4.7) Capital contribution--transfer of Aeomica to Nycomed Amersham (see note 23)......................... -- 3.5 -- -- -- 3.5 Capital contribution--services provided by Nycomed Amersham..... -- 4.7 -- -- -- 4.7 Unearned compensation expense...... -- 14.3 (14.3) -- -- -- ---- ------ ----- ------- ----- ------ BALANCE DECEMBER 31, 2000.......... $1.6 $448.8 $(5.9) $(133.9) $14.6 $325.2 ==== ====== ===== ======= ===== ======
The accompanying notes are an integral part of these financial statements. F-6 108 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY Amersham Pharmacia Biotech Ltd. and Subsidiaries ("APB Ltd." or the "Company") is a leading global provider of biotechnology systems, products and services used in gene and protein research, drug discovery, and development and biopharmaceutical manufacturing. The Company is owned 55% by Nycomed Amersham plc ("Nycomed Amersham") and 45% by Pharmacia Corporation, and is a consolidated subsidiary of Nycomed Amersham. The Company is organized on a global basis into three principal business segments. The drug discovery segment provides high throughput systems to improve the effectiveness of life science and pharmaceutical research and development and the speed to market of drugs. The separations segment provides systems for the purification and production of biopharmaceuticals on a large scale and for separating proteins at a laboratory scale. The laboratory products segment provides tools and technical knowledge for the purification, detection and analysis of biological molecules by life science researchers. The Company also has a regional organization structure consisting of four major markets--North America, Europe, Japan and Rest of the World. The regional organization structure permits the business segments to share activities in service and sales and marketing. They also share research and development, manufacturing and distribution, worldwide. See Note 4 for Segment, Geographic and Customer information. 2. BASIS OF PREPARATION Prior to August 5, 1997, the Company operated as Amersham Life Science ("ALS"), a fully integrated division of Nycomed Amersham, and as such did not prepare separate financial statements in accordance with Generally Accepted Accounting Principles in the normal course of operations. On August 5, 1997, ALS was established as a separate legal entity in the form of APB Ltd, and acquired the Pharmacia Biotech ("PB") business from Pharmacia Corporation (see Note 6). At this time the Company also changed its fiscal year end from March 31 to December 31. Subsequent to August 5, 1997, the Company conducted operations principally as a group of separate legal entities around the world. In certain jurisdictions, however, assets, liabilities, and related revenues and expenses remained with the respective Nycomed Amersham legal entity. In these instances, agreements were entered into with the applicable Nycomed Amersham legal entity to transfer the financial benefits and risks associated with these operations from Nycomed Amersham to the Company. (see Note 22). Nycomed Amersham continues to provide certain support services to the Company and to engage in transactions with the Company (see Note 23). 2A. RESTATEMENT OF 1999 AND 1998 FINANCIAL STATEMENTS In the fourth quarter of 2000 the Company discovered that the calculation of the gains and losses on its foreign currency contracts, included in operating income required revision. As a result, the Company has F-7 109 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) revised its previously reported results of operations and financial position for 1998 and 1999 (including a decrease to opening retained earnings of $1.4 million related to amounts prior to 1998) as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 1998 1999 AS PREVIOUSLY 1998 AS PREVIOUSLY 1999 REPORTED AS RESTATED REPORTED AS RESTATED ------------- ----------- ------------- ----------- ($ IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS) RESULTS OF OPERATIONS Operating income..................... $ 18.0 $ 10.4 $ 32.2 $ 34.1 Net loss............................. (10.5) (15.8) (6.3) (4.9) Net loss available to common stockholders....................... (19.8) (25.1) (16.2) (14.8) Basic and diluted earnings per share.............................. (19.80) (25.10) (16.20) (14.80) FINANCIAL POSITION Total current assets................. $ 471.6 $ 463.9 Total current liabilities............ 620.6 618.2 Total shareholders' equity........... 335.3 330.0
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated. Revenue Recognition. The Company recognizes revenue principally on four types of transactions--sales of consumable products, sales of instruments, agreements which provide access to or license of certain of the Company's proprietary technology and know-how, and contracts for ongoing service and support of instruments sold to customers. Revenues are recorded net of any estimated provisions for returns and allowances and other price adjustments. Revenue on sales of instruments in the United States and on sales of consumable products in all markets are recognized upon transfer of title and risk of loss to the customer, which is generally upon delivery to the carrier. Prior to June of 2000, title and risk of loss for sales of instruments in the United States generally transferred upon payment in full by the customer. In markets outside of the United States, sales of instruments are made with a reservation of title until payment in full by the customer for the equipment. For these sales, revenue is recognized upon transfer of risk of loss to the customer, which is generally upon delivery to the carrier, as the reservation of title is solely for credit protection purposes. Revenues earned under agreements which provide access to or license the Company's proprietary technology and know-how are recognized on a straight line basis based on the total fees received under the agreement over the period the access to the technology and know-how is provided. Revenues earned under contracts for ongoing service is recognized pro rata over the term of the service agreements. The Company has adopted Securities and Exchange Commission Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in Financial Statements," for all periods presented. F-8 110 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Shipping and Handling The Company has adopted EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs." Shipping and handling costs are included in cost of sales. The amount of revenue and cost of sales related to shipping and handling is immaterial for all periods presented. 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 reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Research & Development Costs Research and development costs are expensed as incurred. Income Taxes The Company follows Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." Under the asset and liability method of SFAS 109, 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 and net operating loss and credit carry forward available for tax purposes. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Computation of Earnings Per Share Basic earnings per share amounts are based upon the weighted average number of common shares outstanding. Diluted earnings per share amounts reflect the dilutive effect of convertible preferred stock when appropriate. Cash & Cash Equivalents The Company considers all highly liquid investments that have an original maturity of three months or less at the time of purchase to be cash or cash equivalents. Inventory Valuation Inventories are valued at the lower of cost or market. Cost is determined on a first in, first out basis based on a standard costing system. Such costs include raw materials, direct labor, and manufacturing overhead. Property, Plant & Equipment Items capitalized as property, plant and equipment are recorded at cost. Costs incurred for development of internal use software are capitalized, as appropriate, in accordance with AICPA Statement of Position 98-1 ("Accounting for the Costs of Computer Software Developed or Obtained for Internal Use"). Expenditures for additions and improvements to existing facilities are capitalized and expenditures for repairs and maintenance are expensed as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the respective accounts, and any gain or loss is included in income. F-9 111 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Depreciation is computed using the straight-line method based on the estimated useful life of the assets, which follow: Buildings and improvements.................................. 40 Machinery & equipment....................................... 3 - 20 Furniture & fixtures........................................ 5 - 12 Internal use software....................................... 3 - 7
Capitalized Software Development Costs The Company capitalizes software development costs incurred in accordance with the provisions of SFAS 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." Costs incurred subsequent to the achievement of technological feasibility through general release of the product to customers are generally capitalized. Such costs include external direct costs of materials and services consumed in developing the software and payroll and payroll-related costs for employees directly associated with and who devote time to the development of the software. These costs are amortized upon general release of the product over a period not to exceed three years. Capitalized software costs and related accumulated amortization at December 31, 2000 amounted to $5.0 million and $.2 million, respectively. No costs were capitalized as of December 31, 1999. Such costs are included in other non-current assets in the accompanying balance sheet. Goodwill and Intangible Assets Goodwill represents the excess of cost of acquired businesses over the underlying fair value of the tangible and identifiable intangible net assets acquired and other intangibles represent the cost of patents, trademarks, and know-how. Goodwill and intangible assets are amortized on a straight-line basis over their estimated period of benefit ranging from 5 to 20 years. The Company continually reviews its goodwill and intangible assets to evaluate whether events or changes have occurred that would suggest an impairment of carrying value. An impairment would be recognized to the extent the carrying value is greater than expected future undiscounted cash flows. Long-Lived Assets The Company follows Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," which requires impairment losses to be recorded on long-lived assets used in operations when indications of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The amount of impairment loss recorded is based upon discounted future cash flows estimated to be generated by those assets. Foreign Currency Translation and Transactions The Company treats the local currencies of its international operations as their respective functional currencies. The assets and liabilities of the Company's foreign subsidiaries are translated from their respective functional currencies into U.S. Dollars at exchange rates in effect at the balance sheet date. Income statement and cash flow amounts are translated using average rates in effect during the year. Foreign currency transaction gains and losses are included in income. Foreign currency translation adjustments are included in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. F-10 112 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Derivative Financial Instruments The Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange rates. Derivative financial instruments are entered into with Nycomed Amersham by the Company to reduce those risks. Forward exchange contracts and other derivatives are marked to market, with gains and losses included in operating income. Stock Options As a related entity of Nycomed Amersham, certain employees of the Company have been granted options to purchase common stock of Nycomed Amersham. The Company follows the provisions of SFAS 123, "Accounting for Stock-Based Compensation." As permitted under this standard, the Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued to Employees" (APB 25) in accounting for its stock option and other stock-based employee awards. Pro forma information regarding net income and earnings per share, as calculated under the provisions of SFAS 123, are disclosed in Note 18. Comprehensive Income SFAS 130, "Reporting Comprehensive Income," requires foreign currency translation adjustments and certain other items, which were reported separately in stockholders' equity to be included in other accumulated comprehensive income (loss). The only components of other comprehensive income (loss) for the Company are foreign currency translation adjustments, and unrealized gains (losses) on available-for-sale securities. Segment Information SFAS 131, "Disclosures about Segments of an Enterprise and Related Information" requires segment information to be prepared using the "management" approach. The "management" approach is based on the method that management organizes the segments within the Company for making operating decisions and assessing performance. SFAS 131 also requires disclosures about products and services, geographic areas, and major customers. See Note 4 for Segment, Geographic and Customer information. Advertising Costs Advertising costs are expensed as incurred. Reclassifications Certain reclassifications have been made to the prior year financial statement amounts to conform with the presentation in the current year financial statements. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 is effective for the Company for all fiscal quarters and fiscal years beginning after January 1, 2001. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. SFAS 133 is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows. F-11 113 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION Business Segments The Company manages its business along three principal business segments: drug discovery, separations, and laboratory products. In addition to these principal segments, the Company has service and agency businesses which are included in the service, agency and other segment. The drug discovery business provides systems to improve the effectiveness of life science and pharmaceutical research and the development and speed to market for drugs. Principal products in this business are the MegaBACE DNA sequencing and LEADseeker drug screening systems and the Eltan range of proteomics systems. The separations business provides systems for the purification and production of biopharmaceuticals on a large scale and for separating proteins during the research stage in laboratories. Products in this business include Sepharose, a leading brand of separation media and the AKTA chromatography systems. The laboratory products business provides tools and technical knowledge for the purification, detection, and analysis of biological molecules by life science researchers. The Company's broad range of products include low throughput sequencing systems and reagents, scanning and electrophoresis systems, molecular biology systems, reagents for protein analysis and radiochemicals. The Company maintains a service business which is responsible for the installation, where appropriate, of instruments and systems which are sold by the three principal businesses and provides servicing on the instruments and systems during the warranty period. The cost of these services is generally not recharged to the business segments. The service business also generates income from contracts with customers to provide technical support for instruments and systems as well as scientific support to assist the customer in maximizing the effectiveness of the instruments and systems in research. The Company sells certain products, under agency agreements which complement its existing product range. Due to their relative sizes the service and agency businesses have been aggregated, with income from royalty agreements and charges to customers for product delivery (both of which are not attributed to the principal businesses for management purposes) in the service, agency and other segment. The Company manages the business principally based on accountable operating profit. The businesses are responsible for management of net sales across all geographic regions and for operating costs that are directly controllable by the business. However, a significant portion of the Company's total operating costs relate to the sales organization and central support services covering finance, information technology, and other administrative services. These costs are managed principally by region: however, these costs are allocated to the businesses in measuring operating profit of each business. The businesses are not allocated costs below operating profit, such as interest and income taxes, and as such the information below does not include these costs. As certain of the businesses share production, research, and administrative facilities around the world, the net assets of the Company are managed regionally, principally by the relevant local operating subsidiary. As the regions and local subsidiaries have responsibility for all businesses, it is not practicable to report, and the Company does not manage its operations using identifiable assets or capital expenditures by business segment. Prior to January 2000, the Company did not operate, manage its operations or accumulate financial information based on the business segmentation as described above. As such, the results of operations for the businesses for 1998 and 1999 have been presented using management's best estimates of the allocation of costs to the businesses in those years. Management considers these allocations to be reasonable. However, the reported results of operations of the businesses may differ from those that may have been achieved had the Company managed the businesses in this manner in 1998 and 1999. F-12 114 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The analysis of net sales, operating income (loss), and allocations of depreciation and amortization by business segment is as follows:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 (RESTATED) (RESTATED) 2000 ------------ ------------ ------------ (IN MILLIONS) NET SALES Drug discovery....................... $123.7 $194.4 $224.8 Separations.......................... 263.8 294.4 342.7 Laboratory products.................. 277.2 277.0 273.3 Service, agency and other............ 64.7 98.3 86.2 ------ ------ ------ $729.4 $864.1 $927.0 ====== ====== ====== OPERATING INCOME (LOSS)(a) Drug discovery....................... $(54.7) $(52.9) $(81.7) Separations.......................... 36.1 52.2 87.1 Laboratory products.................. 15.1 24.0 5.9 Service, agency and other............ 13.9 10.8 11.7 ------ ------ ------ $ 10.4 $ 34.1 $ 23.0 ====== ====== ====== DEPRECIATION AND AMORTIZATION Drug discovery....................... $ 20.8 $ 29.8 $ 29.4 Separations.......................... 20.9 24.0 28.0 Laboratory products.................. 17.4 21.4 30.1 Service, agency and other............ 2.7 1.9 1.9 ------ ------ ------ $ 61.8 $ 77.1 $ 89.4 ====== ====== ======
- ------------ (a) Operating income for the Drug Discovery segment includes non-recurring charges related to the acquisition of Molecular Dynamics of $7.0 million in 1998 and related to the acquisition of Praelux of $3.2 million in 2000 (see note 6). Geographic Information On a geographic basis, the Company manages its business in four principal markets: North America, Europe, Japan and Rest of the World. F-13 115 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Net sales and long-lived assets by geographic region are set out below:
YEAR ENDED DECEMBER 31, ------------------------------- 1998 1999 2000 ------- -------- -------- (IN MILLIONS) NET SALES United States...................................... $ 331.0 $ 427.6 $ 482.1 Europe............................................. 477.5 556.9 601.6 Japan.............................................. 115.4 151.6 168.5 Rest of the World.................................. 55.3 65.6 84.8 ------- -------- -------- 979.2 1,201.7 1,337.0 Less inter-region sales............................ (249.8) (337.6) (410.0) ------- -------- -------- $ 729.4 $ 864.1 $ 927.0 ======= ======== ========
AS OF DECEMBER 31, ------------------- 1999 2000 --------- ------ (IN MILLIONS) LONG-LIVED ASSETS United States............................................. $564.8 $560.6 Europe.................................................... 178.1 148.9 Japan..................................................... 8.6 8.3 Rest of the World......................................... 2.9 4.7 ------ ------ $754.4 $722.5 ====== ======
Customer Information The Company has a large and diverse customer base. No single customer accounted for more than 10% of net sales during 1998, 1999 and 2000. 5. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Net loss available to common stockholders consists of net loss reduced by the amount of dividend accretion on the Company's 8% redeemable preferred stock. Diluted earnings per share is calculated by dividing the net loss applicable to common stockholders by the sum of the weighted average number of common shares outstanding and dilutive common share equivalents. The 8% redeemable preferred stock convertible into the Company's common stock was not included in the diluted earnings per share calculations for 1998, 1999 and 2000 as their effect would be antidilutive. F-14 116 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. BUSINESS ACQUISITIONS AND STRATEGIC ALLIANCES BUSINESS ACQUISITIONS Pharmacia Biotech On August 5, 1997, the Company acquired all of the capital stock of Pharmacia Biotech AB and its subsidiaries (collectively "PB") from Pharmacia Corporation for a total purchase price of approximately $450.3 million. PB is an international provider of biotechnology systems, products and services for research into genes and proteins and the manufacture of drugs based on biological molecules, also known as biopharmaceuticals. PB is headquartered in Sweden with principal operations in the United States, Sweden, Europe, and Japan. The purchase price was financed by the Company through the issuance of 450,000 shares of Class B common stock and approximately 30,600,000 shares of preferred stock to Pharmacia Corporation, giving Pharmacia Corporation a 45% ownership interest in the Company. The acquisition was accounted for under the purchase method of accounting and accordingly the results of PB have been included in the Company's financial statements beginning on August 5, 1997. The fair value of the assets acquired and liabilities assumed related to the PB acquisition is as follows:
(IN MILLIONS) Working capital............................................. $ 34.4 Property, plant and equipment............................... 173.8 In-process research and development......................... 18.0 Other intangible assets..................................... 22.8 Goodwill.................................................... 302.7 Long-term debt.............................................. (17.1) Other liabilities........................................... (84.3) ------ $450.3 ======
The acquired identifiable intangibles of $22.8 million are being amortized on a straight-line basis over periods from 7-10 years and the residual goodwill of approximately $302.7 million is being amortized on a straight-line basis over 20 years. In 1997, non-recurring charges of $27.4 million and $18.0 million were recorded to cost of goods sold for an inventory step-up adjustment to fair value and to in-process research and development, respectively, related to the acquisition. Additionally, concurrent with the acquisition the Company announced an integration plan which resulted in accruals of $27.4 million being recorded as liabilities in the purchase price allocation and non-recurring charges of $40.7 million, $19.8 million and $2.7 million being recorded in 1998, 1999 and 2000 respectively (see Note 7). The terms of the acquisition of PB also provided for a settlement payment related to the amount of debt included in the PB acquisition relative to the Company's existing indebtedness. The resolution of this settlement in 1999 resulted in a payment from Nycomed Amersham to the Company of approximately $8.7 million, which has been treated as a capital contribution in the accompanying financial statements. Molecular Dynamics Inc. On September 11, 1998, the Company acquired the remaining 91% of the outstanding capital stock of Molecular Dynamics Inc. ("MDI") that it did not previously own. MDI is a worldwide manufacturer and marketer of principally drug discovery products, with headquarters and manufacturing operations in the United States. The Company's total investment of $204.7 million consisted of $192.1 million for the 91% interest, $6.8 million cost of the previously existing investment, and $5.8 million of direct acquisition costs. F-15 117 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The acquisition was financed principally through borrowings from the Company's parent, Nycomed Amersham. The acquisition was accounted for under the purchase method of accounting and accordingly the results of MDI have been included in the Company's financial statements beginning on September 11, 1998. The fair value of the assets acquired and liabilities assumed related to the MDI acquisition is as follows:
(IN MILLIONS) Working capital............................................. $ 15.6 Property, plant and equipment............................... 4.8 Other intangible assets..................................... 120.0 Goodwill.................................................... 98.6 Deferred taxes.............................................. (34.3) ------ $204.7 ======
The acquired identifiable intangibles of $120.0 million are being amortized on a straight-line basis over 10 years and the residual goodwill of approximately $98.6 million is being amortized on a straight-line basis over 15 years. In connection with the acquisition a non-recurring charge of $7.0 million for an inventory step-up to fair value was recorded in cost of goods sold in 1998. Subsequent to the acquisition the Company announced certain reorganization actions which resulted in charges of $6.5 million in 1998 and $10.0 million in 1999. Pro forma information (unaudited) The following unaudited pro forma information on results of operations for 1998 assumes the purchase of MDI as if the companies had been combined at the beginning of 1998.
PRO FORMA YEAR ENDED DECEMBER 31, 1998(a) (RESTATED) -------------------- (IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenue..................................................... $768.5 Net income.................................................. (28.1) Basic and diluted EPS....................................... (37.40)
- ------------ (a)Includes non-recurring charges related to the MDI acquisition of $7.0 million consisting of the step-up of the fair value adjustment to inventory. These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense as a result of acquired intangibles and goodwill and increased interest expense on acquisition debt. They do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred at the beginning of each respective period, or of future results of operations of the consolidated entities. Praelux Inc. On February 16, 2000, the Company acquired all the outstanding stock of Praelux, Inc., for a purchase price of $8.5 million. Praelux specializes in the development and manufacture of technology and instruments F-16 118 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) for cellular assays and DNA sequencing. The fair value of the assets acquired and liabilities assumed related to the Praelux acquisition is as follows:
(IN MILLIONS) Working capital............................................. $1.3 Goodwill.................................................... 4.0 In-process research and development......................... 3.2 ---- $8.5 ====
Based on this purchase price allocation, the Company has recorded a charge for in-process research and development for which technological feasibility had not yet been established and which had no alternative future use of approximately $3.2 million in the year ended December 31, 2000, and residual goodwill of approximately $4.0 million will be amortized over a life of 10 years. Pro forma Information (unaudited) The following unaudited pro-forma information on results of operations for 2000 and 1999 assumes the purchase of Praelux as if the companies had been combined at the beginning of 1999.
Pro forma Year Ended December 31, -------------------- 1999 2000(a) -------- -------- (in millions except per share amounts) Revenue..................................................... $ 864.5 $ 927.0 Net loss.................................................... (7.0) (18.9) Basic and diluted EPS....................................... (16.93) (28.27)
- ------------ (a)Includes non-recurring charges of $3.2 million consisting of purchased in-process research and development. These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments such as additional amortization expense as a result of expense and acquisition debt. They do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of each respective period, or of futures results of operations of the consolidated entities. STRATEGIC ALLIANCES Gyros AB In January of 2000 the Company entered into agreements with Gyros AB under which the Company committed to contributing approximately $6.4 million to Gyros in exchange for a 19.9% interest in Gyros. Additionally, the Company sold certain intellectual property to Gyros for approximately $9.5 million in cash. At December 31, 2000, approximately $4.8 million of the $6.4 million in funding to Gyros had been advanced. The remaining $1.6 million due under the funding agreement has been recorded as a liability in the accompanying financial statements and is expected to be paid by the end of the first quarter of 2001. The gain recognized on the sale of the intellectual property, after consideration of the Company's 20% interest in Gyros, was approximately $3.1 million, and has been included in other operating income. F-17 119 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) This gain was calculated as follows:
(IN MILLIONS) Cash proceeds from sale..................................... $ 9.5 Book value of assets sold................................... -- ----- Gain on sale................................................ 9.5 Less: 19.9% reduction due to ownership interest in Gyros........ (1.9) Recognition of additional funding obligation.............. (3.3) 19.9% share of Gyros IPR&D charge......................... (1.2) ----- Net gain on sale............................................ $ 3.1 =====
InforMax Inc. In August 2000, the Company purchased convertible preferred shares of InforMax Inc. representing a 6% ownership interest, for approximately $10.0 million. The investment is being accounted for under the cost method and is included in other non-current assets in the accompanying balance sheet. In addition, the Company engaged in certain acquisition and disposition transactions with Nycomed Amersham. See Note 23. 7. INTEGRATION COSTS In connection with the acquisition of PB in August 1997, the Board of Directors of the Company approved a restructuring plan to integrate the ALS and PB businesses. The principal elements of the plan were: -- To consolidate U.S. manufacturing and research at a single site in Piscataway, New Jersey following the divestiture of manufacturing sites in Milwaukee and Cleveland; -- To create a single global sales organization with a regional structure focusing on the North America, Europe, Japan, Asia Pacific and Rest of the World; and -- To unify the management and administrative functions to support the two businesses. ALS Related Charges Integration costs related to the ALS business consisted primarily of the termination of 168 employees, principally at the Cleveland facility and in the sales and administrative support areas, the termination of certain contractual obligations, and the write-down of certain non-production related assets which would no longer be utilized in the business. Other charges primarily related to the termination of contractual obligations and the remediation of facilities no longer to be utilized. Substantially all restructuring activities were completed by the end of 1998, with the exception of certain severance agreements with termination payments extending into 2000. Additional charges in 1999 were recorded as management determined that the accrual for certain employees' termination costs made in 1997 would not be adequate. F-18 120 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table summarizes the Company's accruals for restructuring costs associated with ALS operations:
EMPLOYEE TERMINATION COSTS ------------- (IN MILLIONS) Balance at December 31, 1997................................ $10.3 Utilized.................................................... (9.6) ----- Balance at December 31, 1998................................ 0.7 Charges..................................................... 1.3 Utilized.................................................... (1.3) ----- Balance at December 31, 1999................................ 0.7 Utilized.................................................... (0.7) ----- Balance at December 31, 2000................................ $ -- =====
PB Related Accruals Integration costs related to the PB business consisted principally of: -- The termination of 193 individuals, including skilled workers at the Milwaukee facilities, and research scientists and administrative support personnel at the research and development and sales support facilities in New Jersey. -- The termination of contractual obligations, including equipment leases, associated with the closure or sale of those facilities and the consolidation of the research and development and sales support facilities. -- The write-down of certain fixed assets no longer to be utilized as a result of the consolidation of the research and development and sales support facilities. Substantially all actions were completed within one year of the acquisition of PB, with the exception of certain severance agreements with payments extending into 2000 and the payment of termination fees in 1999. In 1999, management determined certain recorded employee termination reserves were in excess of what was required for ongoing obligations, and as such the excess reserve was released, reducing goodwill from the PB acquisition. F-19 121 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table summarizes the Company's accruals for integration costs associated with the PB operations:
EMPLOYEE TERMINATION CONTRACTUAL COSTS OBLIGATIONS OTHER TOTAL ----------- ----------- ----- ------ (IN MILLIONS) Balance at December 31, 1997........... $19.0 $ 4.3 $0.2 $ 23.5 Utilized............................... (7.5) (3.3) (0.2) (11.0) ----- ----- ----- ------ Balance at December 31, 1998........... 11.5 1.0 -- 12.5 Utilized............................... (7.8) (1.0) -- (8.8) Released against goodwill.............. (0.6) -- -- (0.6) ----- ----- ----- ------ Balance at December 31, 1999........... 3.1 -- -- 3.1 Utilized............................... (3.1) -- -- (3.1) ----- ----- ----- ------ Balance at December 31, 2000........... $ -- $ -- $ -- $ -- ===== ===== ===== ======
Other Charges In addition to the charges recorded at the time of the PB acquisition, the Company incurred charges in 1998 and 1999 which did not qualify for accrual at the time of announcement of the plan. These costs consisted principally of professional and consulting fees, workforce relocation and consolidation costs, and amounted to $29.9 million and $18.0 million in 1998 and 1999, respectively, and were charged to selling, general and administrative expenses in the accompanying statements of operations. No such costs were incurred in 2000. Termination of shared services with Nycomed Amersham Additionally, as a result of the PB acquisition the Company determined that certain services provided by Nycomed Amersham would no longer be required, and entered into negotiation with Nycomed Amersham to terminate those services. Fees related to the termination of these service arrangements, determined in accordance with the terms of the Company's General Services Agreement, amounted to $10.8 million in 1998, $1.8 million in 1999 and $2.7 million in 2000 and were charged to selling, general and administrative expenses in the accompanying statements of income. The Company may incur additional charges if any remaining shared services agreements are terminated in the future. F-20 122 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. INCOME TAXES The provision for income taxes consisted of:
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1999 (RESTATED) (RESTATED) 2000 ---------- ---------- ---------- (IN MILLIONS) Current tax provision (benefit) U.S. Federal.................................. $ 5.0 $ 1.3 $(4.5) State and local............................... 1.3 0.5 (0.9) Non-U.S. ..................................... 16.4 19.1 28.1 ----- ----- ----- Total current tax provision..................... 22.7 20.9 22.7 Deferred tax provision (benefit) U.S. Federal.................................. (8.6) (6.1) (3.8) State and local............................... (1.0) (0.7) (0.9) Non-U.S. ..................................... 0.4 3.5 (4.0) ----- ----- ----- Total deferred tax provision (benefit).......... (9.2) (3.3) (8.7) ----- ----- ----- Provision for income taxes...................... $13.5 $17.6 $14.0 ===== ===== =====
The following table summarizes the reconciliation of the U.S. Federal statutory tax to the Company's tax provision (benefit) for financial statement purposes:
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1999 (RESTATED) (RESTATED) 2000 ---------- ---------- ---------- (IN MILLIONS) Income (loss) before tax........................ $(1.6) $13.2 $(4.0) Federal statutory rate.......................... 35.0% 35.0% 35.0% ----- ----- ----- Tax at Federal statutory rate................. $(0.6) $ 4.6 $(1.4) International tax rate differences............ (2.8) (1.9) (3.9) State & local income/franchise taxes.......... 0.3 (0.2) (1.9) Goodwill...................................... 8.1 9.7 11.6 In-process research & development............. - - 1.4 Integration costs............................. 3.5 1.6 - Research & development credits................ (0.7) (1.5) (1.8) Corporate costs............................... 0.8 1.3 1.8 Unearned compensation expense................. 0.7 0.2 4.1 Gain on disposal of investment................ - - 1.7 Other......................................... 4.2 3.8 2.4 ----- ----- ----- Actual income tax provision..................... $13.5 $17.6 $14.0 ===== ===== =====
Income taxes paid totaled $24.4 million, $13.3 million and $20.5 million in 1998, 1999 and 2000 respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. F-21 123 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Significant components of the Company's deferred tax assets and liabilities as of December 31, 1999 and 2000 were as follows:
AS OF DECEMBER 31, ------------------------ 1999 2000 ---------- ---------- (IN MILLIONS) Deferred tax assets: Bad debt, bonus accrual and other reserves................ $ 5.3 $ 1.5 Inventory valuation....................................... 9.4 13.9 Employee benefit obligations.............................. 1.8 2.8 Integration reserves...................................... 3.2 1.3 Interest expense.......................................... 7.3 7.9 Tax credits and loss carry forward........................ 6.1 15.3 Deferred income........................................... 9.9 5.5 Other..................................................... 3.5 2.3 ------ ------ Net deferred tax assets................................... 46.5 50.5 Deferred tax liabilities: Accelerated depreciation.................................. (16.5) (17.4) Excess book basis over tax basis of identifiable intangibles............................................ (55.7) (44.2) Other..................................................... (2.4) (1.5) ------ ------ Net deferred tax liabilities................................ (74.6) (63.1) ------ ------ Net deferred tax liability.................................. $(28.1) $(12.6) ====== ======
The Company has not accrued income taxes on cumulative undistributed earnings of foreign subsidiaries of approximately $156.8 million as of December 31, 2000, since the majority of such earnings are expected to be permanently reinvested abroad. Where it is the intention to remit earnings, the related income taxes on these earnings, after giving effect to available tax credits, would not be material. The Company believes that the determination of the liability for the amount of unrecognized deferred taxes for temporary differences related to investments in foreign subsidiaries that are permanent in duration is not practicable. At December 31, 2000, the Company has U.S. net operating losses and tax credit carryforwards, the combined tax effect of which is approximately $15.3 million. These carryforwards will expire through 2020. Domestic and foreign income (loss) before income taxes was as follows:
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1999 (RESTATED) (RESTATED) 2000 ---------- ---------- ---------- (IN MILLIONS) United States................................... $(19.7) $(13.1) $(43.8) Foreign......................................... 18.1 26.3 39.8 ------ ------ ------ $ (1.6) $ 13.2 $ (4.0) ====== ====== ======
F-22 124 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 9. SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ (IN MILLIONS) Cash paid for interest................. $ 10.1 $19.9 $30.7 Cash paid for income tax............... 24.4 13.3 20.5 Other non-cash investing activities: Fair value of assets acquired........ 281.6 Liabilities assumed.................. (97.3) ------ $184.3 ====== Cash paid............................ $202.6 Less cash acquired................... (18.3) Fair value of securities issued...... -- ------ Net cash paid........................ $184.3 ====== Other non-cash financing activities: Accretion of preferred stock......... $ 9.3 9.9 9.4 Dividend to Nycomed Amersham (see note 23).......................... 2.1
10. TRADE RECEIVABLES Trade receivables consisted of the following:
AS OF DECEMBER 31, ---------------------------- 1999 2000 ------------ ------------ (IN MILLIONS) Trade receivables, gross.............................. $238.7 $246.9 Other................................................. 2.9 -- ------ ------ 241.6 246.9 Less: allowance for doubtful accounts................. 4.9 5.5 ------ ------ Trade receivables, net................................ $236.7 $241.4 ====== ======
The allowance for doubtful accounts for the years ended December 31, 1998, 1999 and 2000 consisted of the following:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ (IN MILLIONS) Balance at the beginning of the period............................... $ 3.4 $ 5.6 $ 4.9 Provision for doubtful accounts........ 2.1 1.4 2.8 Reduction for amounts written-off...... (0.1) (0.8) (2.0) Translation and other.................. 0.2 (1.3) (0.2) ----- ----- ----- Balance at December 31................. $ 5.6 $ 4.9 $ 5.5 ===== ===== =====
F-23 125 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 11. INVENTORIES Inventories consisted of the following:
AS OF DECEMBER 31, ---------------- 1999 2000 ------ ------ (IN MILLIONS) Raw materials and supplies.................................. $ 25.8 $ 47.1 Work-in-process............................................. 29.2 31.6 Finished goods.............................................. 59.4 54.9 ------ ------ $114.4 $133.6 ====== ======
The inventory valuation reserve for the years ended December 31, 1998, December 31, 1999 and December 31, 2000 consisted of the following:
YEAR ENDED DECEMBER 31, ----------------------- 1998 1999 2000 ----- ----- ----- (IN MILLIONS) Balance at the beginning of the period...................... $ 5.8 $ 5.3 $ 6.8 Inventory valuation reserve................................. 3.5 3.9 11.9 Reduction for amounts written-off........................... (4.1) (3.5) (1.5) Translation and other....................................... 0.1 1.1 0.8 ----- ----- ----- Balance at December 31...................................... $ 5.3 $ 6.8 $18.0 ===== ===== =====
12. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following:
AS OF DECEMBER 31, ------------------ 1999 2000 ------- ------- (IN MILLIONS) Land........................................................ $ 7.0 $ 7.6 Buildings and leasehold improvements........................ 154.7 152.2 Machinery and equipment..................................... 207.2 222.2 Construction in process..................................... 7.1 13.4 ------- ------- Total....................................................... 376.0 395.4 Less accumulated depreciation............................... (148.2) (159.8) ------- ------- Property, plant and equipment, net.......................... $ 227.8 $ 235.6 ======= =======
Depreciation expense was $23.7 million, $25.3 million and $31.1 million in 1998, 1999, and 2000, respectively. F-24 126 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 13. INTANGIBLE ASSETS Intangible assets consist of the following:
AS OF DECEMBER 31, ----------------- 1999 2000 ------ ------- (IN MILLIONS) Goodwill.................................................... $446.8 $ 461.3 Less accumulated amortization............................... (72.5) (100.3) ------ ------- Goodwill, net............................................... 374.3 361.0 ------ ------- Other intangible assets..................................... 231.7 233.2 Less accumulated amortization............................... (79.4) (107.3) ------ ------- Other intangible assets, net................................ 152.3 125.9 ------ ------- Total intangible assets..................................... $526.6 $ 486.9 ====== =======
Amortization expense was $38.1 million, $51.8 million and $58.1 million in 1998, 1999 and 2000, respectively. Goodwill relates primarily to the Pharmacia Biotech and Molecular Dynamics Inc. acquisitions (see Note 6). Goodwill is amortized over periods ranging from 10 to 20 years, with a weighed average life of approximately 16 years at December 31, 2000. Other intangible assets also principally relate to the Pharmacia Biotech and Molecular Dynamics Inc. acquisition. Other intangible assets are amortized over periods ranging from 5 to 20 years with a weighted average life of approximately 8 years at December 31, 2000. 14. SHORT AND LONG-TERM DEBT
AS OF DECEMBER 31, ---------------- 1999 2000 ------ ------ (IN MILLIONS) Short-term debt: Loans from parent......................................... $395.9 $453.9 Bank loans and overdrafts................................. 0.8 0.3 Finance lease obligations................................. 0.5 0.7 ------ ------ $397.2 $454.9 ====== ======
Loans from parent are with Nycomed Amersham and are borrowed in currencies required by the Company's individual subsidiaries. The loans are unsecured and bear interest at floating rates reflecting the cost of financing to Nycomed Amersham in accordance with the Shareholder Agreement between Nycomed Amersham and Pharmacia Corporation. These loans are repayable on demand with the exception of a $34.3 million loan to the Company, which became repayable on 30 days notice on August 5, 1998. Bank loans and overdrafts are principally located in the U.S. and bear varying rates of interest. Interest rates on the short-term debt from Nycomed Amersham ranged from 1.2% to 9.0% at December 31, 1998, from 0.8% to 8.5% at December 31, 1999 and from 0.9% to 7.6% at December 31, 2000. The weighted average interest rate on the short-term debt was 5.9%, 5.4% and 5.9% in 1998, 1999 and 2000, respectively. F-25 127 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF AS OF DECEMBER 31, DECEMBER 31, 1999 2000 ------------ ------------ (IN MILLIONS) Long-term debt: Bank loans.......................................... $ 8.6 $0.5 Finance lease obligations........................... 4.5 4.3 ----- ---- $13.1 $4.8 ===== ====
AS OF DECEMBER 31, 2000 ------------ Maturities of long-term debt are as follows: 2002...................................................... $0.8 2003...................................................... 0.7 2004...................................................... 0.4 2005...................................................... 0.2 After 2006................................................ 2.7 ---- $4.8 ====
Bank loans in 1999 related primarily to Industrial Revenue Bonds with the City of Milwaukee, Wisconsin which were repaid in 2000. On September 28, 2000, the Company and its shareholders, Nycomed Amersham and Pharmacia, entered into an agreement under which the shareholders committed to provide support to the Company of up to $500 million in the form of an additional capital contribution or additional loans to the Company. The support provided under this agreement is available in the event the Company is unable to satisfy its obligations under the demand notes payable to Nycomed Amersham or other third party obligations and is unable to obtain financing from other sources. 15. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES Concentration of credit risk The Company enters into a variety of financial instruments to reduce its risk associated with fluctuations in foreign currency exchange rates. The Company does not hold or issue financial instruments for trading purposes. As all foreign currency exchange contracts are with Nycomed Amersham, the primary source of concentrations of credit risk to the Company consist principally of cash and short-term deposits. The Company controls credit risk by entering into transactions involving financial instruments only with authorized counterparties of strong credit quality consisting of a large number of major international financial institutions. Counterparty positions are regularly monitored. At December 31, 2000, the Company did not consider there to be any significant concentration of credit risk. The Company's minimum acceptable credit rating for counterparties, for the purpose of the investment of surplus cash, is "A" from Standard & Poors. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of the counterparties. Foreign exchange risk management The Company borrows in foreign currencies and enters into foreign exchange contracts with Nycomed Amersham to reduce exposure to foreign exchange rate fluctuations. The Company maintains foreign currency F-26 128 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) liabilities to reduce exposure on foreign currency investments and net assets. The Company also enters into foreign exchange contracts to reduce the foreign exchange risk on uncommitted anticipated transactions. The contractual amounts of the Company's forward foreign exchange contracts were as follows:
DECEMBER 31, ---------------------------------- 1999 2000 FORWARDS FORWARDS -------------- ---------------- BUY SELL BUY SELL ----- ----- ------ ------ (IN MILLIONS) U.S. Dollars...................................... $ -- $32.1 $ -- $ 36.1 Euro currencies................................... -- 10.5 -- 37.3 Japanese Yen...................................... -- 8.7 -- 30.6 GB Sterling....................................... 40.3 1.9 43.7 5.9 Swedish Krona..................................... 24.0 1.5 75.3 1.6 Other............................................. -- 7.5 -- 9.4 ----- ----- ------ ------ Total................................... $64.3 $62.2 $119.0 $120.9 ===== ===== ====== ======
As the Company's foreign exchange contracts do not qualify for hedge accounting under SFAS No. 52, gains or losses related to these contracts are recorded in earnings as incurred, based on movements in forward currency rates. The net transaction gain (loss) included in net income is as follows (in millions, restated): Year ended December 31, 1998................................ $(3.9) Year ended December 31, 1999................................ 0.7 Year ended December 31, 2000................................ (1.5)
Fair value of financial instruments The carrying value of the Company's foreign currency exchange contracts amounted to a liability of $1.9 million and an asset of $1.7 million as of December 31, 1999 and 2000, respectively, and reflects their fair value as gains (losses) are recorded as incurred on the contracts. The carrying amount of the Redeemable Preferred Stock (see Note 16) approximates fair value as the Preferred Stock is convertible into a fixed dollar amount of Common Stock which corresponds to its carrying value. Due to the short-term nature of the Company's non derivative financial assets and liabilities, the fair value of these instruments approximates carrying amount. 16. REDEEMABLE PREFERRED STOCK At December 31, 1999 and 2000 the Company had 67,916,327 shares of 8% Redeemable Preferred stock (the "preferred stock") issued and outstanding. 55% of these shares are owned by Nycomed Amersham and 45% of these shares were issued to Pharmacia Corporation as consideration in the PB acquisition. All preferred stock was issued at its par value of L1 ($1.62 equivalent) each, and accrues a dividend of 8% per year, payable annually in arrears on each anniversary date of the date of issuance. Through October 1999, this dividend was cumulative. As of December 31, 2000 no dividends had been declared or paid related to the preferred shares. F-27 129 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The preferred stock carries no voting rights, other than in any matter which directly affects the rights and privileges of the preferred stock, and has priority over any other class of the Company's stock upon the liquidation, winding-up, or other return of capital of the Company. The preferred stock is redeemable at the option of the holder, as described below, at par value plus any accumulated but unpaid dividends on the date of redemption (the "nominal value"). Additionally, the preferred stock can be converted into shares of common stock of the Company at a ratio determined by dividing the nominal value of the preferred stock by the fair value of the common stock, as defined in the preferred stock Articles. The holder of the preferred stock can elect to redeem or convert the stock on or after the earlier of a public stock offering (as defined in the preferred stock Articles) or the fifth anniversary of the stock's issuance. As the redemption of the preferred stock is outside the control of the Company, the preferred stock and any accumulated but unpaid dividends are not included in the equity portion of the Company's balance sheet. The annual dividend accretion is charged to retained earnings as a dividend and deducted from net income (loss) available to common stockholders in the computation of earnings per share. Accumulated dividends of $22.8 million and $32.2 were accrued at December 31, 1999 and 2000, respectively. The amount of dividends charged to retained earnings and deducted from net loss available to common stockholders amounted to $9.3 million, $9.9 million and $9.4 million for the years ended December 31, 1998, 1999 and 2000, respectively. 17. COMMON STOCK At December 31, 1999 and 2000 the Company had authorized and issued 1,000,000 common shares with a $1.62 par value. These shares are divided into 550,000 "A" ordinary shares and 450,000 "B" ordinary shares. "A" ordinary shares and "B" ordinary shares rank pari passu for dividends and in priority and for amounts on a winding-up. At a general meeting, each "A" shareholder is entitled to one vote for every "A" ordinary share of which he is a holder and each "B" shareholder is entitled to one vote for every "B" ordinary share of which he is a holder. However, "A" ordinary shares do not confer any right to vote upon a resolution for the removal from office of a director appointed by holders of "B" ordinary shares and "B" ordinary shares do not confer any right to vote upon a resolution for the removal from office of a director appointed by holders of "A" ordinary shares. Under the Stockholders Agreement, there is a requirement for the "A" stockholders and the "B" stockholders to approve certain specified matters. 18. STOCK-BASED COMPENSATION Certain employees of the Company participate in Nycomed Amersham sponsored stock option plans. Grants pursuant to the plans are at the market price of Nycomed Amersham shares at the date of grant and, prior to October of 2000, included restrictions on vesting until certain performance targets were met. Unearned compensation expense, which is shown as a separate component of stockholders' equity, has been recorded pursuant to the intrinsic value approach under APB 25 based on the market value of Nycomed Amersham stock at the end of each period and is being amortized over the vesting period based upon expectations of meeting these performance targets. In October of 2000, the Nycomed Amersham Board of Directors elected to remove the performance conditions of the options. Thus, the unearned compensation expense became fixed based on the market value of Nycomed Amersham stock on the date the performance condition was removed, and is being amortized over the remaining vesting period of the options. Amortization of unearned compensation was $2.0 million, $0.9 million and $10.6 million in 1998, 1999 and 2000, respectively. F-28 130 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Option grants in 2000 to U.S. employees have been administered through a Parent Company Trust arrangement. (See note 23.) Had compensation expense for Nycomed Amersham's stock option grants been determined consistent with the fair value approach of Statement of Accounting Standards No. 123, which requires recognition of compensation cost ratably over the vesting period of the underlying instruments and had such compensation cost been allocated to the Company, the Company's net (loss) would have been adjusted to the amounts indicated below:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ (IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net loss As reported.......................... $ (15.8) $ (4.9) $ (18.3) Pro forma............................ (15.2) (6.5) (11.7) Basic and diluted earnings per share As reported.......................... (25.10) (14.80) (27.70) Pro forma............................ (24.50) (16.40) (21.10)
The pro forma net loss is less than the as reported net loss for 1998 and 2000 as the pro forma charges under SFAS 123 are less than the charge actually recorded by the Company under APB 25. The Company estimated the fair value, as of the date of grant, of options outstanding in the plan using the Black-Scholes option pricing model with the following assumptions:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ Expected life (years).................. 5.0 4.4 4.1 Risk-free interest rate................ 6.4% 5.6% 6.2% Expected dividend yield................ 1.9 1.8 1.8 Expected volatility.................... 22.0 35.0 35.0
The fair value of options granted in the years ended December 31, 1998, 1999, and 2000 were $3.8 million, $4.2 million, and $6.1 million, respectively. 19. COMMITMENTS AND CONTINGENCIES The Company is involved in various patent infringement actions with Applera Corporation and its divisions, including those in which the Company is both plaintiff and defendant, related to DNA sequencing technologies. In one action where the Company is a plaintiff, a recent patent claims construction hearing was ruled in favor of the Company. In a number of consolidated actions, the Company is both plaintiff and defendant, and a similar claims construction hearing has been heard and not adjudicated. These cases will not be heard until 2001. Additionally, in May 2000 Applera Corporation filed a further patent infringement suit against the Company. The Company is vigorously contesting these claims. However, it is not possible to predict with certainty the outcome of this litigation, and while the Company does not believe an adverse result would have a material effect on the Company's consolidated financial position, it could be material to the results of operations or cash flows for a fiscal year. The Company is also involved in other litigation arising out of the ordinary cause of business, including those relating to product liability and infringements of intellectual property and validity of patents. Although the amount of any liability that might arise with respect to any of these matters cannot be accurately F-29 131 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) predicted, the resulting liability, if any, will not in the opinion of the management have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company. In connection with the manufacturing agreement related to the Cardiff site (see Note 22), Nycomed Amersham has retained any liabilities related to the radioactive decommissioning of the site which pertain to the period prior to August 4, 1997. Radioactive decommissioning costs which pertain to the period subsequent to August 4, 1997, are charged to the Company by Nycomed Amersham as part of the cost of the contract manufacturing agreement. These costs are determined assuming that the Cardiff facility is operated on a going concern basis and does not require a full radioactive decommissioning, and amounted to $0.3 million in each of the years 2000, 1999 and 1998 respectively. 20. EMPLOYEE BENEFIT PLANS The Company's employees receive retirement benefits under three types of arrangements: participation in State arrangements, participation in the Nycomed Amersham plans or participation in one of the Company's plans. State Arrangements In many of the countries in which the Company operates, pension benefits are provided entirely through state arrangements and the relevant subsidiary therefore does not provide any sponsored pension plans in those countries. Nycomed Amersham Plans In other countries, principally the United Kingdom, the Company has elected to continue its participation in the Nycomed Amersham Plan which operates in that country. The principal plans in the U.K., are defined benefit arrangements. Eligibility for participation in these plans is open to all permanent UK employees and benefits are generally based on employee's compensation and years of service. Nycomed Amersham's funding policy is consistent with funding requirements of the applicable laws and regulations regarding such requirements in the corresponding countries in which the plans operate. Since the aforementioned pension arrangements are part of certain Nycomed Amersham defined plans, no discrete actuarial data is available for the portion allocable to the Company. Therefore, no benefit liability or asset is reflected in the accompanying financial statements. The Company has been allocated pension costs representing amounts payable to these schemes. Net pension expense included in the accompanying financial statements was $1.5 million, $1.3 million and $1.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Company Plans The Company also operates non-contributory defined benefit pension plans for certain of its employees (principally PB employees and employees hired after the PB acquisition) in the United States, Europe and Japan covering a majority of its employees in these locations. For employees eligible to join the Swedish and U.S. schemes, benefits are based on compensation and years of service. The Japanese pension plan operates on a points based system where the number of points earned in a year is based on the employees current grade. The value of the points is set by the Company and reviewed periodically. The Company's funding policy is based on local practices. Plan assets are separately administered and are invested primarily in equities and bonds. F-30 132 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Net pension expense for the Company's plans included in the Statement of Income is comprised of the following:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ Components of net periodic benefit cost: Service cost......................... $ 4.5 $ 5.7 $ 4.0 Interest cost........................ 4.0 3.9 3.6 Expected return on plan assets....... (1.2) (1.0) (1.2) Recognized net actuarial loss........ -- 0.3 (0.5) ----- ----- ----- Net periodic benefit cost.............. $ 7.3 $ 8.9 $ 5.9 ===== ===== =====
The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ (IN MILLIONS) Change in benefit obligation: Benefit obligation at January 1...... $70.0 $ 80.8 $68.1 Service cost......................... 4.4 5.7 4.0 Interest cost........................ 3.9 3.9 3.6 Change in assumptions................ 9.1 (15.7) 3.5 Actuarial gain....................... (2.2) (0.3) (0.6) Settlements.......................... (0.6) -- -- Benefits paid........................ (1.1) (1.2) (1.5) Foreign currency translation......... (0.6) (0.3) (5.6) ----- ------ ----- Benefit obligation at December 31...... $82.9 $ 72.9 $71.5 ===== ====== =====
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ (IN MILLIONS) Change in plan assets: Fair value of plan assets at January 1................................. $ 16.6 $ 14.4 $ 15.8 Actual return on plan assets......... (1.8) 1.0 (0.3) Employer contributions............... -- -- 1.2 Benefits paid........................ (0.3) (0.2) (0.5) Foreign currency translation......... 0.3 0.7 (0.3) ------ ------ ------ Fair value of plan assets at December 1.................................... $ 14.8 $ 15.9 $ 15.9 ====== ====== ====== Funded status.......................... $(68.1) $(57.0) $(55.6) Unrecognized net actuarial (gain) loss................................. 12.5 (3.9) (3.2) ------ ------ ------ Accrued benefit obligation............. $(55.6) $(60.9) $(58.8) ====== ====== ======
F-31 133 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The weighted average rate assumptions used in determining pension costs and the projected benefit obligation were:
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1999 2000 ------------ ------------ ------------ Weighted average assumptions: Discount rate........................ 4.8% 6.1% 5.8% Rates of return on plan assets....... 7.2 7.6 7.3 Salary growth........................ 4.4 4.1 4.0 Pension increases.................... 2.0 2.4 2.4
In the United States, the Company offers employees and employee savings plan under which U.S. employees may contribute up to 16% of their compensation, subject to certain limitations. The Company matches employee contributions up to 100% for the first 3% and 50% for the next 2% of compensation contributed by the employee. Under this plan, matching contributions made in cash by the Company were $1.1 million, $1.4 million and $1.5 million for the years ended December 31, 1998, 1999 and 2000, respectively. 21. LEASE COMMITMENTS The Company leases certain equipment under capital leases. Property and equipment at December 31, 1999 and 2000, include approximately $3.9 million and $4.8 million respectively, of equipment under leases which have been capitalized. Accumulated depreciation for such equipment was approximately $0.9 million and $1.7 million at December 31, 1999 and 2000. Future minimum lease commitments at December 31, 2000 are as follows:
CAPITAL OPERATING LEASES LEASES ------- --------- (IN MILLIONS) Year Ending December 31 2001...................................................... $ 1.0 $11.9 2002...................................................... 0.7 8.5 2003...................................................... 0.7 6.6 2004...................................................... 0.7 5.2 2005...................................................... 0.4 4.6 After 2005................................................ 3.7 2.6 ----- ----- Total minimum lease payments................................ $ 7.2 $39.4 ===== ===== Less: amount representing interest.......................... (2.2) ----- Present value of net minimum lease payments................. 5.0 Less: current portion....................................... (0.7) ----- Long-term capitalized lease obligations..................... $ 4.3 =====
22. FORMATION OF APB LTD. ALS ASSETS NOT TRANSFERRED At the time of the acquisition of PB, ALS operations were transferred to legal entities owned by APB Ltd. in order to more clearly segregate the operations of the Company from the rest of Nycomed Amersham's F-32 134 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) operations. However, due to regulatory circumstances in certain jurisdictions, not all ALS assets and operations could be transferred to APB Ltd., and therefore reverted to Nycomed Amersham. The principal assets and operations affected by this are as follows: Cardiff manufacturing facility The manufacturing facility in Cardiff manufactures radioactive products which require a nuclear manufacturing permit. This permit is held by Nycomed Amersham (see note 19). Nycomed Amersham retained the manufacturing site at Cardiff until such time as the Company applied for and obtained the Nuclear Site License. Since then, the Company has decided not to apply for such a license and intend to continue operating under a contract manufacturing agreement at Cardiff. The Company and Nycomed Amersham have entered into a manufacturing agreement under which Nycomed Amersham supplies the Company with the products manufactured at Cardiff. The Company manages the operations of the Cardiff facility, which produces only the Company's products. All of the costs in connection with operating the Cardiff facility have been included in the Company's results of operations for all periods presented. European sales offices In certain countries, principally France, and Italy, ALS sales operations were not transferred into legal entities owned by the Company until 1998. The sales offices were operated under agency agreements between the Company and Nycomed Amersham, which effectively transferred the financial benefits and risks of the ALS operations of these sales offices until such time as legal entities were established to effect the transfers. In addition, ownership of certain European sales offices which conducted non-ALS operations of Nycomed Amersham were transferred to the Company in their entirety. Agency agreements were established between the Company and Nycomed Amersham which effectively transferred the financial risks and benefits of the non-ALS operations of these sales offices to Nycomed Amersham until such time as the non-ALS operations of these sales offices were transferred to Nycomed Amersham. Substantially all of the required transfers of operations between the Company and Nycomed Amersham were completed during 1998. 23. TRANSACTIONS WITH NYCOMED AMERSHAM Acquisitions and Dispositions Aeomica. In December of 2000 the Company sold the tangible assets and intellectual property associated with its knowledge business, Aeomica, to a separate subsidiary of Nycomed Amersham. The Company received proceeds of approximately $9.1 million. The net book value of the tangible assets and intellectual property at the time of sale was approximately $3.7 million. As the transaction constitutes a transfer of assets between entities under common control, the transfer has been accounted for at historical cost in the accompanying financial statements. The excess of the proceeds over the net book value of the assets, net of related taxes, amounted to $3.5 million and has been treated as a capital contribution from Nycomed Amersham. The Company incurred expenses consisting principally of research and development, related to Aeomica in 2000 and 1999 of $5.3 million and zero, respectively. Buchler. In August of 2000, certain restrictions regarding the transfer of the life sciences operations of Amersham Buchler GmbH ("Buchler") from Nycomed Amersham to the Company was removed. As a result, the Company sold its non-voting interest in Buchler to Nycomed Amersham for approximately $3.8 F-33 135 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) million and acquired the life sciences operations of Buchler from Nycomed Amersham for approximately $6.4 million. As the transactions constitute transfers of assets between entities under common control, the transfers have been accounted for at historical cost in the accompanying financial statements. The net differential between the cash paid and received in the transfers and the historical cost of the assets purchased and sold amounted to approximately $4.7 million and has been treated as a dividend to Nycomed Amersham. Loans and other financing arrangements The Company has borrowed amounts from Nycomed Amersham under uncommitted intercompany loan facilities which are repayable upon demand. Amounts are drawn down by local subsidiaries in the currency in which the subsidiary operates, and bear interest at floating rates reflecting the cost of financing to Nycomed Amersham. The loans are repayable upon demand with the exception of $34.3 million, which is repayable on 30 days notice. The amount of loans outstanding with Nycomed Amersham at December 31, 1999 and 2000 were $395.9 million and $453.9 million, respectively. The weighted average interest rate of loans outstanding was 5.9%, 5.4% and 6.5% for 1998, 1999, and 2000, respectively, and interest paid to Nycomed Amersham on these loans was $13.3 million, $21.1 million and $26.9 million for 1998, 1999 and 2000 respectively. Additionally, the Company participates in Nycomed Amersham's cash management program, and earns interest on amounts held on deposit with Nycomed Amersham. The interest received on deposits with Nycomed Amersham amounted to $2.3 million, $1.5 million and $0.9 million for 1998, 1999, and 2000, respectively. Parent Company Option Trust Payment In March of 2000, the Company's U.S. subsidiaries made loans amounting to $17.4 million to a separate trust (the "Trust") administered on behalf of the Company and its parent, Nycomed Amersham plc, which was established for the purpose of purchasing Nycomed Amersham stock sufficient to satisfy the Company's obligations under employee stock option plans adopted in 2000. The loans are collateralized by the stock held in the Trust. The loans have been included in "Other non-current assets" in the accompanying consolidated balance sheet and are expected to be repaid by the Trust with the proceeds from employee exercises of related stock options. Manufacturing agreement Nycomed Amersham continues to operate the Cardiff manufacturing facility under a contract manufacturing agreement with the Company (see Notes 2 and 22). Payments to Nycomed Amersham under the Cardiff manufacturing agreement were $130.9 million, $143.3 million and $135.3 million for 1998, 1999 and 2000 respectively. Service agreements Nycomed Amersham provides the Company with certain services, including information technology support, logistics, and other administrative support services, under shared service arrangements. Additionally, the Company provides Nycomed Amersham with certain support services related to information technology support for the Cardiff site. F-34 136 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Costs charged to and from Nycomed Amersham were as follows:
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1999 2000 ---------- ---------- ---------- (IN MILLIONS) Charges from Nycomed Amersham................... $7.0 $6.7 $7.6 Charges to Nycomed Amersham..................... 5.2 0.4 0.4
Allocated Support Services Nycomed Amersham also provides central corporate and administrative support services, including finance, treasury, legal and human resources support, to the Company without reimbursement. The cost of these services has been allocated to the Company based on allocations deemed reasonable by management for each function, principally based on the proportion of time spent by personnel in each department on the Company's matters relative to other Nycomed Amersham group matters. The amount of costs allocated to and not reimbursed by the Company was $2.5 million, $3.8 million and $4.7 million for 1998, 1999 and 2000, respectively. These costs have been reflected as an expense of the Company and a capital contribution by Nycomed Amersham in the year the service was provided in the accompanying financial statements. Product Sales Prior to 2000, the Company sold certain of its products to Nycomed Amersham and its subsidiaries. These sales amounted to $13.8 million in 1999 and 1998. Amounts due to and from Nycomed Amersham Amounts due to and from Nycomed Amersham related to the above transactions at December 31, 1999 and 2000 were as follows:
AS OF DECEMBER 31, ------------------------ 1999 2000 ---------- ---------- Payables due to Nycomed Amersham............................ $ 21.5 $ 20.6 Loans due to Nycomed Amersham............................... 395.9 453.9 Receivables due from Nycomed Amersham....................... 6.6 2.1 Short-term deposits held by Nycomed Amersham................ 6.8 21.5
24. PROPOSED CAPITAL TRANSACTIONS Formation of APBiotech Inc and Offering of Shares The Company has commenced the process of conducting an initial public offering of its common shares. APBiotech Inc, a recently formed U.S. corporation, was created with this planned offering and will become the holding company for APB Ltd. The number of shares to be sold will represent approximately 10% of the Company's outstanding common stock subsequent to the offering. The credit facility with Nycomed Amersham will remain outstanding subsequent to the offering. F-35 137 AMERSHAM PHARMACIA BIOTECH LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Additional Capital contribution and conversion of Redeemable Preferred Stock Nycomed Amersham and Pharmacia Corporation as shareholders of the Company, have adopted resolutions that, concurrent with the offering of shares discussed above, will result in the following: -- Nycomed Amersham and Pharmacia have agreed to an additional capital contribution of approximately L100 million, to be contributed 55% by Nycomed Amersham and 45% by Pharmacia. Nycomed Amersham and Pharmacia will receive shares of APBiotech Ltd's common stock in exchange for their contributions. -- Nycomed Amersham and Pharmacia, as holders of the Company's 8% Redeemable Preferred Stock (the "preferred stock"), will convert all of the Company's outstanding preferred stock of 67,916,327 shares into shares of the Company's common stock and class B common stock. The conversion ratio will be determined in accordance with the preferred stock's terms by dividing the dollar value of the preferred shares outstanding, including accrued dividends, by the price of APBiotech Inc's common stock to be sold in the Offering. F-36 138 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of APBiotech Inc: In our opinion, the accompanying balance sheet presents fairly, in all material respects, the financial position of APBiotech Inc (the "Company") at December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. This balance sheet is the responsibility of the Company's management; our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our audit of this statement in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP Florham Park, New Jersey February 23, 2001 F-37 139 APBIOTECH INC BALANCE SHEET
AS OF DECEMBER 31, 2000 ----------------- $ IN THOUSANDS ASSETS Cash...................................................... $ 0.1 Prepaid Expenses.......................................... 3,453.8 -------- TOTAL ASSETS...................................... $3,453.9 ======== LIABILITIES Due to Nycomed Amersham................................... $3,453.8 -------- EQUITY Common stock, $1 par value, 100 shares authorized, issued and outstanding........................................ 0.1 -------- TOTAL LIABILITIES AND EQUITY...................... $3,453.9 ========
NOTE TO BALANCE SHEET APBiotech Inc (formerly Fulham Corp.) (the "Company"), a subsidiary of Nycomed Amersham plc, is a corporation that was formed under the General Corporation Law of the State of Delaware on May 24, 2000 for the purpose of obtaining ownership of Amersham Pharmacia Biotech Ltd. ("APBiotech Ltd.") and subsequently offering a portion of its common stock for sale in an initial public offering (the "IPO"). The transfer of ownership of APBiotech Ltd. from its current owners, Nycomed Amersham and Pharmacia Corporation, to the Company will be effected through the incurrence of indebtedness to Nycomed Amersham and the issuance of common stock to Nycomed Amersham and Pharmacia Corporation in exchange for all outstanding stock of APBiotech Ltd. The Company will then offer a portion of its common stock to the public in the IPO. The proceeds of the offering will be used initially to repay existing indebtedness of APBiotech Ltd. to Nycomed Amersham, with any remaining proceeds to be used by the Company for general corporate purposes and placed on deposit with Nycomed Amersham pending such uses. As the Company and APBiotech Ltd. are subsidiaries of Nycomed Amersham, the transfer of ownership of APBiotech Ltd. will be accounted for as a transfer between entities under common control, and thus the Company will record the assets and liabilities of APBiotech Ltd. at historical cost in a manner similar to a pooling-of-interests. The Company will pay all fees and expenses related to its organization and operations, the acquisition of APBiotech Ltd., and the IPO and be responsible for all debts and other obligations of the Company and APBiotech Ltd. As of December 31, 2000, approximately $3,453.8 of costs had been incurred related to the IPO. Such costs have been financed through borrowings from Nycomed Amersham and will be offset against the proceeds from the IPO in the Company's financial statements. F-38 140 [APBiotech LOGO] 141 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
AMOUNT TO BE PAID ---------- Registration fee............................................ $90,353 NASD Filing fee............................................. $30,500 Nasdaq National Market...................................... $ 1,000 Transfer agent's fees....................................... * Printing and engraving expenses............................. * Legal fees and expenses..................................... * Accounting fees and expenses................................ * Blue Sky fees and expenses.................................. * Miscellaneous............................................... * ------- Total............................................. $ * =======
- ------------ Each of the amounts set forth above, other than the Registration fee and the NASD filing fee, is an estimate. * To be provided by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the Registrant. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise. Section 6.09 of the Registrant's Amended Certificate of Incorporation provides for indemnification by the Registrant of its directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. The Registrant's Certificate of Incorporation provides for such limitation of liability. The Registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and (b) to the Registrant with respect to payments which may be made by the Registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law. The proposed forms of Underwriting Agreement filed as Exhibit 1 to this Registration Statement provide for indemnification of directors and officers of the Registrant by the underwriters against certain liabilities. II-1 142 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. In connection with the reorganization APBiotech Inc. will directly issue the following common shares: 1) 83,581,479 shares of its Class B common Stock, par value $.01 per share to Pharmacia Biosystems AB in exchange for 411,566 shares of Amersham Pharmacia Biotech Limited's Class B ordinary shares; 2) 3,704,005 shares of its Class B common Stock, par value $.01 per share to Pharmacia & Upjohn Company in exchange for 20,635 shares of Amersham Pharmacia Biotech Limited's Class B ordinary shares; and 3) 100,413,689 shares of its common stock, per value $.01 par share to Nycomed Amersham plc in exchange for 572,291 shares of Amersham Pharmacia Biotech Limited's Class A Ordinary shares and three 20 year notes having principal amounts of $170.0 million and $83 million, respectively. The shares will be issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits are filed as part of this Registration Statement:
EXHIBIT NUMBER DESCRIPTION - -------- ------------------------------------------------------------ *1 Form of Underwriting Agreement 2 Reorganization Agreement among Amersham Pharmacia Biotech Limited, AP Biotech Inc, Nycomed Amersham plc, NyCam Biotech Limited, The Pharmacia & Upjohn Company, Pharmacia Biosystems AB and Pharmacia Holding GmbH dated , 2001. ***3.1 Certificate of Incorporation *3.2 Restated Certificate of Incorporation, to be effective immediately prior to the closing of this offering ***3.3 Bylaws *3.4 Restated Bylaws, to be effective immediately prior to the closing of this offering *4.1 Form of Common Stock Certificate *4.2 Shareholders' Agreement dated as of , 2001 among APBiotech Inc., Amersham Pharcacia Biotech Limited, Nycomed Amersham plc, Pharmacia Corporation, Pharmacia y Upjohn Company, Pharmacia AB, and Pharmacia Holding GmbH, to be effective immediately prior to the closing of this offering *5 Opinion of Davis Polk & Wardwell ***10.1 General Services Agreement between Amersham International plc and Amersham Pharmacia Biotech Limited dated August 4, 1997 ***10.2 Contract Manufacture Agreement between Amersham International plc and Amersham Life Science Limited for Amersham Laboratories dated August 4, 1997 *10.3 Contract Manufacture Agreement between Amersham International plc and Amersham Life Science Limited for Cardiff dated August 4, 1997 ***10.4 Lease and Guaranty between MP Argues, Inc. and Molecular Dynamics, Inc. dated November 30, 1999 ***10.5 Lease Agreement between Geoffrey Ranch and Molecular Dynamics dated December 1, 1999 10.6 APBiotech Inc. Executive Stock Option Plan 2000 **10.7 License Agreement between the Perking-Elmer Corporation and Amersham International plc dated April 1, 1996
II-2 143
EXHIBIT NUMBER DESCRIPTION - -------- ------------------------------------------------------------ **10.8 License Agreement between the Regents of the University of California and Molecular Dynamics dated September 15, 1993 **10.9 License Agreement between the Regents of The University of California and Amersham Life Science Inc. dated October 1, 1995, as amended April 2, 1998 **10.10 License Agreement between the Regents of The University of California and Molecular Dynamics dated January 16, 1991, as amended February 10, 1993 and May 15, 2000 **10.11 License Agreement between the President and Fellows of Harvard College and Amersham Pharmacia Biotech Inc. dated January 1, 1999 10.12 Commitment Agreement among Nycomed Amersham plc, Pharmacia Corporation, APBiotech Inc and Amersham Pharmacia Limited dated September 28, 2000 10.13 Amendment to General Services Agreement between Nycomed Amersham plc and Amersham Pharmacia Biotech Limited dated February 19, 2001 10.14 APBiotech Inc Options for All Plan 2000 10.15 APBiotech Inc US Employee Stock Purchase Plan 10.16 APBiotech Inc Savings Related Share Option Scheme *10.17 Employment Agreement between APBiotech Inc and Andrew Carr, dated , 2001 10.18 Employment Agreement between APBiotech Inc and Sandra Cartie, dated October 17, 2000 10.19 Employment Agreement between Pharmacia Biotech Inc and Andrew Rackear, dated November 20, 1996 10.20 Employment Agreement between Amersham Pharmacia Biotech and William Sulinski, dated August 4, 2000 10.21 Employment Contract between Amersham Pharmacia Biotech and Peter Ehrenham, dated November 24, 1999 10.22 Employment Contract between Amersham Pharmacia Biotech AB and Per-Erik Sandlund, dated February 18, 1999 10.23 Employment Agreement between Pharmacia Biotech Europe GmbH and Lars Eric Utterman dated April 12, 1994 10.24 Contract Research and Development Agreement, dated December 29, 2000 between Amersham Pharmacia Biotech Limited and Goldartist Limited. 10.25 Contract Research and Development Agreement, dated December 29, 2000 between Amersham Pharmacia Biotech UK Limited and Nycomed Amersham plc. 21 Subsidiaries of the Registrant 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of PricewaterhouseCoopers LLP *23.4 Consent of Davis Polk & Wardwell (included in Exhibit 5) 24.4 Power of Attorney (included on signature page)
- ------------ * To be filed by amendment ** Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Registrant's application requesting confidential treatment under Rule 406 of the Act, filed on October 2, 2000 ***Previously filed II-3 144 (b) Financial Statement Schedules ITEM 17. UNDERTAKINGS The undersigned hereby undertakes: (a) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this Registration Statement, or otherwise, the registrant has 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 for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or 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 hereunder, 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 of 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. (c) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 145 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Piscataway, State of New Jersey, on the 26th day of February, 2001. APBIOTECH INC By /s/ ANDREW CARR ------------------------------------ Name: Andrew Carr Title: Chief Executive Officer II-5 146 Pursuant to the requirements of the Securities Act of 1933, as amended, Amendment No. 1 to this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------- ----------------------------------------- ----------------- /s/ ANDREW CARR Chief Executive Officer, Director February 26, 2001 - ------------------------------------ Andrew Carr /s/ SANDRA CARTIE Chief Financial Officer, Director February 26, 2001 - ------------------------------------ Sandra Cartie /s/ SANDRA CARTIE Controller or Principal Accounting February 26, 2001 - ------------------------------------ Officer Sandra Cartie /s/ SIR WILLIAM CASTELL Director February 26, 2001 - ------------------------------------ Sir William M. Castell /s/ RON LONG Director February 26, 2001 - ------------------------------------ Ronald Long /s/ GILES KERR Director February 26, 2001 - ------------------------------------ Giles Kerr
II-6 147 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - -------- ------------------------------------------------------------ *1 Form of Underwriting Agreement 2 Reorganization Agreement among Amersham Pharmacia Biotech Limited, AP Biotech Inc, Nycomed Amersham plc, NyCam Biotech Limited, The Pharmacia & Upjohn Company, Pharmacia Biosystems AB and Pharmacia Holding GmbH dated , 2001. ***3.1 Certificate of Incorporation *3.2 Restated Certificate of Incorporation, to be effective immediately prior to the closing of this offering ***3.3 Bylaws *3.4 Restated Bylaws, to be effective immediately prior to the closing of this offering *4.1 Form of Common Stock Certificate *4.2 Shareholders' Agreement dated as of , 2001 among APBiotech Inc., Amersham Pharcacia Biotech Limited, Nycomed Amersham plc, Pharmacia Corporation, Pharmacia y Upjohn Company, Pharmacia AB, and Pharmacia Holding GmbH, to be effective immediately prior to the closing of this offering *5 Opinion of Davis Polk & Wardwell ***10.1 General Services Agreement between Amersham International plc and Amersham Pharmacia Biotech Limited dated August 4, 1997 ***10.2 Contract Manufacture Agreement between Amersham International plc and Amersham Life Science Limited for Amersham Laboratories dated August 4, 1997 *10.3 Contract Manufacture Agreement between Amersham International plc and Amersham Life Science Limited for Cardiff dated August 4, 1997 ***10.4 Lease and Guaranty between MP Argues, Inc. and Molecular Dynamics, Inc. dated November 30, 1999 ***10.5 Lease Agreement between Geoffrey Ranch and Molecular Dynamics dated December 1, 1999 10.6 APBiotech Inc. Executive Stock Option Plan 2000 **10.7 License Agreement between the Perking-Elmer Corporation and Amersham International plc dated April 1, 1996 **10.8 License Agreement between the Regents of the University of California and Molecular Dynamics dated September 15, 1993 **10.9 License Agreement between the Regents of The University of California and Amersham Life Science Inc. dated October 1, 1995, as amended April 2, 1998 **10.10 License Agreement between the Regents of The University of California and Molecular Dynamics dated January 16, 1991, as amended February 10, 1993 and May 15, 2000 **10.11 License Agreement between the President and Fellows of Harvard College and Amersham Pharmacia Biotech Inc. dated January 1, 1999 10.12 Commitment Agreement among Nycomed Amersham plc, Pharmacia Corporation, APBiotech Inc and Amersham Pharmacia Limited dated September 28, 2000 10.13 Amendment to General Services Agreement between Nycomed Amersham plc and Amersham Pharmacia Biotech Limited dated February 19, 2001 10.14 APBiotech Inc Options for All Plan 2000 10.15 APBiotech Inc US Employee Stock Purchase Plan 10.16 APBiotech Inc Savings Related Share Option Scheme
148
EXHIBIT NUMBER DESCRIPTION - -------- ------------------------------------------------------------ *10.17 Employment Agreement between APBiotech Inc and Andrew Carr, dated , 2001 10.18 Employment Agreement between APBiotech Inc and Sandra Cartie, dated October 17, 2000 10.19 Employment Agreement between Pharmacia Biotech Inc and Andrew Rackear, dated November 20, 1996 10.20 Employment Agreement between Amersham Pharmacia Biotech and William Sulinski, dated August 4, 2000 10.21 Employment Contract between Amersham Pharmacia Biotech and Peter Ehrenham, dated November 24, 1999 10.22 Employment Contract between Amersham Pharmacia Biotech AB and Per-Erik Sandlund, dated February 18, 1999 10.23 Employment Agreement between Pharmacia Biotech Europe GmbH and Lars Eric Utterman dated April 12, 1994 10.24 Contract Research and Development Agreement, dated December 29, 2000 between Amersham Pharmacia Biotech Limited and Goldartist Limited. 10.25 Contract Research and Development Agreement, dated December 29, 2000 between Amersham Pharmacia Biotech UK Limited and Nycomed Amersham plc. 21 Subsidiaries of the Registrant 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of PricewaterhouseCoopers LLP *23.4 Consent of Davis Polk & Wardwell (included in Exhibit 5) 24.4 Power of Attorney (included on signature page)
- ------------ * To be filed by amendment ** Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Registrant's application requesting confidential treatment under Rule 406 of the Act, filed on October 2, 2000 ***Previously filed EX-2 2 y42738a1ex2.txt REORGANIZATION AGREEMENT 1 EXHIBIT 2 _____ _____ 2001 AMERSHAM PHARMACIA BIOTECH LIMITED APBIOTECH INC NYCOMED AMERSHAM PLC NYCAM BIOTECH LIMITED THE PHARMACIA & UPJOHN COMPANY PHARMACIA BIOSYSTEMS AB PHARMACIA HOLDING GMBH =================================================== REORGANISATION AGREEMENT ==================================================== [logo] 2 CONTENTS CLAUSE PAGE 1. INTERPRETATION........................................................... 2 2. CONDITION PRECEDENT...................................................... 4 3. CONVERSION OF PREFERENCE SHARES.......................................... 4 4. CAPITAL SUBSCRIPTION..................................................... 5 5. VARIATION OF RIGHTS ATTACHING TO PHGMBH SHARES........................... 5 6. TRANSFER OF SHARES IN APB................................................ 5 7. OVER ALLOTMENT SHARES.................................................... 6 8. NOTICES.................................................................. 7 9. ASSIGNMENT............................................................... 7 10. FURTHER ASSURANCE........................................................ 8 11. VARIATION................................................................ 8 12. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999........................................................ 8 13. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS....................... 8 SCHEDULE I................................................................... 11 SCHEDULE II.................................................................. 17 SCHEDULE III................................................................. 23 SCHEDULE IV.................................................................. 25 SCHEDULE V................................................................... 47 SCHEDULE VI.................................................................. 53 Form of Conversion Notice.............................................. 53 3 THIS AGREEMENT is made on ______________ 2001 BETWEEN: (1) AMERSHAM PHARMACIA BIOTECH LIMITED (registered in England with company number 03387094) whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (APB); (2) APBIOTECH INC (a corporation organised under the laws of the State of Delaware) whose registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 (APBINC); (3) NYCOMED AMERSHAM PLC (registered in England with company number 01002610) whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (NYCOMED); (4) NYCAM BIOTECH LIMITED (registered in [o]) whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (NYCAM); (5) THE PHARMACIA & UPJOHN COMPANY (registered in [o]) whose registered office is at [o] (PUC); (6) PHARMACIA BIOSYSTEMS AB (registered in [o]) whose registered office is at [o] (PAB); and (7) PHARMACIA HOLDING GMBH (registered in [o]) whose registered office is at [o] (PHGMBH). WHEREAS: (A) Nycomed holds 37,353,980 8% cumulative redeemable preference shares in the capital of APB (PREFERENCE SHARES) and 549,999 Class A Ordinary Shares in the capital of APB. (B) PUC holds 30,562,347 Preference Shares. (C) PAB holds 390,931 Class B Ordinary Shares in the capital of APB. (D) PHGmbH holds 59,069 Class B Ordinary Shares in the capital of APB. (E) In connection with a proposed public offering of a minority stake in, and a listing on NASDAQ for, APBInc (the IPO), the parties have agreed to reorganise their existing shareholdings in and the structure of APB, such reorganisation to be implemented in four 4 consecutive stages (THE REORGANISATION), involving the conversion of the Preference Shares into Class A Ordinary Shares and Class B Ordinary Shares, a capital injection into APB by way of subscription for shares by NycAm and PAB, the removal of the voting rights attaching to the Class B Ordinary Shares held by PHGmbH, the transfer of the entire issued share capital of APB less the 59,069 Class B Ordinary Shares held by PHGmbH to APBInc and the issue of Common Stock by APBInc to Nycomed and Class B Common Stock by APBInc to PUC and to PAB and the execution of three loan notes of principal amounts of $169,929,266, $83,000,000 and $81,950,139 respectively by APBInc. (F) It is intended that APBInc will make 2,730,000 shares of its Common Stock available to the Underwriters in the IPO for the sole purpose of covering over-allotments and, should the Underwriters not exercise the over-allotment option, Nycomed shall agree to subscribe for and purchase the Common Stock. (G) The boards of directors of the parties to this Agreement have considered this Agreement and approved the same as being in the best interests of their respective companies. IT IS AGREED: INTERPRETATION 1.1 In this Agreement the following words and expressions have the meanings respectively set opposite them: ASSETS means property of all kinds, both tangible and intangible; CLASS A ORDINARY SHARES means the class A ordinary shares of (pound)1 each in the capital of APB; CLASS B COMMON STOCK means the class B common stock par value $.01 each in the capital of APBInc; COMMON STOCK means the common stock par value $.01 each in the capital of APBInc; CLASS B ORDINARY SHARES means the class B ordinary shares of (pound)1 each in the capital of APB; COSTS means costs, charges, fees and expenses of all kinds; BUSINESS DAY means a day (other than a Saturday or Sunday) on which banks in the City of London are generally open for business; 2 5 IPO has the meaning given to it in recital (E); PREFERENCE SHARES means the 8% cumulative redeemable preference shares in the capital of APB; UNDERWRITERS means Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Chase Securities Inc. and Salomon Smith Barney Inc; and UNDERWRITING AGREEMENT means the underwriting agreement to be entered into among APBInc and the Underwriters in connection with the IPO. 1.2 In this Agreement, unless the context otherwise requires: (a) references to this Agreement or any other document include references to this Agreement, its recitals and its schedules or such other document as varied, supplemented and/or replaced in any manner from time to time; (b) references to any party shall, where relevant, be deemed to be references to or to include, as appropriate, their respective lawful successors, assigns or transferees; (c) references to recitals, clauses, schedules and sub-divisions of them are references to the recitals and clauses of, and schedules to, this Agreement and sub-divisions of them respectively; (d) references to any enactment shall be deemed to include references to such enactment as re-enacted, amended or extended before the date of this Agreement and any subordinate legislation made from time to time under it; (e) references to a "person" include any individual, company, corporation, firm, partnership, joint venture, association, organisation, institution, trust or agency, whether or not having a separate legal personality; (f) references to the one gender include all genders and references to the singular shall include the plural and vice versa; (g) headings are inserted for convenience only and shall be ignored in constructing this Agreement; and (h) the words "company", "subsidiary", "subsidiary undertaking" and "holding company" have the meanings given to them by the Companies Act 1985. 3 6 CONDITION PRECEDENT 2. The obligations of the parties hereunder (other than pursuant to Clause 3.1) and the effecting of any of the steps set out in the Agreement are conditional upon the Underwriting Agreement having been executed and not having been terminated in accordance with its terms by [9a.m Greenwich Mean Time] on the Closing Date (as defined in the Underwriting Agreement) (the COMPLETION DATE). If this condition is not satisfied by the date set out above (or such later date as the parties may agree), the obligations of each of the parties hereunder shall cease and determine. The events in Clauses 3 to 6 shall take place immediately following satisfaction of the above condition. The steps set out in clauses 3 to 6 (including, for the avoidance of doubt, the steps set out in sub-clauses 6.1 to 6.4) shall take place in the order set out in this Agreement. CONVERSION OF PREFERENCE SHARES 3.1 Not later than three (3) Business Days prior to the Completion Date, Nycomed and PUC will each serve on APB a written notice in substantially the form attached to this Agreement as Schedule VI (each a CONVERSION NOTICE) in respect of their holdings of Preference Shares in APB, requesting that, subject to the satisfaction of the condition specified in Clause 2.1, Nycomed's holding of Preference Shares be converted into Class A Ordinary Shares as set forth in Clause 3.2 and PUC's holding of Preference Shares be converted into Class B Ordinary Shares as set forth in Clause 3.3. If the condition specified in Clause 2 is not satisfied or waived (as the case may be) the Conversion Notice shall lapse. 3.2 On the Completion Date and following receipt by APB of the Conversion Notice from Nycomed, the 37,353,908 Preference Shares held by Nycomed will be converted into 22,292 Class A Ordinary Shares in APB in accordance with the articles of association of APB. 3.3 On the Completion Date and following receipt by APB of the Conversion Notice from PUC, the 30,562,347 Preference Shares held by PUC will be converted into 18,239 Class B Ordinary Shares in APB in accordance with the articles of association of APB. 3.4 APB shall procure that a board meeting of its directors shall approve such conversion on the basis referred to above. 3.5 APB shall forthwith enter Nycomed in its register of members as holder of 22,292 Class A Ordinary Shares in APB and shall, as soon as reasonably practicable thereafter, deliver to Nycomed (or its order) a share certificate relating thereto. 4 7 3.6 APB shall forthwith enter PUC in its register of members as holder of 18,239 Class B Ordinary Shares in APB and shall, as soon as reasonably practical thereafter, deliver to PUC (or its order) a share certificate relating thereto. CAPITAL SUBSCRIPTION 4.1(a) On the Completion Date, NycAm shall subscribe for 25,221 Class A Ordinary Shares at a price of: (pound)2,181 (b) The consideration for the allotment and issue to NycAm of the 25,221 Class A Ordinary Shares shall be paid on the Completion Date by [banker's draft/electronic transfer of funds to account number [insert bank details]]. (c) APB shall enter NycAm in their register of members as holder of an additional 25,221 Class A Ordinary Shares and shall send to NycAm a share certificate relating thereto. 4.2(a) On the Completion Date, PAB shall subscribe for 20,635 Class B Ordinary Shares at a price of:(pound)2,181 (b) The consideration for the allotment and issue to PAB of the 20,635 Class B Ordinary Shares shall be paid on the Completion Date by [banker's draft/electronic transfer of funds to account number [insert bank details]]. (c) APB shall enter PAB in their register of members as holder of an additional 20,635 Class B Ordinary Shares and shall send to PAB a share certificate relating thereto. VARIATION OF RIGHTS ATTACHING TO PHGMBH SHARES 5.1 PHGmbH hereby irrevocably consents to and sanctions the reclassification of its 59,069 Class B Ordinary Shares into an equivalent number of non voting Class B ordinary shares in the capital of APB. 5.2 APB shall amend the register to reflect the change to PHGmbH's holding of shares in APB and shall send to PHGmbH a new share certificate. TRANSFER OF SHARES IN APB 6.1 TRANSFER OF SHARES FROM PAB TO APBINC (a) PAB agrees to sell and APBInc agrees to purchase 411,566 Class B Ordinary Shares (THE PAB/APB Shares) on the terms and conditions of an agreement in substantially the form set out in Schedule I. 5 8 (b) Completion of the sale and purchase of the PAB/APB Shares shall take place on the Completion Date and the parties shall enter into the agreement referred to in paragraph (a) above on that date. 6.2 TRANSFER OF SHARES FROM PUC TO APBINC (a) PUC agrees to sell and APBInc agrees to purchase 18,239 Class B Ordinary Shares (THE PUC/APB SHARES) on the terms and conditions of an agreement in substantially the form set out in Schedule II. (b) Completion of the sale and purchase of the PUC/APB Shares shall take place on the Completion Date and the parties shall enter into the agreement referred to in paragraph (a) above on that date. 6.3 TRANSFER OF SHARES FROM NYCOMED TO APBINC (a) Nycomed agrees to sell and APBInc agrees to purchase 572,291 Class A Ordinary Shares (THE NYCOMED/APB SHARES) on the terms and conditions of an agreement in substantially the form set out in Schedule III. (b) Completion of the sale and purchase of the Nycomed/APB Shares shall take place on the Completion Date and the parties shall enter into the agreement referred to in paragraph (a) above on that date. 6.4 TRANSFER OF SHARES FROM NYCAM TO APBINC (a) NycAm agrees to sell and APBInc agrees to purchase 25,221 Class A Ordinary Shares (THE NYCAM/APB SHARES) on the terms and conditions of an agreement in substantially the form set out in Schedule IV. (b) Completion of the sale and purchase of the NycAm/APB Shares shall take place on the Completion Date and the parties shall enter into the agreement referred to in paragraph (a) above on that date. OVER ALLOTMENT SHARES 7.1 If the Underwriters under the Underwriting Agreement fail to exercise the over-allotment option or only exercise it in part, Nycomed agrees to purchase and APBInc agrees to sell 2,730,000 shares of Common Stock (the OVER-ALLOTMENT SHARES) to Nycomed on the terms and conditions of an agreement in substantially the form set out in Schedule V. 6 9 7.2 If the parties fully perform their obligations under the agreement referred to in Clause 7.1, APBInc agrees to repay, in whole or in part, the loan note issued to NycAm, such repayment amount to be equal to the proceeds received from Nycomed in connection with the purchase of the Over-Allotment Shares. 7.3 The parties shall enter into the agreement referred to in Clause 7.1 on the Completion Date (unless the Underwriters have already elected to exercise the over-allotment option in full). NOTICES 8.1 Any notice or other communication to be given under this Agreement shall be in writing, shall be deemed to have been duly served on, given to or made in relation to a party if it is left at the authorised address of that party, posted by first class post addressed to that party at such address, or sent by facsimile transmission to a machine situated at such address and shall if: (a) personally delivered, be deemed to have been received at the time of delivery; (b) posted to an inland address in the United Kingdom, be deemed to have been received on the second Business Day after the date of posting and if posted to an overseas address, be deemed to have been received on the fifth Business Day after the date of posting; or (c) sent by facsimile transmission, be deemed to have been received upon receipt by the sender of a facsimile transmission report (or other appropriate evidence) that the facsimile has been transmitted to the addressee, PROVIDED that where, in the case of delivery by hand or facsimile transmission, delivery or transmission occurs after 6.00 pm on a Business Day or on a day which is not a Business Day, receipt shall be deemed to occur at 9.00 am on the next following Business Day. 8.2 For the purposes of this clause the authorised address of each party shall be the address set out at the head of this Agreement or such other address as that party may notify to the others in writing from time to time in accordance with the requirements of this clause. ASSIGNMENT 9. No party may assign or transfer all or any of its rights or obligations under this Agreement without the prior written consent of the others. This Agreement shall enure to the benefit of and bind the respective successors and permitted assigns of the parties. 7 10 FURTHER ASSURANCE 10. Each party will, and will ensure (so far as is within its power) that any third party as is necessary will, do such acts and things and execute such deeds and documents as may be necessary to fully and effectively carry out the Reorganisation. VARIATION 11. No variation, supplement, deletion or replacement of or from this Agreement or any of its terms shall be effective unless made in writing and signed by or on behalf of each party NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 12. A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 13.1 This Agreement shall be governed by and construed in accordance with the laws of England and Wales. 13.2 Each of the parties agrees that the courts of England are to have exclusive jurisdiction to settle any disputes (including claims for set-off and counterclaims) which may arise in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise arising in connection with this Agreement, and for such purposes irrevocably submit to the jurisdiction of the English courts. 13.3 The parties to this Agreement shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be [ ] currently of [ ] in respect of [insert name of party] and [ ] currently of [ ] in respect of [insert name of party] and any writ, judgment or other notice of legal process shall be sufficiently served on the relevant Party if delivered to such agent at its address for the time being. The parties to this Agreement undertake not to revoke the authority of their respective agents. AS WITNESS the hands of duly authorised representatives of the parties the day and year first above written. 8 11 SIGNED by ) for and on behalf of ) AMERSHAM PHARMACIA ) BIOTECH LIMITED ) SIGNED by ) for and on behalf of ) APBIOTECH INC ) SIGNED by ) for and on behalf of ) NYCOMED AMERSHAM PLC ) SIGNED by ) for and on behalf of ) NYCAM BIOTECH LIMITED ) SIGNED by ) for and on behalf of ) THE PHARMACIA & UPJOHN COMPANY ) SIGNED by ) for and on behalf of ) PHARMACIA BIOSYSTEMS AB ) 9 12 SIGNED by ) for and on behalf of ) PHARMACIA HOLDING GMBH ) 10 13 SCHEDULE I SHARE SALE AND PURCHASE AGREEMENT BETWEEN PHARMACIA BIOSYSTEMS AB AND APBIOTECH INC THIS AGREEMENT is made the day of BETWEEN (1) PHARMACIA BIOSYSTEMS AB (registered in [o]) whose registered office is at [o] (THE VENDOR); and (2) APBIOTECH INC (a corporation organised under the laws of the State of Delaware) whose registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 (THE PURCHASER) WHEREAS: (A) Amersham Pharmacia Biotech Limited (THE COMPANY) is a private company limited by shares with an issued share capital of (pound)1,086,386 divided into 597,512 Class A Ordinary Shares, 429,805 Class B Ordinary Shares, and 59,069 [non-voting B ordinary shares]. The Vendor is the legal and beneficial owner of 411,566 Class B Ordinary Shares in the capital of the Company (THE APB SHARES). (B) Pursuant to a reorganisation agreement dated [o], the Vendor agreed to sell all of the APB Shares to the Purchaser for the consideration and upon the terms set out in this Agreement. IT IS HEREBY AGREED AS FOLLOWS: SHARE SALE AND PURCHASE AGREEMENT BETWEEN PHARMACIA BIOSYSTEMS AB AND APBIOTECH INC 1.1 The Vendor agrees to sell (or procure the sale of) the APB Shares and the Purchaser agrees to purchase the APB Shares with immediate effect from signing of this Agreement, on the terms that the same covenants shall be deemed to be given by the Vendor on Completion in relation to the APB Shares as are implied under Part I of the Law of Property (Miscellaneous Provisions) Act 1994 where a disposition is expressed to be made with full title guarantee. The APB Shares shall be sold free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever, together with all rights 11 14 attaching to them including, without limitation, the right to receive all dividends and other distributions declared, made or paid on or after 31 December 2000. 1.2 The total consideration for the sale of the APB Shares shall be the allotment by the Purchaser to the Vendor of 83,581,479 shares of Class B Common Stock of par value of $.01 per share credited as fully paid in the capital of the Purchaser (THE CONSIDERATION STOCK).] COMPLETION 2.1 The sale and purchase of the APB Shares shall be completed immediately after this Agreement is signed, when the events set out in the following provisions of this clause 2 shall take place. 2.2 The Vendor shall deliver or cause to be delivered to the Purchaser duly executed transfers into the name of the Purchaser or its nominee in respect of all the APB Shares, together with the relative share certificates; 2.3 The Purchaser shall, in satisfaction of its obligations under clause 1.2, cause the Consideration Stock to be allotted to the Vendor and the Vendor's name to be entered in the register of members in respect thereof (with a relative share certificate being delivered to the Vendor). WARRANTIES GIVEN BY THE VENDOR AUTHORITY TO ENTER INTO THIS AGREEMENT 3.1 The Vendor has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed pursuant to or in connection with this Agreement which when executed will constitute valid and binding obligations. NO BREACH 3.2 The execution and delivery of, and the performance by the Vendor of its obligations under, this Agreement and any other documents to be executed pursuant to or in connection with this Agreement will not: (a) result in a breach of any provision of the constitutional documents of the Vendor; or 12 15 (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Vendor is a party. THE SHARES TITLE 3.3 The Vendor is entitled to sell and transfer or to procure the sale or transfer to the Purchaser the full legal and beneficial ownership of those of the APB Shares on the terms of this Agreement without the consent or waiver of any third party. 3.4 The Vendor represents and warrants to the Purchaser that the Vendor is the sole legal and beneficial owner of the APB Shares free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever. The Vendor has the legal right to dispose of the APB Shares. WARRANTIES GIVEN BY THE PURCHASER AUTHORITY AND CAPACITY OF THE PURCHASER INCORPORATION 4.1 The Purchaser is duly incorporated and validly existing under the laws of the State of Delaware. AUTHORITY TO ENTER INTO THIS AGREEMENT 4.2 The Purchaser has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement which when executed will constitute valid and binding and enforceable obligations on the Purchaser in accordance with their respective terms. NO BREACH 4.3 The execution and delivery of, and the performance by the Purchaser of its obligations under, this Agreement and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement will not: 13 16 (a) result in a breach of any provisions of its memorandum or articles of association; or (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Purchaser is a party. CONSIDERATION STOCK 4.4 Upon issue, the Consideration Stock will be lawfully and validly issued and will be credited as fully paid and non-assessable. COVENANTS GIVEN BY THE PURCHASER 5. The Purchaser covenants with the Vendor that it will remain as owner of such shares in the Company as shall represent more than 50 per cent. of the votes attaching to all shares in the Company until 1 January 2002. Counterparts 6. This Agreement may be entered into in any number of counterparts and by the parties to it on separate counterparts, each of which is an original, but all of which together constitute one and the same instrument. FURTHER ASSURANCE 7. The Vendor agrees to perform (or procure the performance of) all further acts and things, and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by law or as the Purchaser may reasonably require, whether on or after Completion, to implement and/or give effect to this Agreement and the transaction contemplated by it and for the purpose of vesting in the Purchaser the full benefit of the assets, rights and benefits to be transferred to the Purchaser under this Agreement. SEVERABILITY 8. If any provision of this Agreement is held to be invalid or unenforceable, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement. The parties shall then use all reasonable 14 17 endeavours to replace the invalid or unenforceable provision by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. VARIATION 9. No variation of this Agreement (or of any of the documents referred to in this Agreement) shall be valid unless it is in writing and signed by or on behalf of each of the parties to it. The expression "variation" shall include any variation, supplement, deletion or replacement however effected. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 10. A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 11.1 This Agreement and the relationship between the parties shall be governed by, and interpreted in accordance with, English Law. 11.2 Each of the parties agrees that the courts of England are to have exclusive jurisdiction to settle any disputes (including claims for set-off and counterclaims) which may arise in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise arising in connection with this Agreement, and for such purposes irrevocably submit to the jurisdiction of the English courts. 11.3 The parties to this Agreement shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be [ ] currently of [ ] in respect of [insert name of party] and [ ] currently of [ ] in respect of [insert name of party] and any writ, judgment or other notice of legal process shall be sufficiently served on the relevant party if delivered to such agent at its address for the time being. The parties to this Agreement undertake not to revoke the authority of their respective agents. IN WITNESS whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written. 15 18 SIGNED by ) for and on the behalf of ) PHARMACIA BIOSYSTEMS AB ) SIGNED by ) for and on the behalf of ) APBIOTECH INC ) 16 19 SCHEDULE II SHARE SALE AND PURCHASE AGREEMENT BETWEEN THE PHARMACIA & UPJOHN COMPANY AND APBIOTECH INC THIS AGREEMENT is made the day of BETWEEN (1) THE PHARMACIA & UPJOHN COMPANY (registered in [o]) whose registered office is at [o] (THE VENDOR); and (2) APBIOTECH INC (a corporation organised under the laws of the State of Delaware) whose registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 (THE PURCHASER) WHEREAS: (A) Amersham Pharmacia Biotech Limited (THE COMPANY) is a private company limited by shares with an issued share capital of (pound)1,086,386 divided into 597,512 Class A Ordinary Shares, 429,805 Class B Ordinary Shares, and 59,069 [non-voting B ordinary shares]. The Vendor is the legal and beneficial owner of 20,635 Class B Ordinary Shares in the capital of the Company (THE APB SHARES). (B) Pursuant to a reorganisation agreement dated [o], the Vendor agreed to sell all of the APB Shares to the Purchaser for the consideration and upon the terms set out in this Agreement. IT IS HEREBY AGREED AS FOLLOWS: SALE OF THE SHARES AND CONSIDERATION 1.1 The Vendor agrees to sell (or procure the sale of) the APB Shares and the Purchaser agrees to purchase the APB Shares with immediate effect from signing of this Agreement, on the terms that the same covenants shall be deemed to be given by the Vendor on Completion in relation to the APB Shares as are implied under Part I of the Law of Property (Miscellaneous Provisions) Act 1994 where a disposition is expressed to be made with full title guarantee. The APB Shares shall be sold free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever, together with all rights 17 20 attaching to them including, without limitation, the right to receive all dividends and other distributions declared, made or paid on or after 31 December 2000. 1.2 The total consideration for the sale of the APB Shares shall be the allotment by the Purchaser to the Vendor of 3,704,005 shares of Class B Common Stock of a par value of $.01 per share credited as fully paid in the capital of the Purchaser (THE CONSIDERATION STOCK).] COMPLETION 2.1 The sale and purchase of the APB Shares shall be completed immediately after this Agreement is signed, when the events set out in the following provisions of this clause 2 shall take place. 2.2 The Vendor shall deliver or cause to be delivered to the Purchaser duly executed transfers into the name of the Purchaser or its nominee in respect of all the APB Shares, together with the relative share certificates; 2.3 The Purchaser shall, in satisfaction of its obligations under clause 1.2, cause the Consideration Stock to be allotted to the Vendor and the Vendor's name to be entered in the register of members in respect thereof (with a relative share certificate being delivered to the Vendor). WARRANTIES GIVEN BY THE VENDOR AUTHORITY TO ENTER INTO THIS AGREEMENT 3.1 The Vendor has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed pursuant to or in connection with this Agreement which when executed will constitute valid and binding obligations. NO BREACH 3.2 The execution and delivery of, and the performance by the Vendor of its obligations under, this Agreement and any other documents to be executed pursuant to or in connection with this Agreement will not: (a) result in a breach of any provision of the constitutional documents of the Vendor; or 18 21 (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Vendor is a party. THE SHARES TITLE 3.3 The Vendor is entitled to sell and transfer or to procure the sale or transfer to the Purchaser the full legal and beneficial ownership of those of the APB Shares on the terms of this Agreement without the consent or waiver of any third party. 3.4 The Vendor represents and warrants to the Purchaser that the Vendor is the sole legal and beneficial owner of the APB Shares free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever. The Vendor has the legal right to dispose of the APB Shares. WARRANTIES GIVEN BY THE PURCHASER AUTHORITY AND CAPACITY OF THE PURCHASER INCORPORATION 4.1 The Purchaser is duly incorporated and validly existing under the laws of the State of Delaware. AUTHORITY TO ENTER INTO THIS AGREEMENT 4.2 The Purchaser has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement which when executed will constitute valid and binding and enforceable obligations on the Purchaser in accordance with their respective terms. NO BREACH 4.3 The execution and delivery of, and the performance by the Purchaser of its obligations under, this Agreement and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement will not: 19 22 (a) result in a breach of any provisions of its memorandum or articles of association; or (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Purchaser is a party. CONSIDERATION STOCK 4.4 Upon issue, the Consideration Stock will be properly and validly allotted and issued and will be credited as fully paid. COUNTERPARTS 5. This Agreement may be entered into in any number of counterparts and by the parties to it on separate counterparts, each of which is an original, but all of which together constitute one and the same instrument. FURTHER ASSURANCE 6. The Vendor agrees to perform (or procure the performance of) all further acts and things, and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by law or as the Purchaser may reasonably require, whether on or after Completion, to implement and/or give effect to this Agreement and the transaction contemplated by it and for the purpose of vesting in the Purchaser the full benefit of the assets, rights and benefits to be transferred to the Purchaser under this Agreement. SEVERABILITY 7. If any provision of this Agreement is held to be invalid or unenforceable, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement. The parties shall then use all reasonable endeavours to replace the invalid or unenforceable provision by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. 20 23 VARIATION 8. No variation of this Agreement (or of any of the documents referred to in this Agreement) shall be valid unless it is in writing and signed by or on behalf of each of the parties to it. The expression "variation" shall include any variation, supplement, deletion or replacement however effected. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 9. A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 10.1 This Agreement and the relationship between the parties shall be governed by, and interpreted in accordance with, English Law. 10.2 Each of the parties agrees that the courts of England are to have exclusive jurisdiction to settle any disputes (including claims for set-off and counterclaims) which may arise in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise arising in connection with this Agreement, and for such purposes irrevocably submit to the jurisdiction of the English courts. 10.3 The parties to this Agreement shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be [ ] currently of [ ] in respect of [insert name of party] and [ ] currently of [ ] in respect of [insert name of party] and any writ, judgment or other notice of legal process shall be sufficiently served on the relevant party if delivered to such agent at its address for the time being. The parties to this Agreement undertake not to revoke the authority of their respective agents. IN WITNESS whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written. SIGNED by ) for and on the behalf of ) THE PHARMACIA & UPJOHN COMPANY ) 21 24 SIGNED by ) for and on the behalf of ) APBIOTECH INC ) 22 25 SCHEDULE III SHARE SALE AND PURCHASE AGREEMENT BETWEEN NYCOMED AMERSHAM PLC AND APBIOTECH INC THIS AGREEMENT is made the day of BETWEEN (1) NYCOMED AMERSHAM PLC (registered in England with company number 01002610) whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (THE VENDOR); and (2) APBIOTECH INC (a corporation organised under the laws of the State of Delaware) whose registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 (THE PURCHASER) WHEREAS: (A) Amersham Pharmacia Biotech Limited (THE COMPANY) is a private company limited by shares with an issued share capital of (pound)1,086,386 divided into 597,512 Class A Ordinary Shares, 429,805 Class B Ordinary Shares, and 59,069 [non-voting B ordinary shares]. The Vendor is the legal and beneficial owner of 572,291 Class A Ordinary Shares in the capital of the Company (THE APB SHARES). (B) Pursuant to a reorganisation agreement dated [o], the Vendor agreed to sell all of the APB Shares to the Purchaser for the consideration and upon the terms set out in this Agreement. IT IS HEREBY AGREED AS FOLLOWS: SALE OF THE SHARES AND CONSIDERATION 1.1 The Vendor agrees to sell (or procure the sale of) the APB Shares and the Purchaser agrees to purchase the APB Shares with immediate effect from signing of this Agreement, on the terms that the same covenants shall be deemed to be given by the Vendor on Completion in relation to the APB Shares as are implied under Part I of the Law of Property (Miscellaneous Provisions) Act 1994 where a disposition is expressed to be made with full title guarantee. The APB Shares shall be sold free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever, together with all rights 23 26 attaching to them including, without limitation, the right to receive all dividends and other distributions declared, made or paid on or after 31 December 2000. 1.2 The consideration for the sale of the APB Shares shall include the allotment by the Purchaser to the Vendor of 100,413,689 shares of Common Stock of a par value of $.01 credited as fully paid in the capital of the Purchaser (THE CONSIDERATION STOCK) and two 20 year notes having principal amounts of $169,929,266 and $83,000,000, respectively (the LOAN NOTES). TERMS OF THE LOAN NOTES The Loan Notes shall be in substantially the form attached as Schedule I to this Agreement. COMPLETION 2.1 The sale and purchase of the APB Shares shall be completed immediately after this Agreement is signed, when the events set out in the following provisions of this clause 2 shall take place. 2.2 The Vendor shall deliver or cause to be delivered to the Purchaser duly executed transfers into the name of the Purchaser or its nominee in respect of all the APB Shares, together with the relative share certificates; 2.3 The Purchaser shall, in satisfaction of its obligations under clause 1.2, cause the Consideration Stock to be allotted to the Vendor and the Vendor's name to be entered in the register of members in respect thereof (with a relative share certificate being delivered to the Vendor) and shall deliver the Loan Notes, duly executed, to the Vendor. WARRANTIES GIVEN BY THE VENDOR AUTHORITY TO ENTER INTO THIS AGREEMENT 3.1 The Vendor has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed pursuant to or in connection with this Agreement which when executed will constitute valid and binding obligations. NO BREACH 3.2 The execution and delivery of, and the performance by the Vendor of its obligations under, this Agreement and any other documents to be executed pursuant to or in connection with this Agreement will not: 24 27 (a) result in a breach of any provision of the constitutional documents of the Vendor; or (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Vendor is a party. THE SHARES TITLE 3.3 The Vendor is entitled to sell and transfer or to procure the sale or transfer to the Purchaser the full legal and beneficial ownership of those of the APB Shares on the terms of this Agreement without the consent or waiver of any third party. 3.4 The Vendor represents and warrants to the Purchaser that the Vendor is the sole legal and beneficial owner of the APB Shares free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever. The Vendor has the legal right to dispose of the Vendor Shares. WARRANTIES GIVEN BY THE PURCHASER AUTHORITY AND CAPACITY OF THE PURCHASER INCORPORATION 4.1 The Purchaser is duly incorporated and validly existing under the laws of the State of Delaware. AUTHORITY TO ENTER INTO THIS AGREEMENT 4.2 The Purchaser has the legal right and full power and authority to enter into and perform this Agreement, the Loan Notes and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement which when executed will constitute valid and binding and enforceable obligations on the Purchaser in accordance with their respective terms. 25 28 NO BREACH 4.3 The execution and delivery of, and the performance by the Purchaser of its obligations under, this Agreement and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement will not: (a) result in a breach of any provisions of its memorandum or articles of association; or (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Purchaser is a party. CONSIDERATION STOCK 4.4 Upon issue, the Consideration Stock will be properly and validly allotted and issued and will be credited as fully paid. COUNTERPARTS 5. This Agreement may be entered into in any number of counterparts and by the parties to it on separate counterparts, each of which is an original, but all of which together constitute one and the same instrument. FURTHER ASSURANCE 6. The Vendor agrees to perform (or procure the performance of) all further acts and things, and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by law or as the Purchaser may reasonably require, whether on or after Completion, to implement and/or give effect to this Agreement and the transaction contemplated by it and for the purpose of vesting in the Purchaser the full benefit of the assets, rights and benefits to be transferred to the Purchaser under this Agreement. SEVERABILITY 7. If any provision of this Agreement is held to be invalid or unenforceable, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement. The parties shall then use all reasonable endeavours to replace the invalid or unenforceable provision by a valid and enforceable 26 29 substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. VARIATION 8. No variation of this Agreement (or of any of the documents referred to in this Agreement) shall be valid unless it is in writing and signed by or on behalf of each of the parties to it. The expression "variation" shall include any variation, supplement, deletion or replacement however effected. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 9. A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 10.1 This Agreement and the relationship between the parties shall be governed by, and interpreted in accordance with, English Law. 10.2 Each of the parties agrees that the courts of England are to have exclusive jurisdiction to settle any disputes (including claims for set-off and counterclaims) which may arise in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise arising in connection with this Agreement, and for such purposes irrevocably submit to the jurisdiction of the English courts. 10.3 The parties to this Agreement shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be [ ] currently of [ ] in respect of [insert name of party] and [ ] currently of [ ] in respect of [insert name of party] and any writ, judgment or other notice of legal process shall be sufficiently served on the relevant party if delivered to such agent at its address for the time being. The parties to this Agreement undertake not to revoke the authority of their respective agents. IN WITNESS whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written. 27 30 SIGNED by ) for and on the behalf of ) NYCOMED AMERSHAM PLC ) SIGNED by ) for and on the behalf of ) APBIOTECH INC ) 28 31 SCHEDULE I THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD, UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. PROMISSORY NOTE DUE 2020 $o o, 2000 For value received, AP BIOTECH INC., a Delaware corporation (the "BORROWER"), promises to pay to the order of Nycomed Amersham plc, a public limited company incorporated under the laws of England and Wales (the "LENDER"), on o, 2020, the principal sum of $o (the "PRINCIPAL AMOUNT") plus any accrued and unpaid interest on the Principal Amount. The Borrower also promises to pay interest on the unpaid Principal Amount for each day from and including the date of this Note until repayment in full of the Principal Amount at a rate per annum of o (the "INTEREST RATE"). Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Interest Payments. Interest shall be due and payable semi-annually on May 31 and November 30 of each year, commencing on May 31, 2001 (or, if any such day is a Saturday, Sunday or other day on which commercial banks in the City of New York or the City of London are authorized or required by law to close or are generally closed, then on the preceding business day) (each such interest payment date being defined in this Note as an "INTEREST PAYMENT DATE"). Interest shall be paid in arrears on each Interest Payment Date, for each day in the period from and including the previous Interest Payment Date (or the date of this Note, in the case of the first such period) to but excluding the Interest Payment Date on which payment is due. Prior to the Principal Amount becoming due, overdue interest (i) may be paid at any time and (ii) shall bear interest at the Interest Rate for each day until the date on which payment is made. Prepayment Restriction. The Borrower may not prepay the Principal Amount in whole or in part at any time other than at the time set forth herein for repayment. Repayment upon Change of Control. (a) Notwithstanding any other provision of this Note, the Lender may, at its option, demand repayment of the Principal Amount plus any accrued 29 32 and unpaid interest thereon to the date of repayment, if the Lender no longer has the right to elect a majority of the board of directors of the Borrower. (b) The Lender shall notify the Borrower in writing of its determination that it no longer controls the Borrower, and from the date of delivery of such notice, shall have 180 days to notify the Borrower in writing of its repayment demand pursuant to clause (a) above. The Lender's right to demand repayment shall terminate if such notice is not delivered within the 180-day period. (c) Should the Lender deliver a notice of repayment in accordance with clause (b) above, the Borrower shall have 180 days from the day it receives such written notice of the Lender's repayment demand to pay to the Lender the Principal Amount plus any accrued and unpaid interest thereon to the date of repayment. The Borrower shall have the right to make repayment at any time during the 180-day period following demand for repayment. Withholding Tax. (a) If any amount of principal or interest payable with respect to this Note becomes subject to tax imposed by way of withholding at the source of such payment, the Borrower shall pay such amount to the Lender so that the net amount actually received by the Lender, after reduction by any such withholding tax, shall be equal to the full amount of such payment otherwise due and payable, except as noted below. (b) The Borrower shall not be required to pay any amount under clause (a) above to the extent that such amount would not have been imposed had the Lender timely delivered to the Borrower a properly completed and, when required, an updated Internal Revenue Service Form W_8, Form 1001 or Form 4224 (or any similar substitute or successor forms) or any equivalent or similar forms of a successor jurisdiction, and under these circumstances the Borrower shall provide to the Lender a document certifying the amount of the tax deducted. The Lender shall provide the initial relevant IRS form to the Borrower at or before the date of this Note. The Borrower shall provide the Lender with timely notice of the need to provide an updated IRS form. (c) If the Lender receives a refund or credit from a relevant taxing or governmental authority in respect of an amount paid by the Borrower under clause (a), it shall promptly notify the Borrower of such refund or credit and shall within 30 days pay over the amount of such refund or credit (including any interest paid or credited by the relevant taxing or governmental authority with respect to such refund or credit) to the Borrower but only to the extent of the amount paid by the Borrower under clause (a) giving rise to such refund or credit. (d) Notwithstanding clause (a) above, if any amount of principal or interest payable with respect to this Note becomes subject to tax imposed by way of withholding at the source of such payment as a result of (i) a change in laws (including any regulations promulgated thereunder) or in the interpretation or administration thereof, provided such change is announced 30 33 and becomes effective on or after the date of this Note and such obligation cannot be avoided by the use of reasonable measures available to the Borrower or (ii) the Lender's transfer or assignment of this Note, then the Borrower shall withhold such tax and shall pay to the Lender the remaining portion of the principal and/or interest. Under these circumstances the Borrower shall provide to the Lender a document certifying the amount of the tax deducted. (e) In the event that the Borrower must withhold tax on any amount of principal and interest as a result of a change in laws as described in clause (d)(i) above, the Borrower shall notify the Lender in writing as soon as possible after it becomes aware of the withholding obligation and in no event later than 60 days before the day on which it will first be required to withhold such tax or, if later, 15 days after the day on which it becomes aware of such withholding obligation. Within 180 days of receiving such notice the Lender may, unless the Borrower has prior to such time given the Lender written notice that such withholding obligation no longer applies, demand repayment of the Principal Amount plus accrued and unpaid interest thereon to the date of repayment. The Lender's right to demand repayment shall terminate if it fails to notify the Borrower in writing of such demand within the 180-day period. (f) The Borrower shall have 360 days from the day it receives written notice of the Lender's repayment demand to pay the Lender the Principal Amount plus any accrued or unpaid interest to the date of repayment. The Borrower shall have the right to make repayment at any time during the 360-day period following demand for repayment. Events of Default. If one or more of the following events (each, an "EVENT OF DEFAULT") shall have occurred and be continuing: (a) the Borrower shall fail to pay within 5 days when due any principal, interest or any other amount payable under the Note other than as a result of the failure of the Lender to make funds available under the terms of any committed loan facilities that were available at the time; (b) the Borrower shall (i) commence a voluntary case or other proceeding seeking (A) liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law in any applicable jurisdiction now or hereafter in effect or (B) the appointment of a trustee, receiver liquidator, custodian or other similar official of it or any substantial part of its property, (ii) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, (iii) make a general assignment for the benefit of creditors, or (iv) fail generally to pay its debts as they become due; or (c) an involuntary case or other proceeding shall be commenced against the Borrower seeking (i) liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law in any applicable jurisdiction now or hereafter in 31 34 effect or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and, in either case, that involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; (d) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as amended), other than the Lender or its affiliates, together with the affiliates of such person or group, shall have acquired beneficial ownership of 51% or more of the voting power of all classes of voting securities of the Borrower; provided that if such acquisition resulting in ownership of 51% of the voting securities is due to a sale of voting securities by the Lender to such person or group then this event of default shall not be applicable but rather such change of control should be governed by "Repayment upon Change of Control"; then, and in every such Event of Default, the Lender may, by notice to the Borrower, declare the Note (together with accrued interest on the Note) to be, and the Note (together with that interest) shall thereupon become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.No Waivers. No failure or delay by the Lender in exercising any right, power or privilege under the Note shall operate as a waiver of that right, power or privilege nor shall any single or partial exercise preclude any other or further exercise or the exercise of any other right, power or privilege. Amendments and Waivers. Any provision of this Note may be amended or waived if, but only if, that amendment or waiver is in writing and is signed by the Lender and the Borrower. Successors and Assigns. This Note shall be binding upon the Borrower, its permitted successors and assigns, and shall inure to the benefit of the Lender and its successors and assigns except that the Borrower may not transfer or assign any or all of its rights or obligations hereunder without the prior written consent of the Lender. The Borrower agrees that the Lender may, without the consent of the Borrower, transfer or assign this Note and any of its rights or obligations under this Note to any third party, including any affiliate, pursuant to a written agreement between the Lender and that third party, and that transferee or assignee shall thereafter be considered the Lender for all purposes of this Note. The Borrower further agrees that it will not assert any setoff or counterclaim with respect to this Note in connection with any assertion of rights by the Lender, any of its transferees or assignees or any of its affiliates. Substitution. (a) The Borrower (or any Substituted Borrower under this clause) may, with the consent of the Lender, substitute any third party, including any affiliate, (a "SUBSTITUTED BORROWER") in place of the Borrower (or any Substituted Borrower) as the principal debtor under this Note. A substitution shall be made by means of an instrument (a "SUBSTITUTION INSTRUMENT") executed by (i) the Borrower or (insofar as relevant) any Substituted Borrower who is the principal debtor under this Note at the relevant time and (ii) the Substituted Borrower 32 35 which is to replace them. The Substitution Instrument may be in such form as the Borrower, the Substituted Borrower and the Lender may agree. (b) Compliance with the provisions of clause (a) above will operate to release the Borrower or Substituted Borrower who is replaced from all obligations under this Note and to transfer to the new Substituted Borrower all their rights and obligations under this Note and/or, insofar as relevant, under any Substitution Instrument and all the provisions of this Note which operate by reference to matters or circumstances pertaining to the Borrower shall operate as if references to the Borrower were references to the new Substituted Borrower. (c) Upon the execution of a Substitution Instrument and compliance with the other provisions of clause (a) above, the new Substituted Borrower will be deemed to be named in this Note as the principal debtor in the place of the Borrower or the Substituted Borrower. The existing Note held by the Lender shall not be cancelled but shall be effective, on its existing terms, in relation to the new Substituted Borrower. Notices. All notices and other communications required or permitted under this Note shall be in writing and shall be deemed to have been duly given or made (i) five days after the date when deposited, postage prepaid in the mail, by first class post or (ii) when delivered if delivered by hand or by facsimile (with receipt acknowledged) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Lender: Nycomed Amersham plc. Amersham Place ittle Chalfont Buckinghamshire HP7 9NA United Kingdom If to the Borrower: AP Biotech Inc. 800 Centennial Avenue PO Box 1327 Piscataway, New Jersey 08855-1327 United States 33 36 THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE INTERNAL LAWS (AND NOT THE CONFLICTS LAWS) OF THE STATE OF NEW YORK. AP BIOTECH INC. By: ------------------------------ Name: Title: 34 37 SCHEDULE IV SHARE SALE AND PURCHASE AGREEMENT BETWEEN NYCAM BIOTECH LIMITED AND APBIOTECH INC THIS AGREEMENT is made the day of BETWEEN (1) NYCAM BIOTECH LIMITED (registered in England with company number [o]) whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (THE VENDOR); and (2) APBIOTECH INC (a corporation organised under the laws of the State of Delaware) whose registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 (THE PURCHASER) WHEREAS: (A) Amersham Pharmacia Biotech Limited (THE COMPANY) is a private company limited by shares with an issued share capital of (pound)1,086,386 divided into 597,512 Class A Ordinary Shares, 429,805 Class B Ordinary Shares, and 59,069 [non-voting B ordinary shares]. The Vendor holds 25,221 Class A Ordinary Share (THE APB SHARES). (B) Pursuant to a reorganisation agreement dated [o] (the REORGANISATION AGREEMENT), the Vendor agreed to sell all of the APB Shares to the Purchaser for the consideration and upon the terms set out in this Agreement. IT IS HEREBY AGREED AS FOLLOWS: SALE OF THE SHARES AND CONSIDERATION 1.1 The Vendor agrees to sell (or procure the sale of) the APB Shares and the Purchaser agrees to purchase the APB Shares with immediate effect from signing of this Agreement, on the terms that the same covenants shall be deemed to be given by the Vendor on Completion in relation to the APB Shares as are implied under Part I of the Law of Property (Miscellaneous Provisions) Act 1994 where a disposition is expressed to be made with full title guarantee. The APB Shares shall be sold free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever, together with all rights attaching to them including, without limitation, the right to receive all dividends and other distributions declared, made or paid on or after 31 December 2000. 35 38 1.2 The total consideration for the sale of the APB Shares shall be a fixed rate long term note for a principal amount of $81,950,734, equivalent to the capital subscription made by the Vendor pursuant to Clause 4.1(a) of the Reorganisation Agreement (the LOAN NOTE). TERMS OF THE LOAN NOTE The Loan Note shall be in substantially the form attached as Schedule I to this Agreement. COMPLETION 2.1 The sale and purchase of the APB Shares shall be completed immediately after this Agreement is signed, when the events set out in the following provisions of this clause 2 shall take place. 2.2 The Vendor shall deliver or cause to be delivered to the Purchaser duly executed transfers into the name of the Purchaser or its nominee in respect of all the APB Shares, together with the relative share certificates; 2.3 The Purchaser shall, in satisfaction of its obligations under clause 1.2, deliver the Loan Note, duly executed to the Vendor. WARRANTIES GIVEN BY THE VENDOR AUTHORITY TO ENTER INTO THIS AGREEMENT 3.1 The Vendor has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed pursuant to or in connection with this Agreement which when executed will constitute valid and binding obligations. NO BREACH 3.2 The execution and delivery of, and the performance by the Vendor of its obligations under, this Agreement and any other documents to be executed pursuant to or in connection with this Agreement will not: (a) result in a breach of any provision of the constitutional documents of the Vendor; or (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Vendor is a party. 36 39 THE SHARES TITLE 3.3 The Vendor is entitled to sell and transfer or to procure the sale or transfer to the Purchaser the full legal and beneficial ownership of those of the APB Shares on the terms of this Agreement without the consent or waiver of any third party. 3.4 The Vendor represents and warrants to the Purchaser that the Vendor is the sole legal and beneficial owner of the APB Shares free from all security interests, options, equities, claims or other third party rights (including, without limitation, rights of pre-emption) of any nature whatsoever. The Vendor has the legal right to dispose of the APB Shares. WARRANTIES GIVEN BY THE PURCHASER AUTHORITY AND CAPACITY OF THE PURCHASER INCORPORATION 4.1 The Purchaser is duly incorporated and validly existing under the laws of the State of Delaware. AUTHORITY TO ENTER INTO THIS AGREEMENT 4.2 The Purchaser has the legal right and full power and authority to enter into and perform this Agreement, the Loan Note and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement which when executed will constitute valid and binding and enforceable obligations on the Purchaser in accordance with their respective terms. NO BREACH 4.3 The execution and delivery of, and the performance by the Purchaser of its obligations under, this Agreement and any other documents to be executed by the Purchaser pursuant to or in connection with this Agreement will not: (a) result in a breach of any provisions of its memorandum or articles of association; or (b) result in a material breach of or give any third party a right to terminate or modify, or result in the creation of any material encumbrance under any material agreement, licence or other instrument or result in a material breach of any order, judgment or decree of any Court, governmental agency or regulatory body to which the Purchaser is a party. 37 40 COUNTERPARTS 5. This Agreement may be entered into in any number of counterparts and by the parties to it on separate counterparts, each of which is an original, but all of which together constitute one and the same instrument. FURTHER ASSURANCE 6. The Vendor agrees to perform (or procure the performance of) all further acts and things, and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by law or as the Purchaser may reasonably require, whether on or after Completion, to implement and/or give effect to this Agreement and the transaction contemplated by it and for the purpose of vesting in the Purchaser the full benefit of the assets, rights and benefits to be transferred to the Purchaser under this Agreement. SEVERABILITY 7. If any provision of this Agreement is held to be invalid or unenforceable, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement. The parties shall then use all reasonable endeavours to replace the invalid or unenforceable provision by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. VARIATION 8. No variation of this Agreement (or of any of the documents referred to in this Agreement) shall be valid unless it is in writing and signed by or on behalf of each of the parties to it. The expression "variation" shall include any variation, supplement, deletion or replacement however effected. NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 9. A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 10.1 This Agreement and the relationship between the parties shall be governed by, and interpreted in accordance with, English Law. 10.2 Each of the parties agrees that the courts of England are to have exclusive jurisdiction to settle any disputes (including claims for set-off and counterclaims) which may arise in 38 41 connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement or otherwise arising in connection with this Agreement, and for such purposes irrevocably submit to the jurisdiction of the English courts. 10.3 The parties to this Agreement shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be [ ] currently of [ ] in respect of [insert name of party] and [ ] currently of [ ] in respect of [insert name of party] and any writ, judgment or other notice of legal process shall be sufficiently served on the relevant party if delivered to such agent at its address for the time being. The parties to this Agreement undertake not to revoke the authority of their respective agents. IN WITNESS whereof this Agreement has been signed by and on behalf of the parties on the day and year first before written. SIGNED by ) for and on the behalf of ) NYCAM BIOTECH LIMITED ) SIGNED by ) for and on the behalf of ) APBIOTECH INC ) 39 42 SCHEDULE I THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD, UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. PROMISSORY NOTE DUE 2020 $o o, 2000 For value received, AP BIOTECH INC., a Delaware corporation (the "BORROWER"), promises to pay to the order of Nycam Biotech Limited, a company incorporated under the laws of England and Wales (the "LENDER"), on o, 2020, the principal sum of $o (the "PRINCIPAL AMOUNT") plus any accrued and unpaid interest on the Principal Amount. The Borrower also promises to pay interest on the unpaid Principal Amount for each day from and including the date of this Note until repayment in full of the Principal Amount at a rate per annum of o (the "INTEREST RATE"). Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Interest Payments. Interest shall be due and payable semi-annually on May 31 and November 30 of each year, commencing on May 31, 2001 (or, if any such day is a Saturday, Sunday or other day on which commercial banks in the City of New York or the City of London are authorized or required by law to close or are generally closed, then on the preceding business day) (each such interest payment date being defined in this Note as an "INTEREST PAYMENT DATE"). Interest shall be paid in arrears on each Interest Payment Date, for each day in the period from and including the previous Interest Payment Date (or the date of this Note, in the case of the first such period) to but excluding the Interest Payment Date on which payment is due. Prior to the Principal Amount becoming due, overdue interest (i) may be paid at any time and (ii) shall bear interest at the Interest Rate for each day until the date on which payment is made. Prepayment Restriction. The Borrower may not prepay the Principal Amount in whole or in part at any time other than at the time set forth herein for repayment. Repayment upon Change of Control. (a) Notwithstanding any other provision of this Note, the Lender may, at its option, demand repayment of the Principal Amount plus any accrued 40 43 and unpaid interest thereon to the date of repayment, if the Lender no longer has the right to elect a majority of the board of directors of the Borrower. (b) The Lender shall notify the Borrower in writing of its determination that it no longer controls the Borrower, and from the date of delivery of such notice, shall have 180 days to notify the Borrower in writing of its repayment demand pursuant to clause (a) above. The Lender's right to demand repayment shall terminate if such notice is not delivered within the 180-day period. (c) Should the Lender deliver a notice of repayment in accordance with clause (b) above, the Borrower shall have 180 days from the day it receives such written notice of the Lender's repayment demand to pay to the Lender the Principal Amount plus any accrued and unpaid interest thereon to the date of repayment. The Borrower shall have the right to make repayment at any time during the 180-day period following demand for repayment. Repayment with Unexercised Greenshoe Proceeds. Notwithstanding any other provision of this Note, the Borrower shall repay to the Lender, in whole or in part, the Principal Amount in an amount equal to any Unexercised Greenshoe Proceeds received by it in connection with its initial public offering of shares on the NASDAQ market. For the purposes of this clause, the term "UNEXERCISED GREENSHOE PROCEEDS" means the proceeds received by the Borrower in the event that Nycomed Amersham plc, and not the underwriters, purchases the shares reserved to cover overallotments in the Borrower's initial public offering. Withholding Tax. (a) If any amount of principal or interest payable with respect to this Note becomes subject to tax imposed by way of withholding at the source of such payment, the Borrower shall pay such amount to the Lender so that the net amount actually received by the Lender, after reduction by any such withholding tax, shall be equal to the full amount of such payment otherwise due and payable, except as noted below. (b) The Borrower shall not be required to pay any amount under clause (a) above to the extent that such amount would not have been imposed had the Lender timely delivered to the Borrower a properly completed and, when required, an updated Internal Revenue Service Form W_8, Form 1001 or Form 4224 (or any similar substitute or successor forms) or any equivalent or similar forms of a successor jurisdiction, and under these circumstances the Borrower shall provide to the Lender a document certifying the amount of the tax deducted. The Lender shall provide the initial relevant IRS form to the Borrower at or before the date of this Note. The Borrower shall provide the Lender with timely notice of the need to provide an updated IRS form. (c) If the Lender receives a refund or credit from a relevant taxing or governmental authority in respect of an amount paid by the Borrower under clause (a), it shall promptly notify the Borrower of such refund or credit and shall within 30 days pay over the amount of such 41 44 refund or credit (including any interest paid or credited by the relevant taxing or governmental authority with respect to such refund or credit) to the Borrower but only to the extent of the amount paid by the Borrower under clause (a) giving rise to such refund or credit. (d) Notwithstanding clause (a) above, if any amount of principal or interest payable with respect to this Note becomes subject to tax imposed by way of withholding at the source of such payment as a result of (i) a change in laws (including any regulations promulgated thereunder) or in the interpretation or administration thereof, provided such change is announced and becomes effective on or after the date of this Note and such obligation cannot be avoided by the use of reasonable measures available to the Borrower or (ii) the Lender's transfer or assignment of this Note, then the Borrower shall withhold such tax and shall pay to the Lender the remaining portion of the principal and/or interest. Under these circumstances the Borrower shall provide to the Lender a document certifying the amount of the tax deducted. (e) In the event that the Borrower must withhold tax on any amount of principal and interest as a result of a change in laws as described in clause (d)(i) above, the Borrower shall notify the Lender in writing as soon as possible after it becomes aware of the withholding obligation and in no event later than 60 days before the day on which it will first be required to withhold such tax or, if later, 15 days after the day on which it becomes aware of such withholding obligation. Within 180 days of receiving such notice the Lender may, unless the Borrower has prior to such time given the Lender written notice that such withholding obligation no longer applies, demand repayment of the Principal Amount plus accrued and unpaid interest thereon to the date of repayment. The Lender's right to demand repayment shall terminate if it fails to notify the Borrower in writing of such demand within the 180-day period. (f) The Borrower shall have 360 days from the day it receives written notice of the Lender's repayment demand to pay the Lender the Principal Amount plus any accrued or unpaid interest to the date of repayment. The Borrower shall have the right to make repayment at any time during the 360-day period following demand for repayment. Events of Default. If one or more of the following events (each, an "EVENT OF DEFAULT") shall have occurred and be continuing: (a) the Borrower shall fail to pay within 5 days when due any principal, interest or any other amount payable under the Note other than as a result of the failure of the Lender to make funds available under the terms of any committed loan facilities that were available at the time; (b) the Borrower shall (i) commence a voluntary case or other proceeding seeking (A) liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law in any applicable jurisdiction now or hereafter in effect or (B) the appointment of a trustee, receiver liquidator, custodian or other similar official of it or any 42 45 substantial part of its property, (ii) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, (iii) make a general assignment for the benefit of creditors, or (iv) fail generally to pay its debts as they become due; or (c) an involuntary case or other proceeding shall be commenced against the Borrower seeking (i) liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law in any applicable jurisdiction now or hereafter in effect or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and, in either case, that involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; (d) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as amended), other than the Lender or its affiliates, together with the affiliates of such person or group, shall have acquired beneficial ownership of 51% or more of the voting power of all classes of voting securities of the Borrower; provided that if such acquisition resulting in ownership of 51% of the voting securities is due to a sale of voting securities by the Lender to such person or group then this event of default shall not be applicable but rather such change of control should be governed by "Repayment upon Change of Control"; then, and in every such Event of Default, the Lender may, by notice to the Borrower, declare the Note (together with accrued interest on the Note) to be, and the Note (together with that interest) shall thereupon become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.No Waivers. No failure or delay by the Lender in exercising any right, power or privilege under the Note shall operate as a waiver of that right, power or privilege nor shall any single or partial exercise preclude any other or further exercise or the exercise of any other right, power or privilege. Amendments and Waivers. Any provision of this Note may be amended or waived if, but only if, that amendment or waiver is in writing and is signed by the Lender and the Borrower. Successors and Assigns. This Note shall be binding upon the Borrower, its permitted successors and assigns, and shall inure to the benefit of the Lender and its successors and assigns except that the Borrower may not transfer or assign any or all of its rights or obligations hereunder without the prior written consent of the Lender. The Borrower agrees that the Lender may, without the consent of the Borrower, transfer or assign this Note and any of its rights or obligations under this Note to any third party, including any affiliate, pursuant to a written agreement between the Lender and that third party, and that transferee or assignee shall thereafter be considered the Lender for all purposes of this Note. The Borrower further agrees 43 46 that it will not assert any setoff or counterclaim with respect to this Note in connection with any assertion of rights by the Lender, any of its transferees or assignees or any of its affiliates. Substitution. (a) The Borrower (or any Substituted Borrower under this clause) may, with the consent of the Lender, substitute any third party, including any affiliate, (a "SUBSTITUTED BORROWER") in place of the Borrower (or any Substituted Borrower) as the principal debtor under this Note. A substitution shall be made by means of an instrument (a "SUBSTITUTION INSTRUMENT") executed by (i) the Borrower or (insofar as relevant) any Substituted Borrower who is the principal debtor under this Note at the relevant time and (ii) the Substituted Borrower which is to replace them. The Substitution Instrument may be in such form as the Borrower, the Substituted Borrower and the Lender may agree. (b) Compliance with the provisions of clause (a) above will operate to release the Borrower or Substituted Borrower who is replaced from all obligations under this Note and to transfer to the new Substituted Borrower all their rights and obligations under this Note and/or, insofar as relevant, under any Substitution Instrument and all the provisions of this Note which operate by reference to matters or circumstances pertaining to the Borrower shall operate as if references to the Borrower were references to the new Substituted Borrower. (c) Upon the execution of a Substitution Instrument and compliance with the other provisions of clause (a) above, the new Substituted Borrower will be deemed to be named in this Note as the principal debtor in the place of the Borrower or the Substituted Borrower. The existing Note held by the Lender shall not be cancelled but shall be effective, on its existing terms, in relation to the new Substituted Borrower. Notices. All notices and other communications required or permitted under this Note shall be in writing and shall be deemed to have been duly given or made (i) five days after the date when deposited, postage prepaid in the mail, by first class post or (ii) when delivered if delivered by hand or by facsimile (with receipt acknowledged) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 44 47 If to the Lender: Nycam Biotech Limited Amersham Place Little Chalfont Buckinghamshire HP7 9NA United Kingdom If to the Borrower: AP Biotech Inc. 800 Centennial Avenue PO Box 1327 Piscataway, New Jersey 08855-1327 United States 45 48 THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE INTERNAL LAWS (AND NOT THE CONFLICTS LAWS) OF THE STATE OF NEW YORK. AP BIOTECH INC. By: -------------------------------------- Name: Title: 46 49 SCHEDULE V SUBSCRIPTION AGREEMENT AGREEMENT dated as of _____________, 2001 between APBiotech Inc, a corporation organized under the laws of the State of Delaware (the "COMPANY"), and Nycomed Amersham plc, a company registered under the laws of England (the "BUYER"). W I T N E S S E T H : WHEREAS, the Buyer holds 100,413,689 shares of the Company's common stock, par value $.01 per share (the "COMMON STOCK"); WHEREAS, pursuant to an underwriting agreement to be dated ________, 2001 (the "UNDERWRITING AGREEMENT") among the Company and Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Chase Securities Inc., and Salomon Smith Barney Inc (collectively, the "UNDERWRITERS"), the Company has granted an option to the Underwriters to purchase an aggregate of 2,730,000 shares of its Common Stock at $16 per share (the "OVER-ALLOTMENT OPTION SHARES"). WHEREAS, pursuant to a reorganization agreement, dated ________, 2001 among the Company, the Buyer, and the other parties named therein, the Buyer agreed to purchase the Over-Allotment Option Shares not purchased by the Underwriters under Underwriting Agreement. NOW THEREFORE, the parties hereto agree as follows: ARTICLE 1 PURCHASE AND SALE SECTION 1.01. Purchase and Sale Pursuant to the terms of the Underwriting Agreement, the Underwriters have 30 days following the Closing Date (as defined therein) to exercise the option to acquire the Over-Allotment Option Shares in whole or in part. If the Underwriters do not exercise the right to acquire the Over-Allotment Option Shares in full, upon the terms and subject to the conditions of this Agreement, the Company agrees to issue and sell to the Buyer, and the Buyer agrees to purchase from the Company, any such Over-Allotment Option Shares at $16 per share (the "PURCHASE PRICE"). The Purchase Price shall be paid as provided in Section 1.02. 47 50 SECTION 1.02. Closing The closing (the "CLOSING") of the purchase and sale of the Shares hereunder shall take place at the offices of Davis Polk & Wardwell, 99 Gresham Street, London, no sooner than five business days and no later than ten business days, after satisfaction of the conditions set forth in Article 2. At the Closing: (a) The Buyer shall deliver to the Company, in immediately available funds, the aggregate Purchase Price, by wire transfer (or other means acceptable to the Company) to an account of the Company with a bank designated by the Company by notice to the Buyer no later than two business days prior to the Closing. (b) The Company shall issue to the Buyer share certificates representing the shares of Common Stock purchased. ARTICLE 2 CONDITIONS TO CLOSING SECTION 2.01. Conditions to Obligations of the Buyer The obligations of the Buyer to consummate the Closing are subject to the satisfaction of the following conditions: (a) no provision of any applicable law, rule or regulation and no judgment, injunction, order or decree by any governmental entity of competent jurisdiction shall prohibit the consummation of the Closing; (b) the Buyer shall have received written notice from the Company that the option period for purchase of the Over-Allotment Option Shares have expired and the Underwriters have not exercised the option in its entirety; SECTION 2.02. Condition to Obligation of the Company The obligation of the Company to consummate the Closing is subject to the satisfaction of the following further condition: (a) the Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing. 48 51 ARTICLE 3 TERMINATION SECTION 3.01. Grounds for Termination This Agreement may be terminated at any time prior to the Closing: (a) by mutual written agreement of the Company and the Buyer; or (b) At such time as the Underwriters provide notice to the Company that they wish to exercise the option over the Over-Allotment Option Shares in full. ARTICLE 4 MISCELLANEOUS SECTION 4.01. Notices All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given: if to the Buyer, to: Nycomed Amersham plc Amersham Place Little Chalfont Buckinghamshire HP7 9NA Attention: Gareth Long Fax: if to the Company, to: APBiotech Inc 800 Centennial Avenue P.O. Box 1327 Piscataway, NJ 08855-1327 Attention: Fax: with a copy to: Davis Polk & Wardwell 99 Gresham Street London EC2V 7NG Attention: Jeffrey Oakes Fax: 44 207 418 1400 49 52 or to such other address or telecopy number and with such other copies as such party may hereafter specify for the purpose of notice. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt. SECTION 4.02. Amendments and Waivers (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 4.03. Successors and Assigns The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto. SECTION 4.04. Governing Law This Agreement shall be governed by and construed in accordance with the law of the State of New York, without giving effect to its rules regarding conflicts of laws. SECTION 4.05. Jurisdiction The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or 50 53 proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in herein shall be deemed effective service of process on such party. SECTION 4.06. Waiver Of Jury Trial EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 4.07. Counterparts; Third Party Beneficiaries This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. SECTION 4.08. Headings The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 51 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. APBIOTECH INC By _________________________ Name: Title: NYCOMED AMERSHAM PLC By _________________________ Name: Title: 52 55 SCHEDULE VI FORM OF CONVERSION NOTICE We, [name of company], hereby notify Amersham Pharmacia Biotech Limited (the COMPANY) that we wish our holding of [insert number] of 8% cumulative redeemable preference shares in the capital of the Company to be converted in accordance with the articles of association of the Company into the relevant number of Class [A/B] ordinary shares in the capital of the Company and request that we be entered as the holder of such shares in the register of members of the Company and be sent a share certificate relating thereto. 53 EX-10.6 3 y42738a1ex10-6.txt APBIOTECH INC. EXECUTIVE STOCK OPTION PLAN 2000 1 EXHIBIT 10.6 RULES OF THE APBIOTECH INC EXECUTIVE STOCK OPTION PLAN 2000 New Bridge Street Consultants 20 Little Britain London EC1A 7DH Ref: N\1021\ARUNDEL\ESTP2000 051200 2 RULES OF THE APBIOTECH EXECUTIVE STOCK OPTION PLAN 2000 1 MEANINGS OF WORDS USED 1.1 In these Rules: "Associated Company" has the meaning given to it by Section 416 of the U.K. Taxes Act; "Business Day" means a day on which NASDAQ is open for the transaction of business; "Company" means APBiotech Inc; "Control" has the meaning given to it by Section 840 of the U.K. Taxes Act; "Date of Grant" means the date on which the Directors resolve to grant an Option; "Directors" means the Board of Directors of the Company or a duly authorised committee of it; "Eligible Employee" means any person who is a common law employee of a Participating Company who devotes substantially the whole of his working time to his duties; "Employees' Share Plan" means a plan for encouraging or facilitating the holding of shares in the Company by or for the benefit of the bona fide employees or former employees of the Company, the Company's subsidiary or holding company or a subsidiary of the Company's holding company; "Market Value" means in relation to a Share: (i) If Shares are listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for Shares, either (a) the average of the low and high prices of the Shares on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, for the trading day immediately preceding the applicable date or (b) the closing or last price of Shares on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, for the trading day immediately preceding the applicable date, as the Option Committee shall determine. (ii) If Shares are not traded on a national securities exchange but are traded on the over-the-counter market, if sales prices are not regularly reported for the Shares for the trading days or day referred to in clause (1), and if bid and asked prices for the Shares are regularly reported, the mean between the bid and the asked price for the Shares at the close of trading in the over-the-counter market for the training day on which Shares were traded immediately preceding the applicable date, as the Option Committee shall determine; and (iii) If the Shares are neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Option Committee, in good faith, shall determine. "Member of the Group" means the Company and all Subsidiaries and Associated Companies of it from time to time; "Option" means a right to acquire Shares granted pursuant to the Plan and for the time being subsisting; "Option Committee" means a duly appointed committee of the Directors comprising Directors who: (i) do not hold any executive office with a Participating Company; and (ii) will not themselves participate in the Plan; - 1 - 3 "Option Exercise Date" means the date when an Option is effectively exercised upon compliance with the provisions of Rules 7.1; "Option Holder" means a person holding an Option, including, where the context so permits, his personal representatives; "Option Period" means, in respect of an Option, a period commencing on the Date of Grant and expiring at the close of business on the day preceding the 10th anniversary of the Date of Grant; "Option Price" means the price per Share payable on the exercise of an Option as determined by the Option Committee under Rule 3.1; "Original Shareholder" means Nycomed Amersham plc (or any subsidiary of Nycomed Amersham plc) or Pharmacia Corp (or any subsidiary of Pharmacia Corp); "Participating Companies" means the Company and any Subsidiary of the Company, direct or indirect, designated by the Option Committee as a Participating Company "Plan" means this plan known as "APBiotech Inc Executive Stock Option Plan 2000" in its present form or as from time to time altered in accordance with the Rules; "Plan Period" means the period commencing on the date of the approval of the Plan by the Directors and ending on the 10th anniversary of that date; "Rules" means these rules as amended from time to time; "Shares" means shares in the Company's common stock, US$0.01 - par value "Subsidiary" means a company which is: (i) a subsidiary of the Company within the meaning given thereto by Section 736 of the U.K. Companies Act 1985, and (ii) under the Control of the Company; "Taxes Act" means the UK Income and Corporation Taxes Act 1988; and "Year" means a year beginning on any January 1 and ending the following December 31. 1.2 Where the context so admits or requires, the singular includes the plural and the masculine includes the feminine and vice versa; references to any statutory provision shall include any modification or re-enactment. 1.3 Headings shall be ignored in construing the Rules. Footnotes and expressions in italics do not form part of the rules and are for guidance only. 2 GRANT OF OPTIONS 2.1 GRANT OF OPTIONS Subject to Rule 2.10 below, the Option Committee may during the Plan Period in its absolute discretion grant to any Eligible Employee an Option to acquire such number of Shares as the Option Committee may determine (or such lesser number as may be the case following an adjustment under Rule 2.8) at the Option Price. 2.2 TIME WHEN OPTIONS MAY BE GRANTED Options shall only be granted at such times as may be permitted by applicable securities laws. 4 2.3 CONDITIONS ON EXERCISE The Option Committee may grant an Option on the basis that it may not be exercised, in whole or in part, until certain conditions have been satisfied. The Option Committee may in its discretion waive, vary or amend any such condition. Such discretion shall only be exercised if events happen which cause the Option Committee to consider that a waived, varied or amended condition would be a fairer measure of performance and would be no more difficult to satisfy. 2.4 OPTION CERTIFICATES Each Option Holder shall be issued an option certificate (executed as a deed), on or as soon as practicable after the Date of Grant, in such form as the Option Committee shall prescribe. 2.5 NO PAYMENT No payment to the Company shall be required on the grant of an Option. 2.6 DISCLAIMER OF OPTION Any Option Holder may, by notice in writing to the Secretary of the Company, within 30 days after the Date of Grant, disclaim in whole his Option and in such case the Option shall be deemed never to have been granted under the Plan. No consideration shall be payable for any disclaimer. 2.7 DISPOSAL RESTRICTIONS Except for the transmission of an Option on the death of an Option Holder to his personal representatives, neither an Option nor any rights in respect of it may be transferred, assigned or otherwise disposed of by an Option Holder to any other person, and if an Option Holder purports to transfer, assigns or disposes of any such Option or rights, whether voluntarily or involuntarily, then the relevant Option shall immediately lapse. 2.8 BLUE PENCIL PROVISION If any Option is purported to be granted on terms which are not in accordance with the provisions of these Rules, including the limitations on participation and the calculation of the Option Price, the Option Committee shall vary the terms of such Option to bring the Option within the Rules and any such variation shall take effect from the Date of Grant. 2.9 LIMITS ON SHARES AVAILABLE 2.9.1 Subject to Rules 2.9.2 and 2.9.3 below, no Options shall be granted under the Plan which would, at the time they are granted, cause the number of Shares which may be issued in pursuance of Options granted under the Plan, or in pursuance of options or other awards made under any other Employees' Share Plan of the Company, to exceed such number as represents 3% of the ordinary share capital of the Company from time to time. 2.9.2 The limit at Rule 2.9.1 above shall apply from the date of adoption of the Plan by the Company until such date as determined by the Directors, which shall not be before 1 June 2002 at the earliest. 2.9.3 Only those Shares which are capable of being issued before 1 June 2002 (or such later date as determined by the Directors pursuant to Rule 2.9.2 above) on the exercise of any options or other awards will be relevant for the purposes of calculating the limit in rule 2.9.1 above, and Shares shall not be regarded as being capable of being issued by reason of any provisions in the relevant Employees' Share Plans under which such options or awards are 5 granted allowing a person to exercise an option or award in circumstances of leaving employment or a change of control of the Company. 2.10 LIMIT ON INDIVIDUAL PARTICIPATION The maximum number of shares over which Options can be granted to an Eligible Employee in any year is 1,000,000 Shares. 3 OPTION PRICE 3.1 DETERMINATION OF OPTION PRICE The Option Committee shall determine the Option Price which shall be stated at the Date of Grant and shall not be less than the Market Value of a Share on the Date of Grant. 4. VARIATIONS IN SHARE CAPITAL 4.1 ADJUSTMENT OF OPTIONS In the event (a "Relevant Event") of any variation in the equity share capital of the Company in consequence of a capitalisation or rights issue, sub-division, consolidation or reduction of share capital or other variation in the share capital: 4.1.1 the number or nominal amount of Shares comprised in each Option, and/or 4.1.2 the Option Price, and/or 4.1.3 the aggregate Option Price in relation to any Option, may be adjusted in such manner as the Directors consider appropriate (including retrospective adjustments where such Relevant Event or the variation in the equity share capital of the Company as a consequence of the Relevant Event occurs after the Option Exercise Date but the relevant record date precedes such Option Exercise Date). If and to the extent a Relevant Event is a change in the number or kind of Shares effected solely by application of a mathematical formula (e.g., a 2-for-1 stock split), the adjustment described in this Rule 4.1 shall be made and shall occur automatically by application of such formula, without further action by the Directors. 4.2 OTHER RELEVANT EVENTS Options may be adjusted following variations in the share capital of the Company other than those specified in Rule 4.1. Any such adjustments shall be made in accordance with Rule 4.1. 4.3 NOTICE The Directors may take such steps as they consider necessary to notify Option Holders of any adjustment made under this Rule 4. 5 EXERCISE AND LAPSE - GENERAL RULES 5.1 EXERCISE - GENERAL RULE Unless otherwise specified in these Rules an Option shall only be exercisable: 5.1.1 on or after the dates specified in the option certificate 5.1.2 on the satisfaction or waiver of any condition imposed under Rule 2.3; 5.1.3 except as provided in Rules 6 and 7, while the Option Holder is an employee of a Member of the Group. 6 5.2 CESSATION OF EMPLOYMENT - GENERAL RULE Unless any of the provisions in Rule 6 apply, when an Option Holder ceases to be an employee of a Member of the Group, all his Options shall lapse. 5.3 LAPSE Options shall lapse on the expiry of the Option Period. 6 RIGHTS OF EXERCISE - PARTICULAR CASES 6.1 CESSATION OF EMPLOYMENT 6.1.1 If an Option Holder ceases to be in the employment of any Member of the Group (except for any reason specified in 6.1.2 or 6.1.3 below), then: 6.1.1.1 all Options which are otherwise exercisable, shall lapse unless exercised within the earlier of the expiry of the Option Period or three months after the date of cessation of the Option Holder's employment; and 6.1.1.2 all Options, which are not otherwise exercisable, shall lapse and determine immediately upon such cessation. 6.1.2 If an Option Holder ceases to be in the employment of any Member of the Group by reason of death or disability, then all Options, whether or not otherwise exercisable, shall become exercisable and shall lapse unless exercised within the earlier of the expiry of the Option Period or twelve months after the cessation of the Option Holder's employment 6.1.3 If an Option Holder ceases to be in the employment of any Member of the Group by reason of dismissal for cause, then all Options, whether or not otherwise exercisable, shall lapse and determine immediately. 6.2 LEAVE OF ABSENCE No Options that are not exercisable at the beginning of an authorized leave of absence shall become exercisable during such leave of absence. 6.3 TAKEOVERS ETC. 6.3.1 Subject to Rule 6.3.4 below if, in consequence of any offer made to the holders of Shares, the Directors become aware that the right to cast more than 50 per cent of the votes which may ordinarily be cast on a poll at a general meeting of the Company has or will become vested in the offeror and/or any company controlled by the offeror and/or any person associated with or acting in concert with the offeror, the Directors shall, within 30 days of becoming so aware, notify every Option Holder accordingly. 6.3.2 Each Option Holder shall be entitled at any time during the Change of Control Period to exercise all his Options (whether or not otherwise exercisable) in whole or in part. The Options shall not lapse on the expiry of the Change of Control Period but all Options not exercisable immediately prior to the beginning of the Change of Control Period shall cease to be exercisable on the expiry of the Change of Control Period. 7 6.3.3 For the purposes of this Rule 6.3, "Change of Control Period" means the period commencing on the date of the giving of the Directors' notification under this Rule 6.3 and ending three months after that. 6.3.3 Unless the Directors decide otherwise the provisions of this Rule 6.3 shall not apply if an Original Shareholder shall become entitled to cast more than 50% of the votes which may ordinarily be case on a poll at a general meeting of the Company. 6.4 DISSOLUTION OR LIQUIDATION In the event of the proposed dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Option Committee; provided, however, that if the rights of a Option Holder (or his personal representatives if appropriate) have not otherwise terminated and expired, the Option Holder (or his personal representatives if appropriate) will have the right to exercise his Options immediately prior to such dissolution or liquidation, and the Option Committee may, in the exercise of its sole discretion in such instances, accelerate the date on which any Option becomes exercisable or fully vests and/or declare that any Option shall terminate as of a specified date. 6.5 LOSS OF OWNERSHIP Where the Option Holder is deprived of the legal or beneficial ownership of the Option by operation of law, or does anything or omits to do anything which causes him to be so deprived or becomes bankrupt, all his Options shall lapse. 6.6 OVERSEAS TRANSFER If an Option Holder, whilst continuing to be employed by a Member of the Group is transferred to work in another country and as a result of that transfer the Option Holder will either: 6.6.1 become subject to tax on his remuneration in the country to which he is transferred and the Option Committee are satisfied that as a result he will suffer a tax disadvantage upon exercising an Option; or 6.6.2 become subject to restrictions on his ability to exercise his Option or to hold or deal in the Shares or the proceeds of the sale of the Shares he may acquire upon the exercise of that Option by reason of or in consequence of the securities laws or exchange control laws of the country to which he is transferred; the Option Committee (or its delegate) may allow the Option Holder to exercise the Option in a period specified by the Option Committee or its delegate. The Options will become exercisable again in the ordinary course if not so exercised. 6.7 PRIORITY In the event of any conflict between any of the provisions of Rules 5 and 6, the provision which results in the earliest lapsing of the Option in question shall prevail. 7 EXERCISE OF OPTIONS 7.1 LIMIT ON EXERCISE An Option may only be exercised during the periods specified in Rules 5 and 6. 7.2 MANNER OF EXERCISE To exercise an Option in whole or in part, an Option Holder must deliver to the Secretary of the Company or other duly appointed agent: 8 7.2.1 the option certificate covering the Shares over which the Option is being exercised; 7.2.2 notice in writing, in the prescribed form, duly completed and signed by the Option Holder or by his duly appointed agent; and 7.2.3 payment in full of the Option Price for the total number of Shares in respect of which the Option is being exercised. The Option Holder shall pay the Option Price for an Option as specified by the Option Committee (x) in cash, (y) with the approval of the Option Committee, by delivering Shares owned by the Option Holder (including Shares acquired in connection with the exercise of an Option, subject to such restrictions as the Option Committee deems appropriate) and having a Market Value on the Option Exercise Date equal to the Option Price or (z) by such other method as the Option Committee may approve, including attestation (on a form prescribed by the Option Committee) to ownership of Shares having a Market Value on the Option Exercise Date equal to the Option Price, or payment through a broker in accordance with procedures permitted by Regulation T of the United States Federal Reserve Board. Shares used to exercise an Option shall have been held by the Option Holder for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Option Holder shall pay the Option Price and the amount of any withholding tax due at the time of exercise. Shares shall not be issued upon exercise of an Option until the Option Price is fully paid and any required withholding is made. If the Option Committee so permits, an Option Holder subject to United States tax may elect to satisfy the Company's income tax withholding obligation with respect to an Option by having Shares withheld having a Market Value up to an amount that does not exceed the Option Holder's minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Option Committee and shall be subject to the prior approval of the Option Committee. The date of receipt by the Company of the items listed in Rules 7.2.1 to 7.2.3 shall constitute the Option Exercise Date. If any conditions must be fulfilled before an Option may be exercised, the receipt of such documents shall not be treated as effecting the exercise of an Option unless and until the Directors are satisfied that the conditions have been fulfilled, in which case the Option Exercise Date shall be the date on which the Directors declare that they are so satisfied. The Directors must use reasonable endeavours to ensure that they obtain evidence as to the satisfaction of any conditions within seven days after the date of receipt by the Company of the items listed at Rules 7.2.1 to 7.2.3 above and shall make a declaration within seven days of receipt of the evidence. 7.3 TRANSFER Subject to Rules 7.6 and 7.7, the Directors shall allot the Shares to be issued or shall procure the transfer of Shares to be transferred following the exercise of an Option within 30 days of the Option Exercise Date. 7.4 RIGHTS In respect of Shares issued or transferred on the exercise of an Option, Option Holders are entitled to all rights attaching to such Shares by reference to a record date after the Option Exercise Date. They shall not be entitled to rights before such date. 7.5 PART EXERCISE Other than on exercise of an Option to the full extent then exercisable, no Option shall be capable of exercise in part except in multiples of 100 Shares. 9 7.6 CONSENTS All allotments, issues and transfers of Shares will be subject to any necessary consents or other applicable requirements or restrictions under any relevant enactments or regulations for the time being in force in the United Kingdom and the United States or elsewhere, and it shall be the responsibility of the Option Holder to comply with any requirements to be fulfilled in order to obtain or obviate the necessity for any such consent. 7.7 TAX WITHHOLDING In a case where a Member of the Group is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which a person exercising an Option is liable by virtue of the exercise of the Option and/or for any social security contributions recoverable from the person in question (together, the "Tax Liability"), no Shares shall be issued or transferred following the exercise of the Option unless that person has either: (i) made a payment to the Member of the Group of an amount equal to the Tax Liability; or (ii) entered into arrangements acceptable to that or another Member of the Group to secure that such a payment is made (whether by authorising the sale of some or all of the shares on his behalf and the payment to the Member of the Group of the relevant amount out of the proceeds of sale or otherwise). 7.8 ARTICLES OF ASSOCIATION Any Shares acquired upon the exercise of Options shall be subject to the Articles of Incorporation and the By-Laws of the Company from time to time in force. 8 GENERAL 8.1 NOTICES Any notice or other document required to be given under or in connection with the Plan may be delivered to an Option Holder or sent by post to him at his home address according to the records of his employing company or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document required to be given to the Company under or in connection with the Plan may be delivered or sent by post to it at its registered office (or such other place or places as the Directors may from time to time determine and notify to Option Holders). 8.2 DOCUMENTS SENT TO SHAREHOLDERS The Company shall send to Option Holders copies of any documents or notices sent to the holders of its Shares, concurrently with issuing the same to the holders of its Shares. 8.3 AVAILABILITY OF SHARES The Company shall procure that sufficient Shares are available for transfer to satisfy all Options under which Shares may be acquired. 8.4 DIRECTORS' DECISIONS FINAL AND BINDING The decision of the Directors in any dispute relating to an Option or matter relating to the Plan shall be final and conclusive. 8.5 COSTS The costs of introducing and administering the Plan shall be borne by the Company. 10 8.6 REGULATIONS The Directors shall have power from time to time to make or vary regulations for the administration and operation of the Plan provided that the same are not inconsistent with these Rules. 8.7 LIMITATION OF LIABILITY The rights and obligations of an Option Holder under the terms and conditions of his office or employment shall not be affected by his participation in the Plan or any right he may have to participate in the Plan. An individual who participates in the Plan waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any company for any reason whatsoever insofar as those rights arise, or may arise, from his ceasing to have rights under or be entitled to exercise any Option under the Plan as a result of such termination or from the loss or diminution in value of such rights or entitlements. If necessary the Option Holder's terms of employment shall be varied accordingly. 9 AMENDMENTS AND TERMINATION 9.1 DIRECTORS' POWERS OF AMENDMENT The Directors may at any time alter or add to all or any of the provisions of the Plan or any previously granted Option in any respect; provided that no such amendment shall materially impair the rights of any Option Holder under any previously granted Option unless the amendment is required by applicable law, or 9.1.1 the Directors shall have invited every relevant Option Holder to give an indication as whether or not he approves of the amendment; and 9.1.2 the alteration is approved by a majority of those Option Holders who have given such an indication. 9.2 OVERSEAS EMPLOYEES Notwithstanding any other provision of the Plan the Directors may, in respect of Options granted to Eligible Employees who are or who may become subject to taxation outside the United States on their remuneration, amend or add to the provisions of the Plan and the terms of Options as they consider necessary or desirable to take account of or to mitigate or to comply with relevant overseas taxation, securities, exchange control and/or other overseas laws, provided that the terms of Options granted to such Eligible Employees are not overall more favourable than the terms of Options granted to other Eligible Employees. 9.3 NOTICE As soon as reasonably practicable after making any alteration or addition, the Directors shall give written notice to any Option Holder affected by the alteration or addition. 9.4 TERMINATION OF THE PLAN The Directors may terminate the Plan at any time, and it shall terminate on the 10th anniversary of its adoption by the Directors, but Options granted prior to such termination shall continue to be valid and exercisable in accordance with these Rules. 10 GOVERNING LAW The Plan and all Options shall be governed by and construed in accordance with [Applicable US State] law. 11 SCHEDULE 1 APBIOTECH INC EXECUTIVE STOCK OPTION PLAN 2000 This Schedule 1 constitutes the US approved part of the APBiotech Inc Executive Stock Option Plan 2000 (THE "US ISO PLAN"). The terms of the US ISO Plan are identical to the APBiotech Inc Executive Stock Option Plan 2000 (the "Plan") to which the US ISO Plan is appended except as follows: 1. For purposes of the US ISO Plan, options otherwise granted in accordance with the Plan may be designated as "Incentive Stock Options" ("ISOS") within the meaning of section 422 of the United States Internal Revenue code of 1986, as amended (the "US TAX CODE"). 2. The aggregate number of shares for which ISOs may be granted under the US ISO Plan shall not exceed 14,500,000. The price at which shares may be acquired by the exercise of an option under the US ISO Plan shall be not less than the fair market value of such shares as of the Grant Date as determined by the Board. 3. The class of persons who may receive ISOs shall, in addition to the limitations imposed by the Plan, be limited to those persons who are employees of the Company or its "parent" or "subsidiary" corporations within the meaning of Sections 424(e) and (f), respectively, of the US Tax Code. 4. In addition to any other restrictions contained in the Plan, ISOs shall not be transferable otherwise than by will or the laws of descent and distribution. During the lifetime of the person to whom the ISO is granted, the ISO shall be exercisable only by such person. 5. To the extent that the aggregate market value of shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under all plans or schemes of the Company or its "parent" and "subsidiary" corporations within the meaning of section 424(e) and (f) respectively of the US tax Code) exceed US$100,000 such option shall to the extent of such excess be treated as options which are not ISOs. For the purpose of the preceding sentence, the market value of any shares subject to an ISO shall be determined at the time such ISO is granted. 6. For purposes of any ISO grants, the terms of the Plan shall be deemed to be incorporated by reference to this schedule. 7. No options may be granted as ISOs under the US ISO Plan after the earlier of the tenth anniversary of (a) the date of adoption of the US ISO Plan by the Board, or (b) the date the US ISO Plan is approved by the Company's stockholders. 12 8. If any option is exercised in accordance with Rules 5 and 6 of the Plan more than three (3) months after the date that the Participant was last employed by the Company (or by its parent or a subsidiary as defined in Rule 3 of this Schedule above) or in the case of either death or "total disability" (as defined by section 422(c)(6) of the US Tax Code) more than twelve (12) months after the date that the Participant was last employed by the Company (or by its parent or a subsidiary as defined in Rule 3 of this Schedule above) then such option shall be treated as a nonqualified stock option for purposes of the US Tax Code. 9. If an option is granted to an individual who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or its parent or any subsidiary as defined in Rule 3 of this Schedule above) then the option exercise price shall be not less than 110% of the fair market value of the shares which may be acquired by the exercise of the option and such option by its terms shall not be exercisable after the expiration of 5 years from the date such option is granted. EX-10.12 4 y42738a1ex10-12.txt SUPPORT AGREEMENT 1 Exhibit 10.12 COMMITMENT AGREEMENT September 28, 2000 TO APBIOTECH, INC. AND AMERSHAM PHARMACIA BIOTECH LIMITED: Nycomed Amersham plc ("NA") and Pharmacia Corporation ("PHA" and, collectively with NA and PHA, the "Shareholders") hereby agree that if (i) the Supported Party (as defined below) is unable to satisfy its debts to Unaffiliated Parties (as defined below) and/or to repay on-demand debt issued by NA to Amersham-Pharmacia Biotech Limited or any of it subsidiaries as and when they fall due, and (ii) the Supported Party is unable to obtain alternative sources of financing, then the Shareholders shall provide to the Supported Party up to $500,000,000 in funding by electing, in their sole discretion, either to extend to the Supported Party a loan or to subscribe for ordinary shares or shares of common stock of the Supported Party, as the case may be, in either case on the terms set forth below. If both Shareholders elect to extend a loan, the Shareholders shall loan to the Supported Party up to an aggregate of $500,000,000. The rate of interest and terms of such loan shall be customary for credits similar to the Supported Party at the time of such loan, and such loan shall be evidenced by documentation containing terms customary for loans to such credits made by financial institutions. If one Shareholder wishes to elect to extend a loan pursuant to the previous paragraph and the other Shareholder wishes to elect to subscribe for ordinary shares or shares of common stock, then neither Shareholder shall subscribe for ordinary shares or shares of common stock and the Shareholders shall instead extend a loan. If both Shareholders elect to subscribe for ordinary shares or shares of common stock of the Supported Party, as the case may be, the Shareholders shall subscribe for: (1) If the Supported Party is APBiotech, Inc. (the "Company"), an aggregate number of shares of common stock of the Company equal to the Company Number, as defined below, at an aggregate subscription price of up to $500,000,000 (such price, up to such maximum price, the "Company Aggregate Price") and a per share subscription price equal to the Reference Price. "Company Number" means the quotient of the Company Aggregate Price divided by the Reference Price (as defined below). "Reference Price" means a per share price equal to volume-weighted average sales price of the Company's common stock on the Nasdaq National Market for the twenty trading days prior to the date on which the subscription price is paid (or, if fewer than twenty trading days have elapsed between the completion of the IPO (as defined below) and such date of payment, such number of trading days as have so elapsed), as determined by Bloomberg Financial Markets. 2 (2) If the Supported Party is Amersham Pharmacia Biotech Limited ("Limited"), a number of ordinary shares of Limited mutually agreed by the Shareholders, for an aggregate subscription price of up to $500,000,000. Such subscription shall be evidenced by documentation containing terms customary for private placements entered into in the United States in the biotechnology industry. "Supported Party" means (i) prior to the completion of the initial public offering of shares of common stock of the Company (the "IPO"), Limited, and (ii) following the completion of the IPO, the Company. "Unaffiliated Parties" means persons or entities other than the Company, Limited, the Shareholders and their respective affiliates. The obligations of the Shareholders under this letter agreement are several and not joint. Any funds provided to the Company pursuant to this Agreement shall be provided by each Shareholder ratably based on the percentage of outstanding shares of capital stock of the Supported Party held by such Shareholder at the date of this letter agreement. This letter agreement shall terminate automatically upon the earliest to occur of (i) the successful completion of the IPO and the repayment of aggregate principal amount of demand debt issued by NA to Limited or any of its subsidiaries, (ii) the day after the first anniversary of the effective date of the SEC registration statement pertaining to the IPO, and (iii) December 31, 2001. This letter agreement is governed by and shall be construed in accordance with the laws of the State of New York. This letter agreement may be executed in any number of counterparts, each of which shall be an original and all of which collectively shall constitute one and the same agreement. NYCOMED AMERSHAM plc By: /s/ Giles Kerr ------------------------------ Name: Giles Kerr Title: Finance Director PHARMACIA CORPORATION By: /s/ Christopher J. Coughlin ------------------------------ Name: Christopher J. Coughlin Title: Chief Financial Officer EX-10.13 5 y42738a1ex10-13.txt AMENDMENT TO GENERAL SERVICES AGREEMENT 1 EXHIBIT 10.13 [Letterhead NYCOMED AMERSHAM] 19th February, 2001 Nycomed Amersham plc Company Secretary Amersham Place Amersham Pharmacia Biotech Limited Little Chalfont Amersham Place Buckinghamshire Little Chalfont HP7 9NA England Bucks HP7 9NA T +44 (0) 1494 544000 F +44 (0) 1494 542266 Attention: J.A. Cooper Dear Sir, GENERAL SERVICES AGREEMENT -- 4TH AUGUST, 1997 (THE "AGREEMENT") -- PROPOSED AMENDMENT As you are aware, we are in the process of making a public offering of approximately 10% of the common stock which we currently hold in Amersham Pharmacia Biotech Limited (or any successor company following a reorganisation of the common stock) ("APBiotech"). With reference to Clause 8.7 of the Agreement, it has been agreed that in future the circumstances in which Nycomed Amersham plc shall be entitled to terminate the Agreement on three months' notice shall be when Nycomed Amersham ceases to have the right to nominate the majority of the Board of Directors of APBiotech, rather than on ceasing to have a direct or indirect interest in at least 50% of the voting rights attaching to the stock of APBiotech. Clause 8.7 shall therefore be amended as follows: "8.7 International may terminate this Agreement on three months' notice ending on or after the date on which International ceases to have the right to nominate the majority of the Board of Directors of Biotech." Please acknowledge agreement by countersigning this letter and returning it to me. Yours sincerely, /s/ G.F.B. Kerr - ------------------ G.F.B. Kerr Finance Director Agreed: /s/ J.A. Cooper -------------------------------------- J.A. Cooper For Amersham Pharmacia Biotech Limited EX-10.14 6 y42738a1ex10-14.txt APBIOTECH INC OPTIONS FOR ALL PLAN 2000 1 EXHIBIT 10.14 APBIOTECH INC RULES OF THE APBIOTECH OPTIONS FOR ALL PLAN 2000 FOR ADOPTION BY APBIOTECH INC BOARD FEBRUARY 2001 2 CONTENTS
PAGE PART A 1. Meanings of Words used............................................ 1 2. Grant of Options.................................................. 3 3. Option Price...................................................... 5 4. Variations in Share Capital....................................... 5 5. Exercise and Lapse - General Rules................................ 5 6. Cessation of Employment........................................... 6 7. Exercise of Options............................................... 8 8. General........................................................... 10 9. Amendments and Termination........................................ 10 10. Governing Law..................................................... 11 PART B 1. Meanings of Words Used............................................ 12 2. Grant of Options.................................................. 13 3. Option Price...................................................... 15 4. UK Inland Revenue Individual(pound)30,000 limit................... 15 5. Variations in Share Capital....................................... 16 6. Exercise and Lapse - General Rules................................ 16 7. Cessation of Employment........................................... 17 8. Exercise of Options............................................... 19 9. General........................................................... 20 10. Amendments and Termination........................................ 21 11. Governing Law..................................................... 22 SCHEDULE 1 - INCENTIVE STOCK OPTION SCHEDULE 23 SCHEDULE 2 - CASH OPTION PLAN 25
3 RULES OF THE APBIOTECH OPTIONS FOR ALL PLAN 2000 PART A 1. MEANINGS OF WORDS USED 1.1 In these Rules: "ASSOCIATED COMPANY" has the meaning given to is by Section 416 of the U.K. Taxes Act; "BUSINESS DAY" means a day on which NASDAQ is open for the transaction of business; "COMPANY" means APBiotech Inc; "CONTROL" has the meaning given to it by section 840 of the U.K. Taxes Act; "DATE OF GRANT" means the date on which the Directors resolve to grant an Option; "DIRECTORS" means the Board of Directors of the Company or a duly authorised committee of it; "ELIGIBLE EMPLOYEE" means any person who is a common law employee of a Participating Company who devotes substantially the whole of his working time to his duties; "EMPLOYEES' SHARE PLAN" means a plan for encouraging or facilitating the holding of shares in the Company by or for the benefit of the bona fide employees or former employees of the Company, the Company's subsidiary or holding company or a subsidiary of the Company's holding company; "MARKET VALUE" means in relation to a Share: (i) If Shares are listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for Shares, either (a) the average of the low and high prices of the Shares on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, for the trading day immediately preceding the applicable date or (b) the closing or last price of Shares on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, for the trading day immediately preceding the applicable date, as the Option Committee shall determine. (ii) If Shares are not traded on a national securities exchange but are traded on the over-the-counter market, if sales prices are not regularly reported for the Shares for the trading days or day referred to in clause (1), and if bid and asked prices for the Shares are regularly reported, the mean between the bid and the asked price for the Shares at the close of trading in the over-the-counter market for the trading day on which Shares were traded immediately preceding the applicable date, as the Option Committee shall determine; and 1 4 (iii) If the Shares are neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Option Committee, in good faith, shall determine. "MEMBERS OF THE GROUP" means the Company and all Subsidiaries and Associated Companies of it from time to time; "OPTION" means a right to acquire Shares granted pursuant to the Plan and for the time being subsisting; "OPTION COMMITTEE" means a duly appointed committee of the Directors comprising Directors who: (i) do not hold any executive office with any Member of the Group; and (ii) will not themselves participate in the Plan; "OPTION EXERCISE DATE" means the date when an Option is effectively exercised upon compliance with the provisions of Rule 7.1; "OPTION HOLDER" means a person holding an Option, including, where the context so permits, his personal representatives; "OPTION PERIOD" means, in respect of an Option, a period commencing on the Date of Grant and expiring at the close of business on the day preceding the 10th anniversary of the Date of Grant; "OPTION PRICE" means the price per Share payable on the exercise of an Option as determined by the Option Committee under Rule 3; "ORIGINAL SHAREHOLDER" means Nycomed Amersham plc (or any subsidiary of Nycomed Amersham plc) or Pharmacia Corp (or any subsidiary of Pharmacia Corp); "PARTICIPATING COMPANIES" means the Company and any Subsidiary of the Company, direct or indirect, designated by the Option Committee as a Participating Company; "PLAN" means this plan known as "The APBiotech Inc. Options for All Plan 2000" in its present form or as from time to time altered in accordance with the Rules; "PLAN PERIOD" means the period commencing on the date of the approval of the Plan by the Directors and ending on the 10th anniversary of that date; "RULES" means these rules as amended from time to time; "SHARES" means shares in the Company's Common Stock, $0.01 par value; "SUBSIDIARY" means a company which is: (i) a subsidiary of the Company within the meaning given thereto by Section 736 of the U.K. Companies Act 1985, and (ii) under the Control of the Company; "TAXES ACT" means the Income and Corporation Taxes Act 1988; and 2 5 "YEAR" means a year beginning on any January 1 and ending the following December 31. 1.2 Where the context so admits or requires, the singular includes the plural and the masculine includes the feminine and vice versa; references to any statutory provision shall include any modification or re-enactment. 1.3 Headings shall be ignored in construing the Rules. 2. GRANT OF OPTIONS 2.1 GRANT OF OPTIONS Subject to Rule 2.10 below, the Option Committee may during the Plan Period in its absolute discretion grant to any Eligible Employee an Option to acquire such number of Shares as the Option Committee may determine (or such lesser number as may be the case following an adjustment under Rule 2.8) at the Option Price. 2.2 TIME WHEN OPTIONS MAY BE GRANTED Options shall only be granted at such times as may be permitted by applicable securities laws. 2.3 CONDITIONS ON EXERCISE The Option Committee may grant an Option on the basis that it may not be exercised, in whole or in part, until certain conditions have been satisfied. The Option Committee may in its discretion waive, vary or amend any such condition. Such discretion shall only be exercised if events happen which cause the Option Committee to consider that a waived, varied or amended condition would be a fairer measure of performance and would be no more difficult to satisfy. 2.4 OPTION CERTIFICATES Each Option Holder shall be issued an option certificate, on or as soon as practicable after the Date of Grant, in such form as the Option Committee shall prescribe. 2.5 NO PAYMENT No payment to the Company shall be required on the grant of an Option. 3 6 2.6 DISCLAIMER OF OPTION Any Option Holder may, by notice in writing to the Secretary of the Company, within 30 days after the Date of Grant, disclaim in whole his Option and in such case the Option shall be deemed never to have been granted under the Plan. No consideration shall be payable for any disclaimer. 2.7 DISPOSAL RESTRICTIONS Except for the transmission of an Option on the death of an Option Holder to his personal representatives, neither an Option nor any rights in respect of it may be transferred, assigned or otherwise disposed of by an Option Holder to any other person, and if an Option Holder purports to transfer, assigns or disposes of any such Option or rights, whether voluntarily or involuntarily, then the relevant Option shall immediately lapse. 2.8 BLUE PENCIL PROVISION If any Option is purported to be granted on terms which are not in accordance with the provisions of these Rules, including the limitations on participation and the calculation of the Option Price, the Option Committee shall vary the terms of such Option to bring the Option within the Rules and any such variation shall take effect from the Date of Grant. 2.9 LIMITS ON SHARES AVAILABLE 2.9.1 Subject to Rules 2.9.2 and 2.9.3 below, no Options shall be granted under the Plan which would, at the time they are granted, cause the number of Shares which may be issued in pursuance of Options granted under the Plan, or in pursuance of options or other awards made under any other Employees' Share Plan of the Company, to exceed such number as represents 3% of the ordinary share capital of the Company from time to time. 2.9.2 The limit at Rule 2.9.1 above shall apply from the date of adoption of the Plan by the Company until such date as determined by the Directors, which shall not be before 1 June 2002 at the earliest. 2.9.3 Only those Shares which are capable of being issued before 1 June 2002 (or such later date as determined by the Directors pursuant to Rule 2.9.2 above) on the exercise of any options or other awards will be relevant for the purposes of calculating the limit in Rule 2.9.1 above, and Shares shall not be regarded as being capable of being issued by reason of any provisions in the relevant Employees' Share Plans under which such options or awards are granted allowing a person to exercise an option or award in circumstances of leaving employment or a change of control of the Company. 2.10 LIMIT ON INDIVIDUAL PARTICIPATION The maximum number of Shares over which Options can be granted to an Eligible Employee in any year is 1,000,000 Shares. 4 7 3. OPTION PRICE 3.1 DETERMINATION OF OPTION PRICE The Option Committee shall determine the Option Price which shall be stated at the Date of Grant and shall not be less than Market Value of a Share on the Date of Grant. 4. VARIATIONS IN SHARE CAPITAL 4.1 ADJUSTMENT OF OPTIONS In the event (a "Relevant Event") of any variation in the equity share capital of the Company in consequence of a capitalisation or rights issue, sub-division, consolidation or reduction of share capital or other variation in the share capital: 4.1.1 the number or nominal amount of Shares comprised in each Option, and/or 4.1.2 the Option Price, and/or 4.1.3 the aggregate Option Price in relation to any Option, may be adjusted in such manner as the Directors consider appropriate (including retrospective adjustment where such Relevant Event or the variation in the equity share capital of the Company as a consequence of the Relevant Event occurs after the Option Exercise Date but the relevant record date precedes such Option Exercise Date). If and to the extent a Relevant Event is a change in the number or kind of Shares effected solely by application of a mathematical formula (e.g., a 2-for-1 stock split), the adjustment described in this Rule 4.1 shall be made and shall occur automatically by application of such formula, without further action by the Directors. 4.2 OTHER RELEVANT EVENTS Options may be adjusted following variations in the share capital of the Company other than those specified in Rule 4.1. Any such adjustments shall be made in accordance with Rule 4.1. 4.3 NOTICE The Directors may take such steps as they consider necessary to notify Option Holders of any adjustment made under this Rule 4. 5. EXERCISE AND LAPSE - GENERAL RULES 5.1 EXERCISE - GENERAL RULE Unless otherwise specified in these Rules an Option shall only be exercisable: 5.1.1 on or after the third anniversary of the Date of Grant (subject to Rule 6 applying); 5.1.2 on the satisfaction or waiver of any condition imposed under Rule 2.3; 5.1.3 except as provided in Rule 6, while the Option Holder is an employee of a Member of the Group; and 5.1.4 in such periods (if any) as are specified by the Board at the time the option is granted. 5 8 5.2 LAPSE Options shall lapse on the expiry of the Option Period. 6. CESSATION OF EMPLOYMENT 6.1 GENERAL RULE If an Option Holder ceases to be an employee of any Member of the Group (except for any reason specified in Rule 6.2 below) then: 6.1.1 all Options granted less than 3 years before cessation shall lapse and determine upon such cessation; and 6.1.2 all other Options shall be exercisable within 6 months of such cessation (but not after the expiry of the Option Period) and if not so exercised shall lapse and determine. 6.2 CESSATION OF EMPLOYMENT - SPECIAL CASES If an Option Holder ceases to be an employee of any Member of the Group 6.2.1 by reason of retirement; or 6.2.2 by reason of injury, disability or dismissal for redundancy, or by reason only that his office or employment is in a company which ceases to be a Member of the Group, or relates to a business or part of a business which is transferred to a person who is not a Member of the Group; or 6.2.3 by reason of death then the Option shall become exercisable and may be exercised by the Option Holder (or by his personal representatives if appropriate) to the extent permitted by Rule 6.3 and within the exercise period as set out in Rule 6.4. For the purposes of this Rule 6.2, whether an Option Holder has ceased to be an employee of any member of the group by reason of retirement, injury, disability or dismissal for redundancy shall be determined by the directors, whose decision on such matter shall be final and binding. 6.3 The extent to which an Option shall become exercisable and may be exercised in accordance with this Rule is that one sixth of the Option can be exercised for each full period of six months from the Date of Grant until the relevant cessation of employment during which the Option Holder was an employee of a Member of the Group. 6.4 The exercise period referred to at Rule 6.2 above is 6.4.1 in the case of death, the period of 12 months from the date of death; and 6.4.2 in all other circumstances considered in Rule 6.2 above, the period which shall expire 6 months after his so ceasing or 42 months after the Grant Date, whichever shall be the later provided that no Option can be exercised after the expiry of the Option Period. 6 9 6.5 LEAVE OF ABSENCE No Options that are not exercisable at the beginning of an authorised leave of absence shall become exercisable during such leave of absence. 6.6 TAKE-OVERS ETC. 6.6.1 Subject to Rule 6.6.4 below, if, in consequence of any offer made to the holders of Shares, the Directors become aware that the right to cast more than 50 per cent of the votes which may ordinarily be cast on a poll at a general meeting of the Company has or will become vested in the offeror and/or any company controlled by the offeror and/or any person associated with or acting in concert with the offeror, the Directors shall, within 30 days of becoming so aware, notify every Option Holder accordingly. 6.6.2 Each Option Holder shall be entitled at any time during the Change of Control Period to exercise all his Options (whether or not otherwise exercisable) in whole or in part. The Options shall not lapse on the expiry of the Change of Control Period but all Options not exercisable immediately prior to the beginning of the Change of Control Period shall cease to be exercisable on the expiry of the Change of Control Period. 6.6.3 For the purposes of this Rule 6, "Change of Control Period" means the period commencing on the date of the giving of the Directors' notification under this Rule 6.6 and ending three months after that. 6.6.4 Unless the Directors decide otherwise, the provisions of this Rule 6.6 shall not apply if an Original Shareholder shall become entitled to cast more than 50% of the votes which may ordinarily be cast on a poll at a general meeting of the Company. 6.7 WINDING UP In the event of the proposed dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Option Committee; provided, however, that if the rights of an Option Holder (or his personal representatives if appropriate) have not otherwise terminated and expired, the Option Holder (or his personal representatives if appropriate) will have the right immediately prior to such dissolution or liquidation to exercise any option to the extent that the Option is exercisable as of the date immediately prior to such dissolution or liquidation, and the Option Committee may, in the exercise of its sole discretion in such instances, accelerate the date on which any Option becomes exercisable or fully vests and/or declare that any Option shall terminate as of a specified date. 6.8 LOSS OF OWNERSHIP Where the Option Holder is deprived of the legal or beneficial ownership of the Option by operation of law, or does anything or omits to do anything which causes him to be so deprived or becomes bankrupt, all his Options shall lapse. 6.9 OVERSEAS TRANSFER If an Option Holder, whilst continuing to hold an office or employment with a Member of the Group is transferred to work in another country and as a result of that transfer the Option Holder will either: 7 10 6.9.1 become subject to tax on his remuneration in the country to which he is transferred and the Option Committee are satisfied that as a result he will suffer a tax disadvantage upon exercising an Option; or 6.9.2 become subject to restrictions on his ability to exercise his Option or to hold or deal in the Shares or the proceeds of the sale of the Shares he may acquire upon the exercise of that Option by reason of or in consequence of the security laws or exchange laws of the country to which he is transferred; the Option Committee (or its delegate) may allow the Option Holder to exercise the Option in a period specified by the Option Committee or its delegate. The Options will become exercisable again in the ordinary course if not so exercised. 6.10 PRIORITY In the event of any conflict between any of the provisions of Rules 5 and 6, the provisions which results in the earliest lapsing of the Option in question shall prevail. 7. EXERCISE OPTIONS 7.1 LIMIT ON EXERCISE An Option may only be exercised during the periods specified in Rules 5 and 6. 7.2 MANNER OF EXERCISE To exercise an Option in whole or in part, an Option Holder must deliver to the Secretary of the Company or other duly appointed agent: 7.2.1 the option certificate covering the Shares over which the Option is being exercised; 7.2.2 notice in writing, in the prescribed form, duly completed and signed by the Option Holder or by his duly appointed agent; and 7.2.3 payment in full of the Option Price for the total number of Shares in respect of which the Option is being exercised. The Option Holder shall pay the Option Price for an Option as specified by the Option Committee (x) in cash, (y) with the approval of the Option Committee, by delivering Shares owned by the Option Holder (including shares acquired in connection with the exercise of an Option, subject to such restrictions as the Option Committee deems appropriate) and having a Market Value on the Option Exercise Date equal to the Option Price or (z) by such other method as the Option Committee may approve, including attestation (on a form prescribed by the Option Committee) to ownership of Shares having a Market Value on the Option Exercise Date equal to the Option Price, or payment through a broker in accordance with procedures permitted by Regulation T of the United States Federal Reserve Board. Shares used to exercise an Option shall have been held by the Option Holder for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Option Holder shall pay the Option Price and the amount of any withholding tax due at the time of exercise. Shares shall not be issued upon exercise of an Option until the Option Price is fully paid and any required withholding is made. 8 11 If the Option Committee so permits, an Option Holder subject to the United States tax may elect to satisfy the Company's income tax withholding obligation with respect to an Option by having Shares withheld having a Market Value up to an amount that does not exceed the Option Holder's minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Option Committee and shall be subject to the prior approval of the Option Committee. 7.3 TRANSFER Subject to Rule 7.5 and Rule 7.6, the Directors shall allot the shares to be issued or shall procure the transfer of Shares to be transferred following the exercise of an Option within 30 days of the Option Exercise Date. 7.4 RIGHTS In respect of Shares issued or transferred on the exercise of an Option, Option Holders are entitled to all rights attaching to such Shares by reference to a record date after the Option Exercise Date. They shall not be entitled to rights before such date. 7.5 CONSENTS All allotments, issues and transfers of Shares will be subject to any necessary consents or other applicable requirements or restrictions under any relevant enactments or regulations for the time being in force in the United Kingdom and the United States or elsewhere, and it shall be the responsibility of the Option Holder to comply with any requirements to be fulfilled in order to obtain or obviate the necessity for any such consent. 7.6 TAX WITHHOLDING In a case where a Member of the Group is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person exercising an Option is liable by virtue of the exercise of the Option and/or for any social security contributions recoverable from the person in question (together, the "Tax Liability), no Shares shall be issued or transferred following the exercise of an Option unless that person has either: (i) made a payment to the Member of the Group of an amount equal to the Tax Liability; or (ii) entered into arrangements acceptable to that or another Member of the Group to secure that such a payment is made (whether by authorising the sale of some or all of the Shares on his behalf and the payment to the Member of the Group of the relevant amount out of the proceeds of sale or otherwise). 7.7 ARTICLES OF ASSOCIATION Any Shares acquired upon the exercise of Option shall be subject to the Articles of Incorporation and the By-Laws of the Company from time to time in force. 9 12 8. GENERAL 8.1 NOTICES Any notice or other document required to be given under or in connection with the Plan may be delivered to an Option Holder or sent by post to him at his home address according to the records of his employing company or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document required to be given to the Company under or in connection with the Plan may be delivered or sent by post to it at its registered office (or such other place or places as the Directors may from time to time determine and notify the Option Holders). 8.2 AVAILABILITY OF SHARES The Company shall procure that sufficient Shares are available for transfer or issue to satisfy all Options under which Shares may be acquired. 8.3 DIRECTORS' DECISION FINAL AND BINDING The decision of the Directors in any dispute relating to an Option or matter relating to the Plan shall be final and conclusive. 8.4 COSTS The costs of introducing and administering the Plan shall be borne by the Company. 8.5 REGULATIONS The Directors shall have power from time to time to make or vary regulations for the administration and operation of the Plan provided that the same are not inconsistent with these Rules. 8.6 LIMITATION OF LIABILITY The rights and obligations of an Option Holder under the terms and conditions of his office or employment shall not be affected by his participation in the Plan or any right he may have to participate in the Plan. An individual who participates in the Plan waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any company for any reason whatsoever insofar as those rights arise, or may arise, from his ceasing to have rights under or be entitled to exercise any Option under the Plan as a result of such termination or from the loss or diminution in value of such rights or entitlements. If necessary the Option Holder's terms of employment shall be varied accordingly. 9. AMENDMENTS AND TERMINATION 9.1 DIRECTORS' POWERS OF AMENDMENT The Directors may at any time alter or add to all or any of the provisions of the Plan or any previously granted Option in any respect; provided that no such amendment shall materially impair the rights of any Option Holder under any previously granted Option unless the amendment is required by applicable law, or 9.1.1 the Directors shall have invited every relevant Option Holder to give an indication as to whether or not he approves of the amendment; and 10 13 9.1.2 the alteration is approved by a majority of those Option Holders who have given such an indication. 9.2 OVERSEAS EMPLOYEES Notwithstanding any other provision of the Plan the Directors may, in respect of Options granted to Eligible Employees who are or who may become subject to taxation outside the United States on their remuneration, amend or add to the provisions of the Plan and the terms of Options as they consider necessary or desirable to take account of or to mitigate or to comply with relevant overseas taxation, securities, exchange control and/or other overseas laws, provided that the terms of Options granted to such Eligible Employees are not overall more favourable than the terms of Options granted to other Eligible Employees. 9.3 NOTICE As soon as reasonably practicable after making any alteration or addition, the Directors shall give written notice to any Option Holder affected by the alteration or addition. 9.4 TERMINATION OF THE PLAN The Directors may terminate the Plan at any time, and it shall terminate on the 10th anniversary of its adoption by the Directors, but Options granted prior to such termination shall continue to be valid and exercisable in accordance with these Rules. 10. GOVERNING LAW The Plan and all Options shall be governed by and construed in accordance with [applicable state] law. 11 14 RULES OF THE APBIOTECH OPTIONS FOR ALL PLAN 2000 PART B 1. MEANINGS OF WORDS USED 1.1 In these Rules: "ASSOCIATED COMPANY" has the meaning given to it by section 416 of the U.K. Taxes Act; "BUSINESS DAY" means a day on which NASDAQ is open for the transaction of business; "COMPANY" means APBiotech Inc; "CONTROL" has the meaning given to it by Section 840 of the U.K. Taxes Act; "DATE OF GRANT" means the date on which the Directors resolve to grant an Option; "DIRECTORS" means the Board of Directors of the Company or a duly authorised committee of it; "ELIGIBLE EMPLOYEE" means either a full-time director of a Participating Company (who is obliged to devote the performance of the duties of his office or employment with that and any other Participating Company not less than 25 hours per week) or an employee of a Participating Company (other than one who is a director of a Participating Company); "EMPLOYEES' SHARE PLAN" means a plan for encouraging or facilitating the holding of shares in the Company by or for the benefit of the bona fide employees or former employees of the Company, the Company's subsidiary or holding company or a subsidiary of the Company's holding company; "MARKET VALUE" means in relation to a Share the market value (within the meaning of Part VIII of the UK Taxation of Chargeable Gains Act 1992) of shares of that class, as agreed in advance for the purposes of this scheme with the Shares Valuation Division of the Inland Revenue; "MEMBER OF THE GROUP" means the Company and all Subsidiaries and Associated Companies of it from time to time; "OPTION" means a right to acquire Shares granted pursuant to the Plan and for the time being subsisting; "OPTION COMMITTEE" means a duly appointed committee of the Directors comprising Directors who: (i) do not hold any executive office with any Member of the Group; and (ii) will not themselves participate in the Plan; "OPTION EXERCISE DATE" means the date when an Option is effectively exercised upon compliance with the provisions of Rule 8.1; 12 15 "OPTION HOLDER" means a person holding an Option, including, where the context so permits, his personal representatives; "OPTION PERIOD" means, in respect of an Option, a period commencing on the Date of Grant and expiring at the close of business on the day preceding the 10th anniversary of the Date of Grant; "OPTION PRICE" means the price per Share payable on the exercise of an Option as determined by the Option Committee under Rule 3; "ORIGINAL SHAREHOLDER" means Nycomed Amersham plc (or any subsidiary of Nycomed Amersham plc) or Pharmacia Corp (or any subsidiary of Pharmacia Corp); "PART B" means the part of this Plan designed for approval by the Inland Revenue under Schedule 9; "PARTICIPATING COMPANIES" means the Company and any Subsidiary of the Company, direct or indirect, designated by the Option Committee as a Participating Company; "PLAN" means this plan known as "The APBiotech Inc. Options For All Plan 2000" in its present form or as from time to time altered in accordance with the Rules; "PLAN PERIOD" means the period commencing on the date of the approval of the Plan by the Directors and ending on the 10th anniversary of that date; "RULES" means these rules as amended from time to time; "SCHEDULE 9" means Schedule 9 to the Taxes Act; "SHARES" means shares in the Company's Common Stock, $0.01 par value; "SUBSIDIARY" means a company which is: (i) a subsidiary of the Company within the meaning given thereto by Section 736 of the U.K. Companies Act 1985, and (ii) under the Control of the Company; "TAXES ACT" means the Income and Corporation Taxes Act 1988; and "YEAR" means a year beginning on any January 1 and ending the following December 31. 1.2 Where the context so admits or requires, the singular includes the plural and the masculine includes the feminine and vice versa; references to any statutory provision shall include any modification or re-enactment. 1.3 Headings and words in italics shall be ignored in construing the Rules. 2. GRANT OF OPTIONS 2.1 GRANT OF OPTIONS 2.1.1 Subject to Rule 2.10, the Option Committee may during the Plan Period in its absolute discretion grant to any Eligible Employee an Option under this Part B to 13 16 acquire such number of Shares as the Option Committee may determine (or such lesser number as may be the case following an adjustment under Rule 2.8) at the Option Price where such Shares satisfy the requirements of paragraphs 10 to 14 of Schedule 9 (fully paid up, unrestricted, ordinary share capital). 2.1.2 A person is not eligible to be granted an Option at any time under this Part B when he is not eligible to participate in this Scheme by virtue of paragraph 8 of Schedule 9 (material interest in a close company). 2.2 TIME WHEN OPTIONS MAY BE GRANTED Options shall only be granted at such times as may be permitted by applicable securities laws. 2.3 CONDITIONS ON EXERCISE The Option Committee may grant an Option on the basis that it may not be exercised, in whole or in part, until certain objective conditions relating to the performance of the Company have been satisfied. The Option Committee may in its discretion waive, vary or amend any such condition. Such discretion shall only be exercised if events happen which cause the Option Committee to consider that a waived, varied or amended condition would be a fairer measure of performance and would be no more difficult to satisfy. 2.4 OPTION CERTIFICATES Each Option Holder shall be issued an option certificate, on or as soon as practicable after the Date of Grant, in such form as the Option Committee shall prescribe. 2.5 NO PAYMENT No payment to the Company shall be required on the grant of an Option. Options will be granted by deed. 2.6 DISCLAIMER OF OPTION Any Option Holder may, by notice in writing to the Secretary of the Company, within 30 days after the Date of Grant, disclaim in whole his Option and in such case the Option shall be deemed never to have been granted under the Plan. No consideration shall be payable for any disclaimer. 2.7 DISPOSAL RESTRICTIONS Except for the transmission of an Option on the death of an Option Holder to his personal representatives, neither an Option nor any rights in respect of it may be transferred, assigned or otherwise disposed of by an Option Holder to any other person, and if an Option Holder purports to transfer, assigns or disposes of any such Option or rights, whether voluntarily or involuntarily, then the relevant Option shall immediately lapse. 2.8 BLUE PENCIL PROVISION If any Option is purported to be granted on terms which are not in accordance with the provisions of these Rules, including the limitations on participation and the calculation of the 14 17 Option Price, the Option Committee shall vary the terms of such Option to bring the Option within the Rules and any such variation shall take effect from the Date of Grant. 2.9 LIMITS ON SHARES AVAILABLE 2.9.1 Subject to Rules 2.9.2 and 2.9.3 below, no Options shall be granted under the Plan which would, at any time they are granted, cause the number of Shares which may be issued in pursuance of Options granted under the Plan, or in pursuance of options or other awards made under any other Employees' Share Plan of the Company, to exceed such number as represents 3% of the ordinary share capital of the Company from time to time. 2.9.2 The limit at Rule 2.9.1 above shall apply from the date of adoption of the Plan by the Company until such date as determined by the Directors, which shall not be before 1 June 2002 at the earliest. 2.9.3 Only those Shares which are capable of being issued before 1 June 2002 (or such later date as determined by the Directors pursuant to Rule 2.9.2. above) on the exercise of any options or other awards will be relevant for the purposes of calculating the limit in Rule 2.91. above, and Shares shall not be regarded as being capable of being issued by reason of any provisions in the relevant Employees' Share Plan under which such options or awards are granted allowing a person to exercise an option or award in circumstances of leaving employment or a change of control of the Company. 2.10 LIMIT ON INDIVIDUAL PARTICIPATION The maximum number of Shares over which Options can be granted to an Eligible Employee in any year is 1,000,000 Shares. 3. OPTION PRICE 3.1 DETERMINATION OF OPTION PRICE The Option Committee shall determine the Option Price which shall be stated at the Date of Grant and shall not be less than the Market Value of a Share on the Date of Grant. 4. UK INLAND REVENUE INDIVIDUAL (POUND)30,000 LIMIT 4.1 No person shall be granted Options which would at the date they are granted cause the aggregate market value of the Shares which he may acquire under all Options granted under Part B of this Plan and all other shares which he may acquire pursuant to any option granted to him (and not exercised) under any other share option scheme, not being a savings-related scheme, approved under Schedule 9 and established by the Company or any Associated Company to exceed or further exceed (pound)30,000 or such other limit imposed from time to time under paragraph 28(1) of Schedule 9. 4.2 In calculating market values for the purpose of this Rule, the calculation shall be by reference to the market value of shares as at the time an option was granted as determined in accordance with the rules of the relevant share option scheme. 5. VARIATIONS IN SHARE CAPITAL 5.1 ADJUSTMENT OF OPTIONS 15 18 Subject to Rule 5.2 below, in the event (a "Relevant Event") of any variation in the equity share capital of the company in consequence of a capitalisation or rights issue, sub-division, consolidation or reduction of share capital or other variation in the share capital: 5.1.1 the number or nominal amount of Shares comprised in each Option, and/or 5.1.2 the Option Price, and/or 5.1.3 the aggregate Option Price in relation to any Option may be adjusted in such manner as the Directors consider appropriate (including retrospective adjustments where such Relevant Event or the variation in the equity share capital of the Company as a consequence of the Relevant Event occurs after the Option Exercise Date but the relevant record date precedes such Option Exercise Date). If and to the extent a Relevant Event is a change in the number or kind of Shares effected solely by application of a mathematical formula (e.g., a 2-for-1 stock split), the adjustment described in this Rule 5.1 shall be made and shall occur automatically by application of such formula, without further action by the Directors. 5.2 UK INLAND REVENUE APPROVAL TO ADJUSTMENTS At a time when Part B of the Plan is approved by the UK Inland Revenue under Schedule 9, no adjustment under Rule 5.1 above shall be made to an Option granted under Part B without the prior approval of the UK Inland Revenue. 5.3 NOTICE The Directors may take such steps as they consider necessary to notify Option Holders of any adjustment made under this Rule 5. 6. EXERCISE AND LAPSE - GENERAL RULES 6.1 EXERCISE - GENERAL RULES Unless otherwise specified in these Rules an Option shall only be exercisable: 6.1.1 on or after the third anniversary of the Date of Grant (subject to Rule 7 applying); 6.1.2 on the satisfaction or waiver of any condition imposed under Rule 2.3; 6.1.3 except as provided in Rule 7, while the Option Holder is a full-time Director or an employee of a Member of the Group; and 6.1.4 in such periods (if any) as are specified by the Board and the time the option is granted. 6.2 LAPSE Subject to Rule 7.3, Options shall lapse on the expiry of the Option Period. 7. CESSATION OF EMPLOYMENT 7.1 GENERAL RULE 16 19 If an Option Holder ceases to be a director or employee of any Member of the Group (except for any reason specified in Rule 7.2 below), then: 7.1.1 All Options granted less than 3 years before cessation shall lapse and determine upon such cessation; and 7.1.2 All other Options shall be exercisable within 6 months of such cessation (but not after the expiry of the Option Period) and if not so exercised shall lapse and determine. 7.2 CESSATION OF EMPLOYMENT - SPECIAL CASES If an Option Holder ceases to be a director or employee of any Member of Group:- 7.2.1 by reason of retirement; or 7.2.2 by reason of injury, disability or dismissal for redundancy, or by reason only that his office or employment is in a Company which ceases to be a Member of the Group, or relates to a business or part of a business which is transferred to a person, who is not a Member of the Group; or 7.2.4 by reason of death then the Option shall become exercisable and may be exercised by the Option Holder (or his personal representatives if appropriate) to the extent permitted by this Rule 7.3 in and within the exercise period as set out in Rule 7.4. For the purposes of this Rule 7.2, whether an Option Holder has ceased to be a director or employee of any Member of the Group by reason of retirement, injury, disability or dismissal for redundancy shall be determined by the Directors, whose decision or such matter shall be final and binding. 7.3 The extent to which an Option shall become exercisable and may be exercised in accordance with this Rule is that one sixth of the Option can be exercised for each full period of six months for the Date of Grant until the relevant cessation of employment during which the Option Holder was a director or employee of a Member of the Group. 7.4 The exercise period referred to at Rule 7.2 above is: 7.4.1 in the case of death, the period of 12 months from the date of death 7.4.2 in all other circumstances considered in Rule 7.2, the period which shall expire 6 months after his so ceasing or 42 months after the Grant Date, whichever shall be the later provided that no Option can be exercised after the expiry of the Option Period. 7.5 LEAVE OF ABSENCE No Options that are not exercisable at the beginning of an authorised leave of absence shall become exercisable during such leave of absence. 7.6 TAKE-OVERS ETC. 7.6.1 Subject to Rule 7.4.4 below if, in consequence of any offer made to the holders of Shares, the Directors become aware that the right to cast more than 50 per cent of the 17 20 votes which may ordinarily be cast on a poll at a general meeting of the Company has or will become vested in the offeror and/or any company controlled by the offeror and/or any person associated with or acting in concert with the offeror, the Directors shall, within 30 days of becoming so aware, notify every Option Holder accordingly. 7.6.2 Each Option Holder shall be entitled at any time during the Change of Control Period to exercise all his Options (whether or not otherwise exercisable) in whole or in part. The Options shall not lapse on the expiry of the Change of Control Period but all Options not exercisable immediately prior to the beginning of the Change of Control Period shall cease to be exercisable on the expiry of the Change of Control Period. 7.6.3 For the purposes of this Rule 7, "Change of Control Period" means the period commencing on the date of the giving of the Directors' notification under this Rule 7.6 and ending three months after that. 7.6.4 Unless the Directors decide otherwise, the provisions of this Rule 7.6 shall not apply if an Original Shareholder shall become entitled to cast more than 50% of the votes which may ordinarily be cast on a poll at a general meeting of the Company. 7.7 WINDING UP In the event of the proposed dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Option Committee; provided, however, that if the rights of an Option Holder (or his personal representatives if appropriate) have not otherwise terminated and expired, the Option Holder (or his personal representatives if appropriate) will have the right immediately prior to such dissolution or liquidation to exercise any Option to the extent that the Option is exercisable as of the date immediately prior to such dissolution or liquidation, and the Option Committee may, in the exercise of its sole discretion in such instance, accelerate the date on which any Option becomes exercisable or fully vests and/or declare that any Option shall terminate as of a specified date. 7.8 LOSS OF OWNERSHIP Where the Option Holder is deprived of the legal or beneficial ownership of the Option by operation of law, or does anything or omits to do anything which causes him to be so deprived or becomes bankrupt, all his Options shall lapse. 7.9 OVERSEAS TRANSFER If an Option Holder, whilst continuing to hold an office or employment with a Member of the Group is transferred to work in another country and as a result of that transfer the Option Holder will either: 7.7.1 become subject to tax on his remuneration in the country to which he is transferred and the Option Committee are satisfied that as a result he will suffer a tax disadvantage upon exercising an Option; or 7.7.2 become subject to restrictions on his ability to exercise his Option or to hold or deal in the Shares or the proceeds of the sale of the Shares he may acquire upon the 18 21 exercise of that Option by reason of or in consequence of the security laws or exchange control laws of the country to which he is transferred; the Option Committee (or its delegate) may allow the Option Holder to exercise the Option in a period specified by the Committee or its delegate. The Options will become exercisable again in the ordinary course if not so exercised. 7.10 PRIORITY In the event of any conflict between any of the provisions of Rules 6 and 7, the provision which results in the earliest lapsing of the Option in question shall prevail. 8. EXERCISE OF OPTION 8.1 LIMIT ON EXERCISE An Option may only be exercised during the periods specified in Rules 6 and 7. 8.2 MANNER OF EXERCISE To exercise an Option in whole or in part, an Option Holder must deliver to the Secretary of the Company or other duly appointed agent: 8.2.1 the option certificate covering the Shares over which the Option is being exercised; 8.2.2 notice in writing, in the prescribed form, duly completed and signed by the Option Holder or by his duly appointed agent; and 8.2.3 payment in full of the Option Price for the total number of Shares in respect of which the Option is being exercised. The Option Holder shall pay the Option Price for a Option as specified by the Option Committee (x) in cash or (y) by such other method as the Option Committee may approve, including, but not limited, to cashless exercise procedures. 8.3 TRANSFER Subject to Rules 8.5 and 8.6, the Directors shall allot the Shares to be issued or shall procure the transfer of Shares to be transferred following the exercise of an Option within 30 days of the Option Exercise Date. 8.4 RIGHTS In respect of Shares issued or transferred on the exercise of an Option, Option Holders are entitled to all rights attaching to such Shares by reference to a record date after the Option Exercise Date. They shall not be entitled to rights before such date. 8.5 CONSENTS All allotments, issues and transfers of Shares will be subject to any necessary consents or other applicable requirements or restrictions under any relevant enactment or regulations for the time being in force in the United Kingdom and the United States or elsewhere, and it shall be the responsibility of the Option Holder to comply with any requirements to be fulfilled in order to obtain or obviate the necessity for any such consent. 19 22 8.6 TAX WITHHOLDING In a case where a Member of the Group is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person exercising an Option is liable by virtue of the exercise of the Option and/or for any social security contributions recoverable from the person in question (together, the "Tax Liability"), no Shares shall be issued or transferred following the exercise of an Option unless that person has either: (i) made a payment to the Member of the Group of an amount equal to the Tax Liability; or (ii) entered into arrangements acceptable to that or other Member of the Group to secure that such payment is made (whether by authorising the sale of some or all of the shares on his behalf and the payment to the Member of the Group of the relevant amount of the proceeds of sale or otherwise). 8.7 ARTICLES OF ASSOCIATION Any Shares acquired upon the exercise of Options shall be subject to the Articles of Incorporation and the By-Laws of the Company from time to time in force. 8.8 UK INLAND REVENUE REQUIREMENTS 8.8.1 An Option Holder shall not be eligible to exercise an Option at any time when he is not eligible to participate in this Part B of the Plan by virtue of paragraph 8 of Schedule 9 (material interest in a close company). 8.8.2 The Shares transferred to an Option Holder following the exercise of an Option shall meet the requirements of paragraphs 10 to 14 of Schedule 9 (fully paid up, unrestricted, ordinary share capital). 9. GENERAL 9.1 Notices Any notice or other document required to be given under or in connection with the Plan may be delivered to an Option Holder or sent by post to him at his home address according to the records of his employing company or such other address as may appear to the Company to be appropriate. Notices sent by post shall be deemed to have been given on the day following the date of posting. Any notice or other document required to be given to the Company under or in connection with the Plan may be delivered or sent by post to it at its registered office (or such other place or places as the Directors may from time to time determine and notify to Option Holders). 9.2 AVAILABILITY OF SHARES 20 23 The Company shall procure that sufficient Shares are available for transfer or issue to satisfy all Options under which Shares may be acquired. 9.3 DIRECTORS' DECISIONS FINAL AND BINDING The decision of the Directors in any dispute relating to an Option or matter relating to the Plan shall be final and conclusive. 9.4 COSTS The costs of introducing and administering the Plan shall be borne by the Company. 9.5 REGULATIONS The Directors shall have the power from time to time to make or vary regulations for the administration and operation of the Plan provided that the same are not inconsistent with these Rules. 9.6 LIMITATIONS OF LIABILITY The rights and obligations of an Option Holder under the terms and conditions of his office or employment shall not be affected by his participation in the Plan or any right he may have to participate in the Plan. An individual who participates in the Plan waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any company for any reason whatsoever insofar as those rights arise, or may arise, from his ceasing to have rights under or be entitled to exercise any Option under the Plan as a result of such termination or from the loss or diminution in value of such rights or entitlements. If necessary the Option Holder's terms of employment shall be varied accordingly. 9.7 NOTIFICATION TO UK INLAND REVENUE If the Company operates the Scheme as an Employees' Share Plan which is not approved by the UK Inland Revenue, the Company will inform the UK Inland Revenue. 10. AMENDMENTS AND TERMINATION 10.1 DIRECTORS' POWERS OF AMENDMENT 10.1.1 Subject to Rule 10.1.2, the Directors may at any time alter or add to all or any of the provisions of this Part B of the Plan in any respect; provided that no such amendment shall materially impair the rights of any Option Holder under any previously granted Option unless the amendments is required by applicable law, or (i) the Directors have invited every relevant Option Holder to give an indication as to whether or not he approves of the amendment; and (ii) the alteration is approved by the majority of those Option Holders who have given such an indication. 10.1.2 If an alteration which does not solely relate to an objective condition relating to the performance of the Company imposed under Rule 2.3 is made at a time when this Part B is approved by the UK Inland Revenue under Schedule 9, the approval will not 21 24 thereafter have effect unless and until the Inland Revenue have approved the alteration. 10.2 OVERSEAS EMPLOYEES Notwithstanding any other provision of the Plan the Directors may, in respect of Options granted to Eligible Employees who are or who may become subject to taxation outside the United States on their remuneration, amend or add to the provisions of the Plan and the terms of Options as they consider necessary or desirable to take account of or to mitigate or to comply with relevant overseas taxation, securities, exchange control and/or other overseas laws, provided that the terms of Options granted to such Eligible Employees are not overall more favourable than the terms of Options granted to other Eligible Employees. 10.3 NOTICE As soon as reasonably practicable after making any alteration, the Directors shall give written notice to any Option Holder affected by the alteration or addition. 10.4 TERMINATION OF THE PLAN The Directors may terminate the Plan at any time, and it shall terminate on the 10th anniversary of its adoption by the Directors, but Options granted prior to such termination shall continue to be valid and exercisable in accordance with these Rules. 11. GOVERNING LAW The Plan and all Options shall be governed by and construed in accordance with [applicable state] law. 22 25 SCHEDULE 1 - US ISO PLAN THE APBIOTECH STOCK OPTION PLAN 2000 - INCENTIVE STOCK OPTION SCHEDULE This Schedule constitutes the US approved part of the APBiotech Stock Option Plan 2000 (the "US ISO PLAN"). The terms of the US ISO Plan are identical to Part A of the APBiotech Stock Option Plan 2000 (the "PLAN") to which the US ISO Plan is appended except as follows: 1. For purposes of the US ISO Plan, Options otherwise granted in accordance with Part A of the Plan may be designated as "Incentive Stock Options" ("ISOS") within the meaning of section 422 of the United States Internal Revenue Code of 1986, as amended (the "US TAX CODE"). 2. The aggregate number of Shares for which ISOs may be granted under the US ISO Plan shall not exceed 2,500,000. The price at which Shares may be acquired by the exercise of an Option under the US ISO Plan shall be not less than the Market Value of such Shares as of the Grant Date as determined by the Board. 3. The class of persons who may receive ISOs shall, in addition to the limitations imposed by the Plan, be limited to those persons who are employees of the Company or its "parent" or "subsidiary" corporations within the meaning of sections 424(e) and (f), respectively, of the US Tax Code. 4. In addition to any other restrictions contained in the Plan, ISOs shall not be transferable otherwise than by will or the laws of descent and distribution. During the lifetime of the person to whom the ISO is granted, the ISO shall be exercisable only by such person. 5. To the extent that the aggregate market value of Shares with respect of which ISOs are exercisable for the first time by a Participant during any calendar year (under all plans or schemes of the Company or its "parent" and "subsidiary" corporations within the meaning of section 424(e) and (f) respectively of the US Tax Code) exceed US$100,000, such Options shall to the extent of such excess be treated as Options which are not ISOs. For the purpose of the preceding sentence, the market value of any Shares subject to an ISO shall be determined at the time such ISO is granted. 6. For purposes of any ISO grants, the terms of the Plan shall be deemed to be incorporated by reference in this Schedule. 7. No Options may be granted as ISOs under the US ISO Plan after the earlier of the tenth anniversary of (a) the date of adoption of the US ISO Plan by the Board, or (b) the date the US ISO Plan is approved by the Company's Stockholders. 8. If any Option is exercised in accordance with Rules 5 to 7 of the Plan more than three (3) months after the date the Participant was last employed by the Company (or by its parent or a subsidiary as defined in Rule 3 of this Schedule above), or in the case of either death or "total disability" (as defined by section 422(c)(6) of the US Tax Code) more than twelve (12) months after the date that the Participant was last employed by the Company (or by its parent or a subsidiary as defined in Rule 3 of this Schedule above), then such Option shall be treated as a non-qualified stock option for purposes of the US Tax Code. 23 26 9. If an Option is granted to an individual who, at the time the Option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or its parent or any subsidiary as defined in Rule 3 of this Schedule above), then the Option exercise price shall be not less than 110% of the fair market value of the Shares which may be acquired by the exercise of the Option, and such option by its terms shall not be exercisable after the expiration of 5 years from the date such Option is granted. 24 27 SCHEDULE 2 CASH OPTION PLAN 1. RULES The Rules of the APBiotech Stock Option Plan 2000 Part A shall apply mutatis mutandis to a right ("Cash Option") to receive a cash sum granted or to be granted pursuant to this Schedule 2 as if it was an option to acquire existing shares in the Company, except as set out in this Schedule 2. 2. RULE CHANGES 2.1 The Rules of Part A of the Plan shall be varied as set out below. Where any Rule is deleted, the other Rules shall be renumbered accordingly (including any cross references in Rules of Part A of the Plan). 2.2 Rule 7.2 ("Manner of Exercise") shall be deleted and replaced by the following Rule. "7.2 MANNER OF EXERCISE An Option shall be exercised in the form and manner prescribed by the Option Committee from time to time". 2.3 Rules 7.3, 7.4, 7.5 and 7.7 (transfer of shares on option exercise; right of shares; consents; articles of association) shall be deleted. 2.4 Rule 8.2 (Availability of Shares) shall be deleted. 3. CASH OPTIONS 3.1 The Option Committee may grant or procure the grant of a Cash Option upon the terms set out below. 3.2 Each Cash Option shall be expressed to relate to a given number of Shares in the Company. 3.3 The amount of the cash sum to be paid to the Participant on the exercise of the Cash Option shall be equal to the amount by which the Exercise Value of the Shares over which the Cash Option is expressed to relate exceeds the Option Price, where the Exercise Value of a Share equals the Market Value of a Share (as calculated in accordance with Part A of the Plan) on the date of exercise of the Cash Option (or if that is not a dealing day, on the immediately prior dealing day) and where the Option Price is the price determined in accordance with Rule 3.1 of Part A of the Plan. 3.4 The cash sum payable pursuant to paragraph 3.3 above shall be paid by the employer within 30 days of the exercise of the Cash Option, net of any deductions (on account of tax or similar liabilities) as may be required by law. [4. TRUST OPTIONS 25 28 3.5 Notwithstanding any other provisions of Part A of the Plan, where a Cash Option is granted, the Company may grant an Option ("a Trust Option") to subscribe for shares in the Company to the trustee of any employee trust if, prior to the grant of the Cash Option, the trustee agreed that if the Company gives notice to the trustee on the exercise of the Cash Option, the trustee will pay to or on behalf of the Company an amount equal to that payable to the person exercising the Cash Option as referred to in paragraph 3.3 above of this Schedule. 3.6 The terms of the Trust Option shall be as follows: (a) The number of shares over which the Trust Option is granted shall be the same as that to which the Cash Option relates (and this number shall be adjusted accordingly in the event that the number of shares to which the Cash Option relates is adjusted). (b) The price per share payable to the Company on the exercise of the Trust Option shall be the same as the Option Price applicable to the Cash Option (after any adjustment). (c) The Trust Option shall be exercisable only if, on the exercise of the Cash Option, the Company gives notice to the trustee requiring the trustee to make a payment to or on behalf of the Company as aforesaid and then only in respect of the number of shares in respect of which the Cash Option is exercised. (d) The Trust Option should be non-transferable other than to any successor trustee of the trust in question.] 26 29 FRANCE SCHEDULE 3 TO PART A TO THE AP BIOTECH OPTIONS FOR ALL PLAN 2000 - ("THE FRENCH PLAN") This Schedule contains the terms of French Options granted under the AP Biotech Stock Option Plan 2000 to Eligible Employees working in France - ("the French Plan"). The terms of the French Plan are identical to the AP Biotech Stock Option Plan 2000 Part A ("the Plan") to which the French Plan is appended except as follows: 1. For the purposes of any French Options, the terms of the Plan should be deemed incorporated by reference to this Schedule. 2. For the purposes of the French Plan, Options granted in accordance with the French Plan ("French Options") may be designated as Qualifying French stock Options within the meaning of the conditions set forth in the French Company law (Loi 24 Juillet 1966 code Societes commerciales, articles 208-1 a 208-8-2) ("French Company Law"), subject to amendment by the bill Projet de Loi relatif aux Regulations Economiques numero 2250 depose le 15 mars 2000 (urgence declaree) before the Senate/National Assembly. 3. The aggregate number of shares for which French Options may be granted under the French Plan shall not exceed one third of the Company's issued share capital from time to time. 4. The exercise price of French Options shall not be less than 80% of the average quoted price of the shares on the NASDAQ during the 20 Business Days preceding the Date of Grant. 5. No persons holding more than 10% of the issued share capital of the Company shall be eligible to participate under the French Plan. 6. Subject to Clause 7 below, the definition of Eligible Employee in Rule 1.1 of the Plan shall be amended as follows: "Eligible Employee means any person who is a common law employee of a Participating Company and who is based in France (but not a Director of the Company) who devotes substantially the whole of his working time to his duties". 7. Only individuals who are based in France and have either an employment relationship with a Participating Company or hold one of the following offices [of the French Company] shall be eligible to be granted French Options: President Directuer General, Directuer General, Members of the "Directoire", "Gerint" of the "Societe en commandite par actions". 8. In addition to any other restrictions contained in the Plan, French Options shall not be transferable otherwise on death. During the lifetime of the Option Holder to whom the French Option has been granted, the French Option shall only be exercisable by the Option Holder. On the death of the Option Holder, the Option Holders heirs may exercise his French Options within 6 months following the Option Holders death. 9. Rule 4 of the Plan shall only apply to French Options to the extent that such variations are permitted under French Company Law. 10. In the case of Options to acquire subsisting Shares the Company shall procure that sufficient Shares are available for transfer to satisfy the exercise of such Options (which have neither lapsed nor been exercised) to the full extent possible, taking into account any other obligations of the Company to provide shares of the same class as such Shares. 30 11. Rule 3 of the Plan shall be limited as follows: (a) No French Options may be granted before the end of the period of 20 Business Days following a dividend distribution or capital increase or before or after 10 Trading Days of the publication of consolidated or, if none, annual accounts or between the date that company officers have knowledge of a significant event which would affect the value of the share and 10 trading days after the event has been publicised.; (b) With respect to Options to subscribe for newly issued Shares Options may not be granted during any other period prohibited by French law. 12. In accepting the grant of the French Option the Option Holder undertakes that he will advise the Company of the date on which the Option is exercised and the date on which the shares are sold within 14 days of either event. 13. An exercise of French Options in accordance with Rule 4 of the Plan shall be permitted until the later of 6 months of the Option Holder ceasing to be employed or 42 months after the Date of Grant. 14. The French Options shall not be ordinarily capable of exercise before the third anniversary of the Date of Grant or such earlier date as may be determined by the Company at any time before the date when the French Option would otherwise first become capable of being exercised. 15. In the case of Options to acquire treasury stock the Company must deliver to the Option Holder on exercise, Shares which have already been acquired not more than 12 months prior to the date on which the French Options first became exercisable. Any Treasury Stock to be used to satisfy the exercise of French Options shall be kept separate and identifiable and shall be held in a defined French Share account (Instruction du 6 mai 1988 4 N 3 88). 31 AP Biotech SCHEDULE 4 TO PART A TO THE AP BIOTECH OPTIONS FOR ALL PLAN 2000 This Schedule 4 contains the terms of Options ("Italian Options") granted under the AP Biotech Options For All Plan 2000 to eligible employees working in Italy - - ("the Italian Plan"). The terms of the Italian Plan are identical to the AP Biotech Options For All Plan 2000 Part A ("the Plan") to which the Italian Plan is appended except as follows: 1. The exercise price of the Italian Options shall not be less than the Normal Value of the Shares at the Date of Grant. Normal Value is defined as the average settlement price on the NASDAQ during the period of the 30 days preceding the Grant Date (article 9, paragraph 4, Italian Tax Code). If the Company has been listed on the NASDAQ stock exchange for less than 30 days prior to grant of Italian Options, then Normal Value will be the average value for the period of the listing. 2. The shares allocated to any participant of the Plan shall not exceed 10% of the share capital or voting rights of the Company. 3. The definition of Eligible Employee in Rule 1.1 of the Plan shall be amended as follows: "Eligible Employee means any person who is a common law employee of the Participating Company and who is based in Italy (but not a Director of the Company) who devotes substantially the whole of his working time to his duties" 32 AP Biotech SCHEDULE 5 TO PART A TO THE AP BIOTECH OPTIONS FOR ALL PLAN 2000 - ("THE DUTCH PLAN") This Schedule 5 contains the terms of Options ("Dutch Options") granted under the AP Biotech Options For All Plan 2000 to Eligible Employees working in the Netherlands - ("the Dutch Plan"). The terms of the Dutch Plan are identical to the AP Biotech Options For All Plan 2000 Part A ("the Plan") to which the Dutch Plan is appended except as follows: 1. The exercise price of Dutch Options shall not be less than the Market Value of the Shares at the Date of Grant. 2. The Option Period in relation to Dutch Options is confirmed as the period commencing on the Date of Grant and expiring at the close of business on the day preceding the 10th anniversary of the Date of Grant and in accordance with Dutch wage and income tax law the employee may elect to defer taxation until the date of exercise provided such election is made before the third anniversary of the Date of Grant. The Eligible Employee shall notify his Participating Company before the third anniversary of the Grant Date if such an election is made. 3. The definition of Eligible Employee in Rule 1.1 of to the Plan shall be amended as follows: "Eligible Employee means any person who is a common law employee of a Participating Company and who is based in the Netherlands (but not a Director of the Company) who devotes substantially the whole of his working time to his duties" 33 AP Biotech SCHEDULE 6 TO PART A TO THE AP BIOTECH OPTIONS FOR ALL PLAN 2000 This Schedule 6 contains the terms of Options ("Austrian Options") granted under the AP Biotech Options For All Plan 2000 to Eligible Employees working in Austria- ("the Austrian Plan"). The terms of the Austrian Plan are identical to the AP Biotech Options For All Plan 2000 Part A ("the Plan") to which the Austrian Plan is appended except as follows: 1. The definition of Eligible Employee in Rule 1.1 of to the Plan shall be amended as follows: "Eligible Employee means any person who is a common law employee of a Participating Company and who is based in Austria (but not a Director of the Company) who devotes substantially the whole of his working time to his duties". 2. In accepting the Grant of Austrian Options, the Option Holder undertakes that Shares acquired on exercise of Austrian Options shall be deposited with an Austrian bank. EX-10.15 7 y42738a1ex10-15.txt APBIOTECH INC US EMPLOYEE STOCK PURCHASE PLAN 1 Exhibit 10.15 APBIOTECH INC US EMPLOYEE STOCK PURCHASE PLAN 2 ARTICLE I Introduction Sec. 1.01 Statement of Purpose. The purpose of the APBiotech Inc US Employee Stock Purchase Plan is to provide eligible employees of certain United States subsidiaries of the Company, who wish to become shareholders, an opportunity to purchase Stock in Company. The Board of Directors of the Company believes that employee participation in stock ownership will be to the mutual benefit of the employees and the Company. Sec. 1.02 Internal Revenue Code Considerations. The Plan is intended to constitute an "employee stock purchase plan" within the meaning of section 423 of the Internal Revenue Code of 1986, as amended. The Plan will be approved by the Company's shareholders within 12 months of the Plan being adopted by the Board of Directors. Sec. 1.03 ERISA Considerations. The Plan is not intended and shall not be construed as constituting an "employee benefit plan," within the meaning of section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. ARTICLE II Definitions Sec. 2.01 "Shares" means shares in the Company's Common Stock, $0.01 par value. Sec. 2.02 "Board of Directors" means the board of directors of the Company or a committee of the board of directors authorized to act on its behalf. Sec. 2.03 "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar nature. References to specific sections of the Code shall be taken to be references to corresponding sections of any successor statute. Sec. 2.04 "Committee" means the committee appointed by the Board of Directors to administer the Plan, as provided in Section 6.03 hereof, or any delegate of that committee. Sec. 2.05 "Company" means APBiotech Inc. Sec. 2.06 "Effective Date" means January 1, 2001. Sec. 2.07 "Election Date" means each January 1 and July 1 or such other dates as the Committee shall specify. Sec. 2.08 "Eligible Employee" means each person employed as an employee of an Employer who (a)(i) has been employed by an Employer for not less than three (3) months and (ii) is customarily employed for more than twenty (20) hours per week, and (b) is not - 1 - 3 deemed for purposes of section 423(b) (3) of the Code to own stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary. Sec. 2.09 "Employer" means each Subsidiary. Sec. 2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended, and as the same may hereafter be amended. Sec. 2.11 "Market Value" means the last price for the Shares as reported on NASDAQ for the date of reference. If there was no such price reported for the date of reference, "Market Value" means the "Market Value" as of the date next preceding the date of reference for which such price was reported. Sec. 2.12 "Participant" means each Eligible Employee who elects to participate in the Plan. Sec. 2.13 "Plan" means the APBiotech Inc US Employee Stock Purchase Plan, as the same is set forth herein and as the same may hereafter be amended. Sec. 2.14 "Purchase Agreement" means the instrument prescribed by the Committee pursuant to which an Eligible Employee may enroll as a Participant and subscribe for the purchase of Shares on the terms and conditions offered by the Company. The Purchase Agreement also is intended to evidence the Company's offer of an option to the Eligible Employee to purchase Shares on the terms and conditions set forth therein and herein. Sec. 2.15 "Purchase Date" means June 30, 2001 and the last business day of each Purchase Period ending thereafter. Sec. 2.16 "Purchase Period" means, beginning January 1, 2001, each six-calendar month period or other period specified by the Committee during which the Participant's stock purchase is funded through payroll deduction accumulations. Sec. 2.17 "Subsidiary" means any present or future corporation (i) which constitutes a "subsidiary corporation" of the Company as that term is defined in section 424 of the Code, and (ii) is designated as a participating entity in the Plan by the Committee. Unless the Committee specifically designates otherwise, a subsidiary not incorporated and resident in the United States shall not be considered a Subsidiary for purposes of the Plan, and employees of such a subsidiary shall not be Eligible Employees. - 2 - 4 ARTICLE III Admission to Participation Sec. 3.01 Initial Participation. Any Eligible Employee may elect to participate in the Plan and may become a Participant by executing and filing with the Committee a Purchase Agreement at such time in advance of any subsequent Election Date as the Committee shall prescribe. An Eligible Employee's initial election to participate in the Plan may be made at any time after he or she first becomes eligible to participate in the Plan and shall be effective as of the next Election Date after the Eligible Employee submits in a timely manner the necessary documentation to the Committee. After an Eligible Employee has first become a Participant in the Plan, subsequent elections to participate in the Plan shall be made pursuant to Section 3.03. A Participants' Purchase Agreement shall remain in effect until modified or canceled in accordance with the further terms of this Plan, as hereinafter set forth. Sec. 3.02 Discontinuance of Participation. A Participant may voluntarily cease his or her participation in the Plan and stop payroll deductions at any time by filing a notice of cessation of participation on such form and at such time in advance of the effective date as the Committee shall prescribe. Notwithstanding anything in the Plan to the contrary, if a Participant ceases to be an Eligible Employee, his or her participation automatically shall cease and no further purchase of shares shall be made for such Participant hereunder. In either case, if a Participant ceases participation in the Plan before the end of the then current Purchase Period, any amounts held for purchase of shares on behalf of the Participant on the next subsequent Purchase Date shall be refunded to the Participant. Sec. 3.03 Readmission to Participation. Any Eligible Employee who has previously been a Participant, who has discontinued participation (whether by cessation of eligibility or otherwise), and who wishes to be reinstated as a Participant may again become a Participant by executing and filing with the Committee a new Purchase Agreement. Reinstatement to Participant status shall be effective as of any Election Date, provided the Participant files such new Purchase Agreement with the Committee at such time in advance of such Election Date as the Committee shall prescribe. - 3 - 5 ARTICLE IV Share Purchase and Resale Sec. 4.01 Reservation of Shares. (a) The maximum number of Shares which shall be issued under the Plan (subject to adjustment in the capitalization of the Company in accordance with Section 5.02 below) shall be 600,000 Shares. (b) Notwithstanding Section 4.01(a) above, the number of Shares that may be purchased under the Plan in any calendar year, shall not exceed the lesser of (i) the annual limit on such Shares, if any, established by the Committee from time to time, or (ii) the number of Shares that would cause the number of Shares in the Company which shall have been or may be issued in pursuance of options or which have been or may issued otherwise than in pursuance of options, under the Plan or under any other employees' share scheme adopted by the Company, to exceed such number as represents 3% of the ordinary share capital of the Company in issue at that time. (c) The limit at Section 4.01(b)(ii) above shall apply from the date of adoption of the Plan by the Company until such date as determined by the Committee, which shall not be before 1 June 2002 at the earliest. (d) Only those Shares which are capable of being issued before 1 June 2002 (or such later date as determined by the Directors pursuant to Section 4.01(c) above) on the exercise of any options or other awards will be relevant for the purposes of calculating the limit in Section 4.01(b)(ii) above, and Shares shall not be regarded as being capable of being issued by reason of any provisions in the relevant employees' share schemes under which such options or awards are granted allowing a person to exercise an option or award in circumstances of leaving employment or a change of control of the Company. Sec. 4.02 Limitation on Shares Available. (a) Subject to the limitations of Section 4.04, the maximum number of Shares that may be purchased for each Participant on a Purchase Date is the lesser of (i) the number of whole and fractional Shares that can be purchased by applying the full balance of the Participant's withheld funds to the purchase of Shares at the Purchase Price, or (ii) the Participant's proportionate part of the maximum number of Shares available under the Plan, as stated in Section 4.01. (b) Notwithstanding the foregoing, if any person entitled to purchase Shares pursuant to any offering under the Plan would be deemed for purposes of section 423(b)(3) of the Code to own stock (including any number of Shares that such person would be entitled to purchase under the Plan) possessing five percent or more of the total combined voting power or value of all classes of stock of the Company, the maximum number of Shares that such person shall be entitled to purchase pursuant to the Plan shall be reduced to that number which, when added to the number of Shares of stock that such person is deemed to own (excluding any number of Shares that such person would be entitled to purchase under the Plan), is one less than - 4 - 6 such five percent. Any amounts withheld from a Participant's compensation that cannot be applied to the purchase of Shares by reason of the foregoing limitation or the limitation set forth in Section 4.02(a)(ii) shall be returned to the Participant as soon as practicable. Sec. 4.03 Purchase Price of Shares. The Purchase Price per Share sold to Participants pursuant to any offering hereunder shall be the lower of (i) 85% of the Market Value per Share on the first day of the Purchase Period or (ii) 85% of the Market Value per Share on the Purchase Date. Notwithstanding the foregoing, the Board of Directors may determine that the Purchase Price for any subsequent Purchase Period shall be the Market Value, or a percentage of the Market Value on either of such dates or the lower of such dates, so long as such percentage shall not be lower than 85% of such Market Value. Sec. 4.04 Exercise of Purchase Privilege. (a) Each Participant shall be granted an option to purchase Shares as of the first day of each Purchase Period at the Purchase Price specified in Section 4.03. The option shall continue in effect through the Purchase Date for the Purchase Period. Subject to the provisions of Sections 3.02 and 4.02 above and Sections 4.04(c) and 4.05 below, on each Purchase Date, the Participant shall be automatically deemed to have exercised his or her option to purchase Shares on the Purchase Date, unless he or she notifies the Committee, in such manner and at such time in advance of the Purchase Date as the Committee shall prescribe, of his or her desire not to make such purchase. (b) There shall be purchased for the Participant on such Purchase Date at the Purchase Price for such Purchase Period the largest number of whole and fractional Shares as can be purchased with the amounts withheld from the Participant's compensation during the Purchase Period. Each such purchase shall be deemed to have occurred on the Purchase Date occurring at the close of the Purchase Period for which the purchase was made. Any amounts withheld from a Participant's compensation during a Purchase Period that are not applied to purchase Shares on the Purchase Date occurring at the close of that Purchase Period shall be retained and applied to purchase Shares on the next subsequent Purchase Date. (c) Notwithstanding the foregoing, a Participant may not purchase Shares having an aggregate Market Value of more than $25,000, determined at the beginning of each Purchase Period, for any calendar year in which one or more such offerings are outstanding at any time, and a Participant may not purchase a Share under any offering after the expiration of the Purchase Period for such offering. Sec. 4.05 Payroll Deductions. Each Participant shall authorize payroll deductions from his or her base pay for the purpose of funding the purchase of Shares pursuant to his or her Purchase Agreement. In the Purchase Agreement, each Participant shall authorize an after-tax payroll deduction from each payment of his base pay during a Purchase Period, of an amount not less than $5 per paycheck and not more than a percentage of such Participant's base pay determined by the Committee and communicated to Eligible Employees before the beginning of that Purchase Period. A Participant may change the deduction to any permissible level effective as of any Election Date. Such change shall be made by the Participant's filing - 5 - 7 with the Committee a notice in such form and at such time in advance of the date on which such change is to be effective as the Committee shall prescribe. Sec. 4.06 Payment for Shares. The Purchase Price for all Shares purchased by a Participant under the Plan shall be paid out of the Participant's authorized payroll deductions. All funds received or held by the Company under the Plan are general assets of the Company, free of any trust or other restriction, and may be used for any corporate purpose. Sec. 4.07 Share Ownership; Issuance of Certificates. (a) The Shares purchased by a Participant on a Purchase Date shall, for all purposes, be deemed to have been issued or transferred at the close of business on such Purchase Date. Prior to that time, none of the rights or privileges of a shareholder of the Company shall inure to the Participant with respect to such Shares. All the Shares purchased under the Plan shall be delivered by the Company in a manner as determined by the Committee. (b) The Committee, in its sole discretion, may determine that the Shares shall be delivered by the Company by (i) issuing and delivering to the Participant a certificate for the number of Shares purchased by such Participant on a Purchase Date or during a calendar year or other period determined by the Committee, (ii) issuing and delivering a certificate or certificates for the number of Shares purchased by all Participants on a Purchase Date or during a calendar year or other period determined by the Committee to a firm which is a member of the National Association of Securities Dealers, as selected by the Committee from time to time, which shares shall be maintained by such firm in separate brokerage accounts of each Participant, or (iii) issuing and delivering a certificate or certificates for the number of Shares purchased by all Participants on a Purchase Date or during the calendar year or other period determined by the Committee to a bank or trust company or affiliate thereof, as selected by the Committee from time to time, which shares may be held by such bank or trust company or affiliate in "street name," but with separate accounts maintained by such entity for each Participant reflecting such Participant's interests in the Shares. Each certificate or account, as the case may be, shall be in the name of the Participant. (c) In addition to any restrictions or limitations on the resale of Shares purchased under the Plan set forth in Section 4.08 hereof or otherwise hereunder, the Committee, in its sole discretion, may impose such restrictions or limitations, as it shall determine, on the resale of Shares, the issuance of individual stock certificates or withdrawal from any shareholder accounts established for a Participant pursuant to the terms hereof. (d) Any dividends payable with respect to whole or fractional Shares credited to a shareholder account of a Participant established pursuant to Section 4.07(b) hereof will be reinvested in Shares and credited to such Participant's account. Such reinvestment shall be made based on the Market Value of the Shares on the date of the reinvestment, with no discount from Market Value. Sec. 4.08 Withdrawal of Shares or Resale of Shares - 6 - 8 (a) A Participant may (i) sell any Shares purchased hereunder by requesting the sale of those Shares at any time in such form and at such time as the Committee shall prescribe, or (ii) withdraw his or her Shares from any shareholder account established pursuant to Section 4.07(b) hereof by requesting the withdrawal of those Shares in such form and at such time as the Committee shall prescribe, but not earlier than the second anniversary of the first day of the Purchase Period for which options to purchase such Shares were granted. (b) If a Participant is to receive a withdrawal of Shares, the withdrawal shall be paid in whole Shares, with fractional Shares paid in cash. ARTICLE V Special Adjustments Sec. 5.01 Shares Unavailable. If, on any Purchase Date, the aggregate funds available for the purchase of Shares would purchase a number of Shares in excess of the number of shares then available for purchase under the Plan, the following events shall occur: (a) The number of Shares that would otherwise be purchased by each Participant shall be proportionately reduced on the Purchase Date in order to eliminate such excess; and (b) The Plan shall automatically terminate immediately after the Purchase Date as of which the supply of available Shares is exhausted. Sec. 5.02 Anti-Dilution Provisions. The aggregate number of Shares reserved for purchase under the Plan, as hereinabove provided, and the calculation of the Purchase Price per Share may be appropriately adjusted to reflect any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of Shares or other capital adjustment, or the payment of a stock dividend, or other increase or decrease in such Shares, if effected without receipt of consideration by the Company. Any such adjustment shall be made by the Committee acting with the consent of, and subject to the approval of, the Board of Directors. Sec. 5.03 Effect of Certain Transactions. Subject to any required action by the shareholders, if the Company shall be the surviving or resulting corporation in any merger or consolidation, any offering hereunder shall pertain to and apply to the Shares of the Company. In the event of a merger or consolidation in which the Company is not the surviving or resulting corporation, the Purchase Date for the Purchase Period during which such transaction shall occur shall be the last business day preceding the closing date for such transaction. In the event of a dissolution or liquidation of the Company, the Plan and any offering hereunder shall terminate upon the effective date of such dissolution, liquidation, merger or consolidation, and the balance of any amounts withheld from the Participant's compensation, which had not by such time been applied to the purchase of Shares shall be returned to the Participant. - 7 - 9 ARTICLE VI Miscellaneous. Sec. 6.01 Non-Alienation. The right to purchase Shares under the Plan is personal to the Participant, is exercisable only by the Participant during the Participant's lifetime except as hereinafter set forth, and may not be assigned or otherwise transferred by the Participant. Notwithstanding the foregoing, there shall be delivered to the executor, administrator or other personal representative of a deceased Participant such Shares and such residual amounts as may remain to the Participant's credit from amounts withheld from the Participant's compensation as of the Purchase Date occurring at the close of the period in which the Participant's death occurs, including Shares purchased as of that date or prior thereto with moneys withheld from the Participant's compensation. Sec. 6.02 Administrative Costs. The Company shall pay all Company related administrative expenses, including stamp duty, associated with the operation of the Plan. Sec. 6.03 The Committee. The Board of Directors shall appoint a Committee, which shall have the authority and power to administer the Plan and to make, adopt, construe, and enforce rules and regulations not inconsistent with the provisions of the Plan. The Committee shall adopt and prescribe the contents of all forms required in connection with the administration of the Plan, including, but not limited to, the Purchase Agreement, payroll withholding authorizations, withdrawal documents, and all other notices required hereunder. The Committee shall have the fullest discretion permissible under law in the discharge of its duties. The Committee's interpretations and decisions in respect of the Plan, the rules and regulations pursuant to which it is operated, and the rights of Participants hereunder shall be final and conclusive. Sec. 6.04 Withholding of Taxes. All acquisitions of Shares under the Plan shall be subject to applicable federal, state and local tax withholding requirements if the Internal Revenue Service or other taxing authority requires such withholding. The Company may require that Participants pay to the Company (or make other arrangements satisfactory to the Company for the payment of) the amount of any federal, state or local taxes that the Company is required to withhold with respect to the purchase of Shares or the sale of Shares acquired under the Plan, or the Company may deduct from the Participants wages or other compensation the amount of any withholding taxes dues with respect to the purchase of Shares or the sale of Shares acquired under the Plan. Sec. 6.05 Amendment of the Plan. The Board of Directors (or its delegate) may amend or terminate the Plan at any time; provided, however, that the Board of Directors (or its delegate) (a) shall not amend the Plan without stockholder approval if such approval is required by section 423 of the Code, and (b) shall not amend provisions relating to eligibility, limits on the purchase or availability of Shares, or other material Participant entitlements, where such amendments would be to the advantage of Participants, without prior stockholder approval - 8 - 10 (provided that this requirement to obtain stockholder approval will not apply to any minor amendment to benefit the administration of the Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control, or regulatory treatment for Participants or the Company or any Subsidiary). Sec. 6.06 Expiration and Termination of the Plan. The Plan shall continue in effect for 10 years from the date the Plan is approved by stockholders, unless terminated prior thereto pursuant to the provisions of the Plan or pursuant to action by the Board of Directors, which shall have the right to terminate the Plan at any time without prior notice to any Participant and without liability to any Participant. Upon the expiration or termination of the Plan, the balance, if any, then standing to the credit of each Participant from amounts withheld from the Participant's compensation which had not, by such time, been applied to the purchase of Shares shall be refunded to the Participant. Sec. 6.07 Repurchase of Shares. The Company shall not be required to purchase or repurchase from any Participant any of the Shares that the Participant acquired under the Plan. Sec. 6.08 Notice. A Purchase Agreement and any notice that a Participant files pursuant to the Plan shall be on the form prescribed by the Committee and shall be effective only when received by the Committee. Delivery of such forms may be made by hand or by certified mail, sent postage prepaid. Forms shall be addressed to Director of Compensation, Amersham Pharmacia Biotech, Inc., 80 Centennial Avenue, P. O. Box 1327, Piscataway, N.J. 08855. Delivery by any other mechanism shall be deemed effective at the option and discretion of the Committee. Sec. 6.09 Government Regulation. The Company's obligation to sell and to deliver the Shares under the Plan is at all times subject to all approvals of any governmental authority required in connection with the authorization, issuance, sale or delivery of such Shares. Sec. 6.10 Headings, Captions, Gender. The headings and captions herein are for convenience of reference only and shall not be considered as part of the text. The masculine shall include the feminine, and vice versa. Sec. 6.11 Severability of Provisions, Prevailing Law. The provisions of the Plan shall be deemed severable. In the event any such provision is determined to be unlawful or unenforceable by a court of competent jurisdiction or by reason of a change in an applicable statute, the Plan shall continue to exist as though such provision had never been included therein (or, in the case of a change in an applicable statute, had been deleted as of the date of such change). The Plan shall be governed by the laws of the State of New Jersey to the extent such laws are not in conflict with, or superseded by, federal law. -9- EX-10.16 8 y42738a1ex10-16.txt APBIOTECH INC. SAVINGS RELATED SHARE OPTION SCHEME 1 EXHIBIT 10.16 RULES OF THE APBIOTECH INC SAVINGS RELATED SHARE OPTION SCHEME New Bridge Street Consultants 20 Little Britain London EC1A 7DH Inland Revenue Reference: SRS 2530/ELW Date adopted: February 16, 2001 Ref: N\1021\ARUNDEL\SRSOS JUN2000 v5 2 CONTENTS PAGE 1. DEFINITIONS.............................................................1 2. OFFERS OF OPTIONS.......................................................4 3. OFFER AND APPLICATION...................................................4 4. GRANT OF OPTIONS........................................................5 5. LIMITATIONS.............................................................6 6. EXERCISE OF OPTIONS.....................................................6 7. RIGHTS OF EXERCISE AND LAPSE OF OPTIONS.................................7 8. EXERCISE OF OPTIONS.....................................................9 9. VARIATIONS.............................................................11 10. ADMINISTRATION.........................................................12 11. GENERAL................................................................12 12. ALTERATIONS TO THIS SCHEME.............................................12 13. GOVERNING LAW..........................................................13 3 1. DEFINITIONS 1.1 In this Scheme, except where inconsistent with the subject or context, words or expressions defined in or bearing a specific meaning for the purposes of Schedule 9 of the Taxes Act (or any statutory modification or re-enactment thereof - the "Statutory Provisions") or a relevant provision thereof shall bear the same meaning; and the words and expressions set out below shall bear the following respective meanings, namely: ACQUIRING COMPANY: Any company which obtains control or becomes bound or entitled to acquire Shares in accordance with Rule 7.7; APPLICATION DATE: In relation to any Offer, the date specified by the Directors as the last day for receipt of applications which shall be no less than 14 days and no more than 21 days; AUDITORS: The auditors for the time being of the Company; COMPANY: APBiotech Inc or in the event of another company gaining control of APBiotech Inc, and only in relation to new rights granted in accordance with Rule 7.7, the acquiring company (but so as not to extend to the term the "Company" included in the definitions of the "Group" or "Subsidiary"); DIRECTORS: The Board of Directors of the Company or a duly authorised committee thereof; EMPLOYEE: An employee (including a director holding a salaried employment or office) of any member of the Group; GROUP: The Company and any Subsidiary for the time being designated by the Directors as a member of the Group for the purposes of this Scheme or, where the context permits, any one or more of them; MARKET VALUE: The market value (within the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of shares of that class, as agreed in advance for the purposes of this Scheme with the Shares Valuation Division of the Inland Revenue; NEW OPTION: An option granted pursuant to Rule 7.7; - 1 - 4 OFFER: A general invitation to Qualifying Employees to apply for an Option; OFFER DATE: The date on which an Offer is made; OLD OPTION: Option released pursuant to Rule 7.8; OPTION: A right to acquire Shares granted to a Qualifying Employee in pursuance of this Scheme and for the time being subsisting; OPTION EXERCISE DATE: The date when an Option is effectively exercised upon compliance with the provisions of Rule 8.1; OPTION HOLDER: A person holding an Option or, where the context requires or permits, his legal personal representatives (but not his trustee in bankruptcy); OPTION PRICE: In relation to any Option: (i) as at the Offer Date, such price per Share as may have been determined by the Directors being an amount not less than whichever shall be the greater of the Market Value minus the lesser of: (a) the discount allowable under the applicable legislation; and (b) 20 per cent, thereof and, if the Shares are to be subscribed, the nominal amount of an Share; and (ii) as at any other date, such price as adjusted pursuant to this Scheme; ORIGINAL SHAREHOLDER: means Nycomed Amersham plc (or a subsidiary of Nycomed Amersham plc) or Pharmacia Corp (or any subsidiary of Pharmacia Corp); QUALIFYING EMPLOYEE: As at such date as the Directors may prescribe (being as near as conveniently practicable to the related Offer Date), any Employee who either: (i) (a) is chargeable to tax in respect of his office or employment under - 2 - 5 Case 1 of Schedule E of the Taxes Act; and (b) has such qualifying period (if any) of continuous employment (being a period commencing not earlier than five years prior to the Date of Grant) as the Directors may determine; or (ii) is nominated by the Directors as a Qualifying Employee. RELATED SAVINGS CONTRACT: In relation to any Option, a Savings Contract in respect whereof a duly signed proposal is delivered to the Company in accordance with Rule 3.2.2; RELEVANT ANNIVERSARY: The date on which any bonus becomes payable under the terms of a Related Savings Contract; RELEVANT EVENT: Any variation in the share capital of the Company arising from any reduction of capital or subdivision or consolidation of capital or issue of shares by way of capitalisation of profits or reserves or by way of rights; REPAYMENT AMOUNT: In relation to any Option Holder, that part of the amount payable to him upon the termination of a Related Savings Contract as is equal to the aggregate amount of all contributions made by him thereunder (and so that there shall be disregarded any contributions whose due date would have fallen more than one month after such termination) and any bonus, maximum bonus or payment of interest received; SAVINGS CONTRACT: A contract under a certified contractual savings scheme approved by the Board of Inland Revenue for the purposes of the Statutory Provisions and within the meaning of S326 of the Taxes Act; SCHEME: This scheme in its present form or as from time to time altered in accordance with the provisions hereof; SHARES: Shares in the Company's common stock, US$ 0.01- par value which satisfy the conditions - 3 - 6 specified in Paragraphs 10 to 14 (inclusive) of Schedule 9 of the Taxes Act; SPECIFIED AGE: Age 65; SUBSIDIARY: Any company which is for the time being under the control of the Company; TAXES ACT: The Income and Corporation Taxes Act 1988. TRUSTEES: The trustee or trustees for the time being of any employee benefit trust established for the benefit of beneficiaries including all or substantially all of the Employees, including a qualifying employee share ownership trust within the meaning of the Finance Act 1989, which has confirmed to the Company that it will comply with the Scheme. 2. OFFERS OF OPTIONS. 2.1 Subject to the restrictions hereinafter contained, the Directors may from time to time make an Offer to all Qualifying Employees. Each Offer may be limited to such maximum number of Shares over which Options may be granted as shall be specified by the Directors. 2.2 An offer shall only be made at such times as may be permitted by applicable securities laws and no offer shall be made until approval of the Scheme by the Board of the Inland Revenue pursuant to Schedule 9 of the Taxes Act. 3. OFFER AND APPLICATION. 3.1 The directors may make an Offer by whatever means (whether by notice, advertisement, circular or otherwise and whether addressed to Qualifying Employees generally or individually) they think fit. Each Offer shall constitute an invitation to each Qualifying Employee to apply on or before the related Application Date for the grant of an Option over such number of Shares as may be appropriate pursuant to the provisions of Rule 4. 3.2 Each application for an Option must: 3.2.1 be made on the prescribed application form in accordance with any related instructions 3.2.2 be accompanied by a duly signed proposal for a Savings Contract which will oblige the Qualifying Employee concerned to make monthly contributions of an aggregate amount of not more than that specified in the related Offer;. 3.2.3 be accompanied by an authority for the contributions to be payable thereunder to be deducted from his remuneration; 3.2.4 specify whether the Repayment Amount is to include the bonus under the Related Savings Contract - 4 - 7 4. GRANT OF OPTIONS. 4.1 As soon as practicable after each Application Date (but not later than 30 days or, in the event of the Company having to scale down applications pursuant to Rule 4.2, 42 days after the first date by reference to which the Market Value was established for the purpose of the related Offer) each Qualifying Employee who has applied for an Option pursuant to the related Offer (provided that he is then an Employee and that his application has not been withdrawn) shall be granted a non-transferable Option at the applicable Option Price and for the applicable duration over the least of: 4.1.1 the number of Shares which are the subject of such application; 4.1.2 any lesser number in respect of which such application is accepted in order to ensure, following any scaling down under Rule 4.2, that the total number of Shares over which options are granted pursuant to the related Offer does not exceed any number specified in that Offer; 4.1.3 the number of Shares over which an Option may be granted under Rule 5. 4.2 If following any Offer, the Company receives valid applications which would result in the total number of Shares over which Options are granted pursuant to that Offer exceeding any maximum number specified in that Offer pursuant to Rule 2.1 or any maximum specified in Rule 5.4, the Directors shall scale down applications by taking at their absolute discretion - any one or more of the following methods steps until the number of Shares available equals or exceeds the number of Shares applied for: 4.2.1 by selecting applications by lot, each based on the proposed monthly amounts specified in the agreed invitations reduced pro rata to the excess over (pound)10; or 4.2.2 by treating each election for a bonus as an election for no bonus; or 4.2.3 by reducing the proposed monthly amounts specified in the invitation pro rata to the excess over(pound)10 to the extent necessary. If the number of Shares available is insufficient to enable an Option based on monthly contributions of the minimum monthly amount specified in the Offer to be granted to each Qualifying Employee making a valid application, the Directors may, as an alternative to the above, determine in their absolute discretion that no Options shall be granted. If the Directors so determine, the provisions in Rule 4.2.1, 4.2.2 and 4.2.3 may be modified or applied in any manner as may be agreed in advance with the Inland Revenue. 4.3 No payment shall be required for the grant of any Option. Each Option shall be granted by means of a certificate under the autographic or facsimile signatures of a Director and the Secretary or executed in such other manner as appropriate or as may be required from time to time by legislation or by the Directors. - 5 - 8 5. LIMITATIONS 5.1 No Option shall be granted to any Qualifying Employee pursuant to any Offer if the monthly amount agreed to be saved in respect of that Option under the Related Savings Contract: 5.1.1 would be less than the minimum amount specified in the Offer; and 5.1.2 would exceed the maximum monthly contribution as may be permitted pursuant to paragraph 24 of Schedule 9 to the Taxes Act (or such lower monthly maximum contribution as may be determined from time to time by the Directors) when taken together with any monthly contributions he makes under any other Savings Contract related to options. 5.2 No person shall be eligible to receive or exercise an Option at any time when he has (or had within the preceding 12 months) a material interest within the meaning of Section 187(3)(a) of the Taxes Act in (if it is at that time a close company) the Company or in a close company which has control of the Company or is a member of a consortium which owns the Company. 5.3 No Option shall be granted more than 10 years after the date of adoption of the Scheme. 5.4 5.4.1 Subject to Rules 5.4.2 and 5.4.3 below, no Options shall be granted under the Scheme which would, at the time they are granted, cause the number of Shares which may be issued in pursuance of Options granted under the Scheme, or in pursuance of options or other awards made under any other employees' share scheme of the Company, to exceed such number as represents 3% of the ordinary share capital of the Company from time to time. 5.4.2 The limit at Rule 5.4.1 above shall apply from the date of adoption of the Scheme by the Company until such date as determined by the Directors, which shall not be before 1 June 2002 at the earliest. 5.4.3 Only those Shares which are capable of being issued before 1 June 2002 (or such later date as determined by the Directors pursuant to Rule 5.4.2 above) on the exercise of any options or other awards will be relevant for the purposes of calculating the limit in rule 5.4.1 above, and Shares shall not be regarded as being capable of being issued by reason of any provisions in the relevant employees' share schemes under which such options or awards are granted allowing a person to exercise an option or award in circumstances of leaving employment or a change of control of the Company. 6. EXERCISE OF OPTIONS 6.1 Save as hereinafter provided, an Option may be exercised only during the period of six months commencing on the Relevant Anniversary of the Related Savings Contract; and (notwithstanding any other provision of this Scheme); 6.1.1 it may only be exercised after such period pursuant to Rule 7.1; and 6.1.2 it may only (save as provided in Rules 7.1, 7.3, 7.4 and 7.8) be exercised by a person who is an Employee at the date of exercise. - 6 - 9 6.2 Save as provided in Rule 7, in the event of an Option Holder ceasing to be an Employee all his Options shall thereupon cease and determine; provided that, for the purposes of this provision and of Rules 7.3, 7.4 and 7.8 no person shall be treated as ceasing to be an Employee until he ceases to be an employee or a director holding a salaried employment or office of the Company or of any company which is controlled by, or is an associated company of, the Company. 6.3 If, before the earliest time when, in accordance with the provisions of the Scheme, an Option Holder may exercise an Option he gives (or is deemed to have given) notice that he intends to stop paying contributions under a Related Savings Contract, such Option shall thereupon cease and determine. 6.4 If an Option Holder is adjudicated bankrupt, any Options held by him shall automatically cease and determine. 7. RIGHTS OF EXERCISE AND LAPSE OF OPTIONS. 7.1 If an Option Holder dies whilst any Option remains in whole or in part available for future exercise by him, such Option may be exercised in whole or in part at any time during the period of 12 months from the earlier of 7.1.1 the date of his death; and. 7.1.2 the Relevant Anniversary of the Related Savings Contract To the extent that any Option so exercisable is not exercised within such period, it shall thereupon cease and determine. 7.2 If an Option Holder remains an Employee after he has reached the Specified Age, he may exercise an Option in whole or in part within six months after attaining such age. 7.3 If an Option Holder ceases to be an Employee by reason of: 7.3.1 injury or disability (evidenced to the satisfaction of the Directors); or 7.3.2 redundancy; or. 7.3.3 retirement on reaching the Specified Age or any other age at which he is bound to retire in accordance with the terms of his contract of employment; or 7.3.4 his employing company ceasing to be under the Control of the Company or the business or part of a business in which he is employed being transferred to a person who is neither an Associated Company nor a company of which the Company has Control; he may exercise any Option in whole or in part within six months thereafter. To the extent that any Option so exercisable is not exercised within such period, it shall thereupon cease and determine. 7.4 If, after the third anniversary of the grant of an Option, an Option Holder ceases to be an Employee by reason of circumstances other than those specified in Rule 7.3 he may within six months of so ceasing exercise any Option in whole or in part. To the extent - 7 - 10 that any Option so exercisable is not exercised within such period, it shall thereupon cease and determine. 7.5 7.5.1 If, in consequence of any offer made to the holders of Shares, the Directors become aware that the right to cast more than 50 per cent of the votes which may ordinarily be cast on a poll at a general meeting of the Company has or will become vested in the offeror and/or any company controlled by the offeror and/or any person associated with or acting in concert with the offeror, the Directors shall, within 30 days of becoming so aware, notify every Option Holder accordingly. 7.5.2 An Option Holder shall be entitled at any time during the Change of Control Period to exercise all his Options (whether or not otherwise exercisable) in whole or in part. The Options shall not lapse on the expiry of the Change of Control Period but all Options not exercisable immediately prior to the beginning of the Change of Control Period shall cease to be exercisable on the expiry of the Change of Control Period. 7.5.3 For the purposes of this Rule 7.5, "Change of Control Period" means the period commencing on the date of the giving of the Directors' notification under this Rule 7.5 and ending three months after that. 7.5.4 Unless the Directors decide otherwise, the provisions of this Rule 7.5 shall not apply if an Original Shareholder shall become entitled to cast more than 50% of the votes which may ordinarily be cast on a poll at a general meeting of the Company. 7.6 In the event of the proposed dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Option Committee; provided, however, that if the rights of a Option Holder (or his personal representatives if appropriate) have not otherwise terminated and expired, the Option Holder (or his personal representatives if appropriate) will have the right immediately prior to such dissolution or liquidation to exercise any Option to the extent that the Option is exercisable as of the date immediately prior to such dissolution or liquidation, and the Option Committee may, in the exercise of its sole discretion in such instances, accelerate the date on which any Option becomes exercisable or fully vests and/or declare that any Option shall terminate as of a specified date. 7.7 If any company (the "Acquiring Company"):. 7.7.1 obtains control of the Company as a result of making: (a) a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the Acquiring Company will have control of the Company; or (b) a general offer to acquire all the shares in the Company which are the same class as the ordinary shares which may be acquired by the exercise of Options; in either case ignoring any shares which are already owned by it or a member of the same group of companies; or - 8 - 11 7.7.2 obtains control of the Company in pursuance of a compromise or arrangement sanctioned by the Court under Section 425 of the Companies Act 1985; or 7.7.3 becomes bound or entitled to acquire Ordinary Shares under Sections 428 to 430F of the Companies Act 1985 any Option Holder may at any time within the appropriate period as defined in paragraph 15(2) of Schedule 9 to the Taxes Act, by agreement with the Acquiring Company, release his rights under the Scheme in consideration of the grant to him of rights which are equivalent but relate to shares in a different company (whether the Acquiring Company itself or some other company falling within paragraph (b) or (c) of paragraph 10, Schedule 9 of the Taxes Act). New rights will not be equivalent to old rights unless the conditions set out in paragraph 15(3) of Schedule 9 to the Taxes Act are satisfied but so that the provisions of the Scheme shall for this purpose be construed as if:- (a) the New Option were an option granted under the Scheme at the same time as the Old Option; and (b) except for the purposes of the definitions of the Group and Subsidiary in Rule 1, the reference to AP Biotech Inc in the definition of the Company in Rule 1 were a reference to the different company mentioned in this Rule 7.8 7.8 If an Option Holder ceases or has ceased to be an Employee, but at the date of the Relevant Anniversary of the Related Savings Contract is an employee or executive director of any company which is under the control or is an associated company of the Company, he may exercise his Option within 6 months of that date. 7.9 In the event of any conflict between any of the provisions of this Rule 7, the provision which results in the earliest lapsing of the Option in question shall prevail. 8. EXERCISE OF OPTIONS. 8.1 To exercise an Option in whole or in part, an Option Holder must deliver to the Secretary of the Company a notice in writing specifying the related Repayment Amount and the number of Shares over which the Option is exercised and accompanied by either (a) evidence of the termination of the Related Savings Contract and by payment in full of the aggregate Option Price; or (b) an authority for the Company to terminate the Related Savings Contract on the Option Holder's behalf and receive the Option Price from the proceeds of that contract. The date of such delivery shall constitute the date of such exercise. 8.2 No Option shall be capable of exercise to the extent that the aggregate Option Price on such exercise exceeds the related Repayment Amount less so much thereof as has already been taken into account upon the exercise (in whole or in part) of any Option. 8.3 No Option shall be capable of exercise in part (other than as to the full extent then exercisable) as to an aggregate Option Price of less than(pound)100. 8.4 Subject to Rule 8.5 below, Shares to be issued pursuant to the exercise of an Option shall be allotted within 30 days of the Option Exercise Date and the Directors shall procure - 9 - 12 that Shares to be transferred pursuant to the exercise of an Option shall be transferred within 30 days following the Option Exercise Date. 8.5 8.5.1 All allotments, issues and transfers of Shares will be subject to such consents (if any) of H M Treasury or other authorities as may for the time being be necessary and it shall be the responsibility of the Option Holder to comply with any requirements to be fulfilled in order to obtain or obviate the necessity for any such consent. 8.5.2 In a case where any company which is a Member of the Group is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person exercising an option is liable by virtue of the exercise of the option and/or for any social security contributions recoverable from the person in question (together, the "Tax Liability"), no Shares shall be issued or allotted following the exercise of the Option unless that person has either: (a) made a payment to the Group Company of an amount equal to the Tax Liability; or (b) entered into arrangements acceptable to that or another Group Company to secure that such a payment is made (whether by authorising the sale or some or all of the shares on his behalf and the payment to the Group Company of the relevant amount out of the proceeds of sale or otherwise). 8.6 If, under the terms of a resolution passed or an announcement made by the Company prior to the Option Exercise Date, a dividend is to be or is proposed to be paid to holders of Shares on the register on a date prior to such Option Exercise Date, the Shares to be issued upon such exercise will not rank for such dividend. Subject as aforesaid the Shares so to be issued shall be identical and rank pari passu in all respects with the fully paid Shares in issue on the Option Exercise Date. 8.7 Where Shares are to be transferred to an Option Holder, he shall be entitled to any rights attaching to Shares by reference to a record date on or after the date of the Option Exercise Date. 8.8 Subject to Rule 8.9, where an Option is to be satisfied by the transfer of Shares by the Trustees any monies received by the Company shall be as agent for the Trustees PROVIDED THAT if at any time of exercise: 8.8.1 an offer (which has not lapsed or been withdrawn) has been made (and the offer is recommended, or if not recommended, the Option is exercised not earlier than seven days before the first closing date of the offer) to acquire the whole or part of the share capital of the Company (with or without exceptions for persons connected with or acting in concert with the offeror or for shares held by such persons) such that if the offer is completed the person making the offer will obtain control of the Company, whether or not such offer has become or has been declared unconditional; or - 10 - 13 8.8.2 an application has been made (and the application has not been withdrawn or rejected by the Court) to the Court under Section 425 of the Companies Act 1985 to sanction a compromise or arrangement proposed for the purpose of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies; then such payments shall be made to the Company as principal. 8.9 Notwithstanding the provisions of Rule 8.8 above on the exercise of any Option the exercise of which is to be satisfied by the transfer of Shares from an employee benefit trust established by the Company or any company within the same group of companies as the Company (other than a trust qualifying as a qualifying employee share ownership trust for the purposes of the Finance Act 1989), the monies paid for Shares on exercise should be payable to such companies, individual or individuals as the Board may from time to time direct. 9. VARIATIONS 9.1 Upon the occurrence of a Relevant Event:. 9.1.1 the number or nominal amount of Shares comprised in each Option; and/or. 9.1.2 the Option Price; may be adjusted in such manner as the Directors may deem appropriate subject to the prior approval of the Inland Revenue and to the written concurrence of the Auditors that in their opinion the adjustments proposed are fair and reasonable. Adjustments may take effect from the date of the Relevant Event. No increase shall be made in the aggregate Option Price in relation to any Option. 9.2 This Rule 9.2 applies where an adjustment under Rule 9.1 above would have the effect of reducing the Option Price to less than the nominal value of a Share. Where an Option subsists over both issued and unissued Shares the adjustment may only be made if the reduction of the Option Price of Options over issued and unissued Shares can be made to the same extent. Any adjustment reducing the option price of unissued shares to less than nominal value shall only be made if and to the extent that the Board shall be authorised to capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the Ordinary Shares in respect of which the Option is exercisable exceeds the adjusted Option Price. The Board may apply such sum in paying up such amount on such Ordinary Shares so that on exercise of any Option in respect of which such a reduction shall have been made the Board shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid. 9.3 Options may be adjusted, following variations in the share capital of the Company, other than those specified in Rule 9.1 but only with the prior approval by Ordinary resolution of the members of the Company in general meeting. Any such adjustments shall be made in accordance with Rules 9.1 and 9.2 inclusive. 9.4 Notice of any adjustment made pursuant to this Rule shall be given to all Option Holders. - 11 - 14 10. ADMINISTRATION 10.1 Any notice or other document which the Company is required or may desire to give to any Option Holder pursuant to this Scheme shall be sufficiently given if delivered to him (if he is still an Employee) at his place of work or sent through the post in a pre-paid cover addressed to the Option Holder at his address last known to the Company and if so sent shall be deemed to have been duly given on the date of posting. Any document so sent to an Option Holder shall be deemed to have been duly delivered notwithstanding that he be then deceased (and whether or not the Company has notice of his death) except where his legal personal representatives have established their title to the satisfaction of the Company and supplied to the Company an address to which documents are to be sent. 10.2 Option Holders not otherwise entitled thereto shall be sent copies of all notices and (so far as appropriate) other documents sent by the Company to its shareholders generally. 10.3 The Directors shall have power from time to time to make or vary regulations for the administration and operation of this Scheme provided that such regulations are not inconsistent with the provisions of this Scheme. 11. GENERAL 11.1 The Directors shall at all times keep available for issue such authorised and unissued Shares as may be required to meet all Options under which Shares may be subscribed or to procure that sufficient Shares are available for transfer to satisfy all Options under which Shares may be acquired. 11.2 The decision of the Directors in any dispute or question affecting any Option Holder shall be final and conclusive subject to the concurrence of the Auditors whenever required under the provisions of this Scheme. 11.3 The Company in General Meeting or the Directors may at any time resolve to terminate this Scheme in which event no further Options shall be granted but the provisions of this Scheme shall in relation to Options then subsisting continue in full force and effect. 11.4 The rights and obligations of any individual under the terms of his office or employment with the Company or any member of the Group shall not be affected by his participation in the Scheme or any right which he may have to participate therein, and an individual who participates therein thereby waives all and any rights to compensation or damages in consequence of the termination of his office or employment with any such company for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under or be entitled to exercise any Option under the Scheme as a result of such termination or from the loss or diminution in value of such rights or entitlements. 12. ALTERATIONS TO THIS SCHEME 12.1 This Scheme may be altered by the Directors from time to time in any manner subject to the following provisions: 12.1.1 if the approved status of the Scheme is to be maintained no amendment or alteration made to the Scheme after it has become an Approved Scheme shall have effect unless and until such amendment has been approved by the Board of the Inland Revenue; and - 12 - 15 12.1.2 no alteration shall be effective to abrogate or alter adversely any of the subsisting rights of Option Holders except with the consent or sanction of the Option Holders. 13. GOVERNING LAW The Scheme and all Options shall be governed by and construed in accordance with English law. - 13 - EX-10.18 9 y42738a1ex10-18.txt EMPLOYMENT AGREEMENT RE SANDRA CARTIE 1 Exhibit 10.18 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") made as of the 17th day of October 2000, by and between APBiotech Inc., a Delaware corporation with its principal place of business at 800 Centennial Avenue, Piscataway, New Jersey 08855 (the "Employer"), and Sandra Cartie, an individual residing at 11 Thomas Road, Westport, Connecticut 06880 (the "EXECUTIVE"). WITNESSETH: WHEREAS, the Employer desires to employ the Executive, and the Executive desires to be employed by the Employer, upon the terms and conditions set forth in the Agreement. NOW, THEREFORE, in consideration of the above premises and the mutual promises contained herein, the Employer and the Executive agree as follows: 1. Appointment The Employer hereby employs the Executive to serve as Chief Financial Officer of the Employer, and the Executive hereby accepts such employment, upon the terms and conditions set forth in this Agreement. The Executive will report to the Chief Executive Officer of the Employer (the "CEO") and will be subject to the direction of the Board of Directors of the Employer (the "BOARD"). 2. Duties of the Executive The Executive shall, while this Agreement is in effect: (a) have the authority and responsibilities of a chief financial officer to manage the financial operations of the Employer, consistent with the terms and conditions hereof. The Employer will provide the Executive with a staff, office facilities and other support reasonably necessary for the Executive to perform her responsibilities under this Agreement; (b) devote the whole of her time, attention and abilities during normal business hours, and at such other times as the Employer or her duties may require, to the business and affairs of the Employer; (c) faithfully and diligently perform such duties and exercise such powers as may from time to time be assigned to or vested in her; (d) obey all reasonable and lawful directions given to her by the Board, the CEO and by any person having executive authority over her, consistent with her professional duties as a chief financial officer; 2 (e) provide to the Board and the CEO such information as in her possession concerning the financial affairs of the Employer; (f) use her best endeavours to manage investor relations and promote the interests and reputation of the Employer; and (g) act as director of the Board, in accordance with the By-Laws of the Employer, if so elected or appointed by the shareholders or Board of the Employer. Subject to the vote of the shareholders or Board of the Employer, and to the provisions of the By-Laws of the Employer, it is contemplated by the Executive that she will be elected or appointed as a director of the Board. 3. Location The Executive's normal place of work is the Employer's principal place of business in Piscataway, New Jersey, or such other location as the Employer may from time to time require the Executive to base herself. 4. General Obligations The Executive agrees that, during her employment with the Employer, she will not (without the prior written consent of the Board) be directly or indirectly engaged or financially interested in any other business activity, trade or occupation. However, this provision shall not preclude the Executive from investing her assets in a public company for which she will not be performing any services and which will not result in a conflict of interest, other than a Prohibited Company (as defined in Section 13). The preceding notwithstanding, the Executive shall be: (a) permitted to exercise her vested stock options of her prior employer no later than November 30, 2000; and (b) required to sell her stock of her prior employer no later than May 31, 2002. Nothing herein shall prohibit the Executive from owning mutual funds. 5. Salary A base salary of three hundred thousand dollars ($300,000) per annum, less applicable withholdings, will be paid in accordance with the Employer's standard payroll practices. The salary will be reviewed in line with performance, and as part of the general review, on or about January 1 of each year. The Employer agrees to utilize criteria in granting salary increases that are comparable to the criteria utilized in granting salary increases to other senior corporate executives of the Company. The first review will take place on January 1, 2002. 6. Car The Executive will be eligible to utilize a 2 door or 4 door leased Employer car, suitable for business requirements in accordance with Employer policies, having a pre-sales tax purchase price of up to sixty thousand dollars ($60,000). The Executive may elect to utilize an Employer car having a pre-sales tax purchase price in excess of sixty thousand dollars ($60,000), in which case she will be responsible for any lease payments in excess of the lease payments due on an Employer car having a pre-sales tax purchase price of sixty thousand dollars ($60,000). The Executive shall have an option to purchase the car at fair market value at the expiration of -2- 3 the lease, to the extent permitted by the lease. In addition, the Employer will reimburse the Executive for fuel, maintenance, insurance and other car-related expenses in accordance with Employer policies. 7. Paid Time Off The Executive shall participate in the Employer's PTO program, with an initial annualized eligibility of twenty (20) days. 8. Benefits (a) The Executive shall be eligible to participate in the Employer's pension, 401(k), 423(a) Stock Purchase Plan, medical and life insurance plans and employee relocation plan in accordance with the Employer's policies. (b) In lieu of a reimbursement for travel and accommodations for the purpose of house hunting, and in lieu of a payment of three thousand seven hundred and fifty dollars ($3,750) for miscellaneous expenses, the Executive will be paid the sum of ten thousand dollars ($10,000) upon commencement of her employment. 9. Stock Option Plan (a) The Board (or the Option Committee) may, at its sole discretion and from time to time, grant stock options to the Executive in accordance with the Employer's policies, which currently provide for the award of stock options on an annual basis (the "PERIODIC OPTIONS"). Subject to the sole discretion of the Board (or the Option Committee) and to satisfactory reviews of the Executive's performance, the Employer anticipates recommending that the Board (or the Option Committee) grant Periodic Options to the Executive based upon criteria similar to those used by the Employer in recommending the grant of Periodic Options to the other senior corporate executives of the Employer. It is anticipated that the Employer shall make any such recommendations when recommending the grant of Periodic Options to the other senior corporate executives of the Employer. The Executive will be eligible for an award of Periodic Options beginning in calendar year 2001. In the event that the Executive is granted IPO Options (as hereinafter defined), the Executive shall not also be eligible for Periodic Options during the same year in which the IPO Options are granted. (b) During the year in which the Employer completes an initial public offering while this Agreement is in effect, the Employer will recommend to the Board (or the Option Committee) that the Executive be granted an option to purchase up to a number of shares equal to two million four hundred thousand dollars ($2,400,000) divided by the per share offering price in the initial public offering (the "IPO OPTIONS"), minus the number of Periodic Options, if any, granted to the Executive during the same calendar year. (c) On termination of the Executive's employment, whether lawfully, unlawfully or in breach of contract, the Executive shall lose certain rights or benefits (including rights or benefits which the Executive would not have lost had her employment not been terminated) as set forth in the Employer's executive stock option plan in effect as of the date of termination (the "PLAN"). The preceding notwithstanding, if the Executive's employment: (i) is terminated as a - 3 - 4 result of a change of control (as defined in the Plan) of the Employer, a permanent closure of the facility where the Executive is employed, or the death or disability (as defined in the Plan) of the Executive, then all of the unexpired options granted to the Executive shall fully vest; or (ii) is terminated without cause, or as a result of a redundancy or lay-off, then all of the unexpired options granted to the Executive shall fully vest only if so determined by the Board in its sole discretion. Any such vested options shall expire if not exercised within three (3) months of the Executive's termination (or of the Board determination contemplated under Section 9(c)(ii)). The Executive shall not be entitled, by way of compensation or otherwise, to be compensated for the loss of any rights or benefits under any Employer stock option plan. (d) The Executive will be required to comply with the Employer's stock ownership guideline policy, as amended from time to time. 10. Bonus (a) The Board may, at its sole discretion and from time to time, grant a performance bonus (in cash and/or as a grant of the Employer's deferred stock) to the Executive in accordance with Employer policies. The Executive's position falls within the scope of an Employer policy which currently offers potential for a maximum payout of one hundred percent (100%) of her base annual salary based upon business and personal performance. The Employer agrees to utilize criteria in granting performance bonuses that are comparable to the criteria utilized in granting performance bonuses to other senior corporate executives of the Company. The Executive will be eligible for a performance bonus beginning in calendar year 2001. (b) In addition to the bonus contemplated in Section 10(a), in the event that the Employer completes an initial public offering during calendar year 2000 or 2001, the Executive will receive a bonus for such calendar year equal to one hundred percent (100%) of her base annual salary. (c) In the event that; (i) the Executive has been granted a performance bonus in the form of deferred stock; and (ii) the Executive's employment is (A) terminated as a result of a change of control of the Employer, a permanent closure of the facility where the Executive is employed, or the death or disability of the Executive, then all of the deferred stock granted to the Executive shall be delivered to the Executive in accordance with the Employer's policies; or (B) is terminated without cause, or as a result of a redundancy or lay-off, then all of the deferred stock granted to the Executive shall be delivered to the Executive only if so determined by the Board in its sole discretion and in accordance with the Employer's policies. (d) Upon the commencement of her employment, the Executive will receive a signing bonus in the amount of nineteen thousand dollars ($19,000). The signing bonus shall be reduced pro-rata for every day between October 23, 2000 and December 1, 2000 in which the Executive delays commencement of her employment with the Employer. 11. Confidentiality The Executive agrees that she shall not use, divulge or communicate to any person, firm or organization (other than in the course of properly performing her duties or with the consent of the Board or as required by law) any of the trade secrets or other confidential, -4- 5 technical or business information of the Employer, including without limitation any information relating to the organization, transactions, accounts, finances or affairs of the Employer, the names of customers and suppliers, results of research, scientific studies or analyses, detail of training, manufacturing or accounting methods, marketing analyses, new products, sales promotions, reports, papers, data and other information, in whatever form, prepared for the Employer or acquired by the Employer (the "CONFIDENTIAL INFORMATION") which she received or obtained while in the service of the Employer. This restriction shall continue to apply after the termination of her employment under this Agreement (howsoever occasioned) without limit in point of time but shall cease to apply to information which has come into the public domain otherwise than through unauthorized disclosure by the Executive. The Executive shall also use her best endeavors to prevent the unauthorized use, publication or disclosure of Confidential Information. 12. Intellectual Property Rights 12.1 If the Executive (whether alone or with others) shall at any time during the period of this Agreement make or reduce to practice an invention, create an original work of authorship, develop a mark or name, or otherwise create any trade secret or other intellectual property relating to or capable of being used in the business of the Employer (the "INTELLECTUAL PROPERTY"), she shall promptly disclose to the Employer full details thereof. 12.2 Any Intellectual Property contemplated by Section 12.1 shall be the property of the Employer. The Executive shall, at the request and expense of the Employer, do all things necessary to vest all right, title and interest in any such Intellectual Property in the Employer, or its nominee, absolutely as legal and beneficial owner and to secure and preserve full patent, copyright, trademark or other appropriate forms of protection therefor in any part of the world. 13. Covenant Not to Compete 13.1 Definitions: (a) COMPANY means the Employer and its affiliates and subsidiaries. (b) PROHIBITED BUSINESS means all or any of the research, manufacture or supply of life science products and services for the purpose of DNA: sequencing, drug development, chromatography, and utilization of electrophoresis systems for DNA synthesis. (c) PROHIBITED COMPANY means companies engaged in or about to be engaged in Prohibited Business. The attached Exhibit A gives current examples. (d) RESTRICTED PERIOD means the period of twelve (12) months commencing from the Termination Date. (e) TERMINATION DATE means the date on which the Executive's employment under this Agreement shall terminate irrespective of the cause or manner. -5- 6 (f) TERRITORY means the United States of America, Canada, the European Union, Norway, Switzerland, Australia, Japan and Russia. 13.2 Since the Executive will obtain, in the course of her employment with the Employer, Confidential Information, and since she is likely to obtain, during the course of her employment with the Employer, personal knowledge of and influence over numerous employees and customers of the Employer, the Executive hereby agrees that she will not, directly or indirectly, during the Restricted Period and within the Territory: (a) Be employed by, or provide consulting services to: (i) a Prohibited Company; or (ii) any business that is otherwise in competition with the Employer, provided that this restriction shall not extend to any employment the performance of which could not involve the Executive in competition with the Employer; (b) Entice away or solicit any person who is employed or engaged by the Company; either: (i) as a director or a managerial, executive or senior technical capacity; or (ii) who is in possession of Confidential Information belonging to the Employer; and (c) Entice away or solicit any customer of the Company with whom the Executive has had business dealings or personal contact during her employment with the Employer. 13.3 If the Executive shall breach, or threaten to commit a breach of any of the covenants set forth in Sections 12 or 13 (the "RESTRICTIVE COVENANTS"), the Employer shall have the right, in addition to, and not in lieu of, any other rights and remedies available to the Employer under law or in equity, to have the Restrictive Covenants specifically enforced by any court, including, without limitation, the right to seek entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of the Restrictive Covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Employer and that money damages will not provide an adequate remedy to the Employer. 13.4 If any court determines that any of the Restrictive Covenants contained in this Agreement, or any part thereof, are unenforceable because of the duration or scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced. 14. Term of Agreement 14.1 The parties anticipate that this Agreement shall take effect on October 23, 2000 and, in any event, it shall take effect no later than on December 1, 2000. This Agreement shall continue unless terminated by mutual written agreement of the parties or by: (a) the Executive's resignation of employment upon sixty (60) days prior written notice of the Employer; (b) the Executive's death or the Executive's disability which extends beyond six (6) consecutive months; - 6 - 7 (c) termination of the Executive's employment by Employer for Cause (as defined in Section 14.6 below) upon written notice to the Executive; or (d) termination of the Executive's employment by Employer without cause upon written notice to the Executive. 14.2 In the event of termination of this Agreement for any reason, the Executive will be entitled to her base salary and benefits, including payment for PTO time, accrued through the effective date of termination, and to reimbursement of expenses reasonably and necessarily incurred in connection with her employment prior to the effective date of termination. The Executive shall not be entitled to any bonus payment unless she has remained employed by the Employer for the entire year in which the bonus applies, without prejudice to any rights set forth in Section 10. 14.3 In the event of termination of this Agreement in accordance with Section 14.1(d), and except as contemplated by Section 14.4, the Executive will, in addition to the amounts contemplated by Sections 14.2, be entitled to the Executive's base salary for a period of twelve (12) months from the effective date of termination. 14.4 If the Executive breaches the Restrictive Covenants set forth in Sections 12 or 13, the Executive shall not be entitled to the severance payments contemplated by Section 14.3. 14.5 All payments and benefits paid under this Section 14 shall be subject to applicable withholdings and shall be paid or provided in accordance with the Employer's standard payroll practices and policies. 14.6 For purposes of this Agreement, the term "CAUSE" for termination shall mean the following: (a) any material breach of this Agreement by the Executive, any intentional violation of the reasonable directions of the Board or of the Executive's superiors, or any act of negligence with respect to the Executive's duties, which the Executive fails to cure within fifteen (15) days of written notice thereof from the Employer; (b) any intentional material misrepresentation or any intentional material misconduct; (c) conviction of the Executive for theft, embezzlement or any other felony or for any misdemeanor relating to fraud, dishonesty, embezzlement or other misappropriation of property; or (d) the willful engaging by the Executive in illegal or grossly negligent conduct. 15. Effect of Termination (a) Upon the termination of her employment under this Agreement howsoever occasioned, the Executive shall forthwith: - 7 - 8 (i) deliver to the Employer or its authorized representative: (A) all Confidential Information an all papers, records, documents or other materials or whatsoever nature (including correspondence, lists, notes, memoranda, plans, reports, drawings, tables, tapes, films, photographs and charts) which may be in her possession or control and relate in any way to the business, organization, transactions, accounts, finances or affairs of the Employer, and no copies shall be retained by her other than a copy of this Employment Agreement and any other documents relating to the benefits received; (B) all other property of the Employer (including any car made available to the Executive which shall be returned in good condition (ordinary wear and tear excepted)) in the possession or under the control of the Executive; and (C) a certificate confirming that she has done the foregoing; and (ii) resign from office as a director and officer of the Employer. (b) The Employer shall be entitled to deduct from any monies due to the Executive any sums due from the Executive to the Employer. (c) The following provisions of this Agreement shall survive termination: 11, 12, 13, 14.2, 14.3, 14.4, 14.5, 15 and 16. 16. Miscellaneous 16.1 This Agreement supersedes all previous agreements between the Executive and the Employer, in relation to the matters addressed herein. Except for the Employer's employee-related policies and plans (as they may be issued or modified from time to time and to the extent that such issuances or modifications do not contradict the terms hereof), this Agreement represents the entire understanding between the parties hereto with respect to the subject matter hereof. The Executive acknowledges and agrees that she has not entered into this Agreement in reliance upon any representation, warranty or undertaking which is not set out or referred to in this Agreement. 16.2 The invalidity or unenforceability of any provisions of this Agreement shall not affect the other provisions, and the Agreement shall be constructed in all respects as if such invalid or unenforceable provisions were omitted. 16.3 Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if delivered at the addresses first above stated by: (a) personal delivery; (b) registered or certified mail, return receipt requested; or (c) Federal Express or other similar nationally known overnight delivery service. 16.4 The rights and obligations of the Executive under this Agreement shall inure to the benefit, and shall be binding upon, the successors and assigns of the Employer, including any successors by merger, purchase or otherwise. The Agreement may not be assigned by the Executive. Any attempted assignment in breach of this provision shall be null and void. - 8 - 9 16.5 This Agreement shall be governed by the laws of the State of New Jersey, except for its conflicts of law rules. 16.6 This Agreement cannot be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharged is sought. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any such other right, power or privilege. 16.7 The headings herein are for reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement. 16.8 Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled exclusively by arbitration in New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. APBIOTECH INC. SANDRA CARTIE By: /s/ Andrew Carr /s/ Sandra Cartie ----------------------------------- ----------------------------------- Name: Andrew Carr Title: Chief Executive Officer -9- 10 EXHIBIT A COMPETITORS LISTING BY BUSINESS AREA
Separations Microanray Lab Products Genomics Drug Screening Life Technologies/BioSepra Affymetrix/Genetic Micro Systems Bio-Rad Laboratories Beckman Coulter NEN Life Science Products Bio-Rad Laboratories Agilent Perbio Science/Pierce Surmodics PerkunElmer/Wallac Dyax/Biolage Cartesian Technologies Chemdex Caliper PE Biosystems Millipore Corporation Gene Machines Clontech Hyseq Packard Bioscience Pall Corporation Genomic Solutions Cuno Incyte PE Biosystems Invitrogen/Research Fisher Scientific Motorola Merck KGaA Genetics Becton Dickinson PE Biosystems Tosoh Haas PE Biosystems Schleicher & Schuell Sartorious Molecular Probes Invitrogen/Novex Waters Corporation BioRobotics (UK) Life Technologies Protogene NEN Life Science Products GSI Lumonics PE Biosystems Axon Kodak NEN Life Science Promega Corning Qiagen Corporation Sigma-Aldrich Corporation Roche Molecular Biochem Stratagene Merck KgaA Techne Corp/R & D Systems Biosource ICN
Genotyping Pharmacogenetics Proteomics PE Corp Waters/Micromass Orchid Biosciences Bruker Sequenom PE Sciex Rapigene PE Biosystems ThermoBioanalysis/Finnigan Genetic Solutions Protana
EX-10.19 10 y42738a1ex10-19.txt EMPLOYMENT AGREEMENT RRE ANDREW RACKEAR 1 Exhibit 10.19 EMPLOYMENT AGREEMENT AGREEMENT made as of the 20th day of November, 1996, by and between PHARMACIA BIOTECH INC., a Delaware corporation maintaining its principal offices at 800 Centennial Avenue, Piscataway, New Jersey 08854 (the "Employer" or the "Company"), and ANDREW D. RACKEAR, an individual with an address of 105 Lincoln Road, Westfield, N.J. 07090 (the "Employee"). W-I-T-N-E-S-S-E-T-H WHEREAS, the Employer desires to continue to retain the Employee's services and the Employee desires to continue in the employ of Employer upon the terms and conditions set forth in this Agreement; and WHEREAS, Employer and Employee desire to provide in this Agreement for certain severance compensation to be paid to Employee in the event his employment is terminated; NOW, THEREFORE, in consideration of the above premises and the mutual covenants contained herein, the Employer and Employee mutually agree as follows: 1. EMPLOYMENT (a) The Employer hereby employs the Employee to serve as a corporate officer in a senior management position, with the current title of General Counsel and Employee does hereby accept such employment upon the terms and conditions set forth herein. Unless otherwise advised by Employer, the Employee shall report and be responsible to the Vice President, Legal of Pharmacia Biotech AB. The parties acknowledge that such employment is "at will". 1 2 (b) Employee shall devote his entire time, attention and energies to the business of Employer or companies affiliated with the Employer. Employee shall not during the term of this Agreement be engaged in any other business activities (except as otherwise agreed upon in writing by the parties) whether or not such business activity is pursued for gain, profit or other pecuniary advantage; however this shall not be construed as preventing the Employee from investing his assets in such form or manner as will not require any services on the part of the Employee in the operation of the affairs of the companies in which such investments are made nor result in a conflict of interest as to Employee's duties and obligations to Employer. 2. COMPENSATION AND EMPLOYMENT BENEFITS (a) Base Salary. As compensation for services rendered to the Employer during the term of this Agreement, the Employer shall pay the Employee in each then-current year an annual base salary ("Base Salary") of no less than his current annual salary of One Hundred Twenty Six Thousand Six Hundred Twenty Dollars ($126,620), payable in accordance with the standard payroll practices of the Employer (less all necessary withholdings and deductions for Social Security, federal and state income taxes). (b) Annual Bonus. In addition to the Base Salary compensation, Employee shall be given an opportunity to earn an annual bonus in an amount to be determined at Employer's sole discretion, depending upon performance and objectives to be set by the Employer. The actual amount of each year's annual bonus shall be dependent on the extent to which the Employee attains one or more performance objectives annually set and agreed upon by the Employer. If no such objectives are agreed upon or none is attained, then no bonus shall be payable. 2 3 (c) Commencing on January 1, 1997, and January 1st of each calendar year during which this Agreement is in effect, Employer shall review Employee's Base Salary and bonus potential for possible increases. Any such increases shall be at the sole discretion of the Employer. (d) Employer shall provide Employee with an automobile in accordance with the policies of the Employer. (e) Employer will reimburse Employee for all reasonable and anticipated business expenses incurred by Employee in promoting the business of Employer upon presentation by Employee, from time to time, of an itemized account of such expenditures. (f) Employee shall be entitled to all other fringe benefits as may be provided from time to time generally to employees of the Employer, including, without limitation, participation in Employer's pension, 401(k), disability, medical insurance and life insurance plans. 3. TERM OF AGREEMENT (a) This Agreement shall be effective as of the date first above written and shall continue until terminated by: (i) mutual written agreement of the parties; (ii) the Employee's resignation of employment, death or disability which extends beyond six (6) months; (iii) termination of Employee's employment by Employer for Cause as defined in Section 3(c) below; or (iv) termination of Employee's employment by Employer without Cause. 3 4 (b) If Employee is terminated without Cause by Employer, then Employee shall be entitled to receive the severance benefits which are specified in Article 4 below. The parties agree that said severance benefits are agreed upon as liquidated damages for any and all claims concerning Employee's employment and its termination by Employer, except claims to any right to vested pension and 401(k) benefits. (c) For purposes of this Agreement, the term "Cause" for termination purposes shall include the following: (i) any acts of gross misconduct on the part of the Employee with respect to his duties; (ii) any flagrant act by the Employee in violation of the reasonable directions of Employee's superiors; (iii) conviction of Employee for theft, embezzlement or any other felony or misdemeanor relating to fraud, dishonesty, embezzlement or other misappropriation of property; (iv) the willful and continued failure by Employee to substantially perform his duties with the Employer after written notice is given to Employee of such failure, if for thirty (30) days after receipt of such notice Employee continues to fail to perform; or (v) the willful engaging by Employee of conduct which is demonstrably and materially injurious to the Employer. (d) For purposes of this section "Willful" shall not include acts or omissions done in good faith and in reasonable belief that such acts or omissions were in the best interests of the Employer. 4 5 (e) In the event that the Employee is both (i) removed from his position within the Company, and (ii) not given a different position at a similar level with the Company or any of its affiliates or subsidiaries, then Employee may elect to treat such event as a "Constructive Termination" and receive the severance benefits as are provided for in Article 4 below; provided, however, that the Employee must first notify the Employer of the specific event(s) upon which he is claiming this "Constructive Termination" election and such event(s) must remain unchanged for thirty (30) days from the date the Employee has provided such notice to the Employer. If the event remains unchanged, the Employee shall be deemed to have received written notice of termination at the expiration of the thirty (30) day period, as required by paragraph 4(g). The Employee may elect to treat any relocation to a facility more than thirty-five (35) miles from the Employee's principal office as a Constructive Termination. 4. SEVERANCE BENEFITS (a) In the event (i) the Employee terminates this Agreement due to a "Constructive Termination" event as provided for in Section 3(e) above, or (ii) the Employer terminates the employment of Employee at any time without Cause, then the Employee's sole and exclusive relief and the agreed upon liquidated damages for such termination in lieu of any other severance or termination benefits or payments of any kind whatsoever, which are hereby expressly waived, shall be that the Employer shall be required to pay the Employee the following: (i) his Senior Total Salary (as defined in Section 4(c) below) for a period of eighteen (18) months from the Employee's date of termination; and (ii) one hundred percent (100%) of the Employee's then-current annual bonus potential for any month the Employee works up to the effective date of termination. For example, if the Employee's effective date of termination is at the end of February, he will be entitled to receive 5 6 two-twelfths (2/12) of the entire bonus he could have earned for that year. The Employee will be deemed to have worked for a particular month if his effective date of termination is after the fifteenth date of any month. (b) The parties acknowledge and specifically agree that these liquidated damages shall not be deemed or construed to be a penalty of any sort whatsoever. Additionally, the Employee acknowledges and agrees that such liquidated damages have been voluntarily and mutually agreed upon as sufficient consideration for any and all claims and damages of any nature whatsoever relating to his employment and its termination (including, without limitation, any and all claims concerning any manner of wrongful discharge, breach of contract, discrimination, or any other claim concerning the means, methods and purposes of Employee's termination), all of which are hereby expressly waived. (c) For purposes of this Article 4, the term "Senior Total Salary" shall mean the highest annual rate of Base Salary and Annual Bonus paid to the Employee in any year during the two (2) year period of time immediately prior to the Employee's date of termination. (d) During the 18-month period that the Employee is receiving any severance payments pursuant to Section 4(a) above, the Employee shall also be entitled to receive the following additional severance benefits: (i) participation in the Employer's then-current life insurance and medical and dental insurance plans to the extent the Employee is not receiving any similar respective benefits from any subsequent employment; (ii) reasonable executive outplacement services (e.g., secretarial service, employment consults, etc.), at Employer's expense for up to one (1) year from the date of termination or until Employee commences new employment. Alternatively, upon termination Employee may elect to 6 7 receive fifteen percent (15%) of his final annual Base Salary, in lieu of receiving any outplacement services; (iii) $15,000 in cash or, alternatively at Employee's option, a $15,000 credit against the purchase of the Employee's then-current company car. The Employee may elect to purchase his company car at either fair market value or book value. The Employee must exercise his purchase option prior to the effective date of his termination. Any part of the $15,000 credit not used to purchase the car will be paid to Employee. If the Employee elects not to purchase his company car, he will return it to the Employer on or before his date of termination. (e) All payments and benefits paid under this Article 4 shall be made be in accordance with Employer's then-current standard policies and practices. Appropriate and required withholding and deductions for social security, federal and state income taxes, together with any other deductions authorized by Employee or required by law or court order shall be made and will reduce any gross amounts to be paid under this Agreement. (f) Other than as specifically set forth in Article 4(d)(i) and (ii), there shall be no offset or reduction for any salary or other compensation received by Employee from subsequent employment. (g) Employer shall provide Employee with at least sixty (60) days prior written notice of any Constructive Termination or termination without Cause. With respect to any Constructive Termination, the sixty (60) day notice period will be deemed to begin thirty (30) days after the Employee has provided notice to the Employer of an event which is claimed to constitute a Constructive Termination, if the event remains unchanged as set forth in Article 3(e). The Employee may request that his termination become effective before the sixty day period ends. In such event, the Employee shall be paid as if he were employed for the sixty day period. 7 8 (h) The Employee will receive a lump sum payment for any unused vacation. 5. CONFIDENTIAL INFORMATION The confidentiality agreement signed by Employee at the commencement of the Employee's employment remains in effect and is incorporated herein and made a part of this Agreement. If requested by the Company, the Employee will execute any similar agreement prior to the termination of employment to protect against future disclosures of the Employer's confidential information. 6. MISCELLANEOUS (a) The invalidity or unenforceability of any particular provisions of this Agreement shall not affect the other provisions hereof, and the Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. (b) Any notice required or permitted to be given under this Agreement shall be sufficient if in writing to the respective party at the address indicated below, or at some other designated address, and if sent by (i) personal delivery, (ii) registered or certified mail, return receipt requested, or (iii) Federal Express or other similar nationally known overnight delivery service: (1) To Employee, at the address indicated above, and (2) To the Employer, (Attention: President) at its principal office, with a copy to the Pharmacia Biotech Inc. Law Department (Attn: General Counsel) at the same address. (c) The rights and obligations of Employee under this Agreement shall inure to the benefit and shall be binding upon the successors and assigns of the Employer. 8 9 including any successors by merger, purchase or otherwise. The Agreement may not be assigned by Employee. Any such attempted assignment shall be null and void. (d) This Agreement has been made in the State of New Jersey. It shall be governed by the laws of the State of New Jersey and all disputes shall be resolved in the State or Federal Courts located in the State of New Jersey. (e) This instrument contains the entire agreement of the parties with respect to the employment and termination of Employee and supersedes all prior agreements or arrangements between the parties concerning such subject matters. This Agreement cannot be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The parties hereto have executed this Agreement as of the day and year first above written. EMPLOYEE PHARMACIA BIOTECH INC. /s/ Andrew D. Rackear /s/ Michael Woehler - -------------------------- --------------------------- Andrew D. Rackear Michael Woehler President 9 EX-10.20 11 y42738a1ex10-20.txt EMPLOYMENT AGREEMENT RE WILLIAM SULINSKI 1 Exhibit 10.20 [AMERSHAM PHARMACIA BIOTECH LOGO] August 4, 2000 Mr. William Sulinski 136 Birch Lane Bloomsbury, NJ 08885 Dear Bill: APBiotech Inc. (the "Company") is pleased that you have agreed to fill the position of acting global head of Business Development until a permanent replacement is hired. We confirm our agreement as follows, effective August 1, 2000: 1. You will temporarily be employed as the Acting VP -- Global Business Development ("Acting VP"). You will continue in that role until the position is filled. When the position is filled, you will resume your current responsibilities as VP -- Business Development, North America. 2. As Acting VP, you will report to the Chief Executive Officer of the Company, Andrew Carr. 3. While you are Acting VP, you will receive supplemental compensation of $2000/month above your current salary of $13,813.80/month. Your appointment as Acting VP will last a minimum of three (3) months. For purposes of earning supplemental compensation, you will be deemed to have worked a particular month if you remain in the position of Acting VP until the fifteenth (15th) date of any month. The supplemental compensation will be pension eligible in accordance with the Company's pension plan but will not be factored in the determination of your bonus. The Company at its sole discretion may grant you an additional bonus. 4. You will continue receiving your current benefits in accordance with Company policies. All payments contemplated by this letter will be subject to applicable withholdings and shall be made in accordance with the Company's standard payroll practices. You will participate in the Company's bonus plan and will be eligible for annual merit increases at the discretion of the Company. 5. The Company agrees that you will continue to be employed through September 30, 2002. Notwithstanding the foregoing, the Company may terminate your employment for cause, at any time, with no prior notice. Cause shall include, without limitation, engaging in any acts of negligence, misconduct, violation of Company rules, conduct which is injurious to the Company or conduct which is in violation of the directions of the Board of Directors or your superiors. Amersham Pharmacia Biotech Inc. tel 732-457-8000 800 Centennial Avenue fax 732-457-8474 PO Box 1327 Piscataway New Jersey web-site 08855-1327 http://www.apbiotech.com 2 [ AMERSHAM PHARMACIA BIOTECH LOGO ] August 4, 2000 Page - 2 - 6. In the event that the Company terminates your employment for cause, or in the event that your employment terminates as a result of your resignation, death or disability prior to September 30, 2002, this Agreement shall terminate and no salary or additional payment shall be due for the period beyond the termination date. 7. All other policies and procedures of the Company will continue to apply with respect to your employment with the Company. 8. In consideration of the above, you agree to the terms and conditions in the attached Covenant Not to Compete. Please sign and return to us one original of this letter and of the Covenant Not to Compete to confirm your acceptance. Sincerely, /s/ Glenn Melrose ----------------------------------- Glenn Melrose Vice President, Human Resources Acknowledged and Agreed: /s/ William Sulinski - ----------------------------------- William Sulinski 3 COVENANT NOT TO COMPETE THIS COVENANT NOT TO COMPETE (the "AGREEMENT") made as of the 4 day of August 2000, by and between Amersham Pharmacia Biotech Inc., a Delaware corporation with its principal place of business at 800 Centennial Avenue, Piscataway, New Jersey 08855 (the "EMPLOYER") and William J. Sulinski, an individual residing at 136 Birch Lane, Bloomsbury, New Jersey 08885 (the "EMPLOYEE"). WITNESSETH: WHEREAS, the Employer and the Employee have entered into that certain letter agreement of even date hereof (the "LETTER AGREEMENT"), whereby the Employee has been appointed as the Acting VP-Global Business Development. WHEREAS, in his capacities as Acting VP-Global Business Development and VP-Business Development, North America, the Employee has and will receive information about the Employer's operations, finances and strategies of a highly confidential nature, which he has agreed to maintain confidential; and WHEREAS, in consideration of the terms of the Letter Agreement, and in order to protect the Employer's confidential information, its competitive position in the marketplace, its ability to implement its strategies, its employee and customer relations, and its goodwill, the Employee is wiling to covenant that he will not compete with the Employer or solicit its employees or customers, on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the above premises and of the premises contained herein, the Employer and the Employee agree as follows: 1. Definitions: (a) COMPANY means the Employer and its affiliates and subsidiaries. (b) PROHIBITED BUSINESS means all or any of the research, manufacture or supply of life science products and services for the purpose of DNA sequencing or drug development, including without limitation the research, manufacture or sale of chromatography and electrophoresis systems for DNA synthesis. (c) PROHIBITED COMPANY means companies engaged in or about to be engaged in Prohibited Business. (d) RESTRICTED PERIOD means the period of twelve (12) months commencing from the Termination Date. (e) TERMINATION DATE means the date on which the Employee's employment with the Employer shall terminate irrespective of the cause or manner. (f) TERRITORY means the United States of America, the European Union, Norway, Switzerland, Australia, Japan and Russia. 2. Covenant Not to Compete In consideration of the terms of the Letter Agreement and of the premises set forth herein, the Employee hereby agrees that he will not, directly or indirectly, during the Restricted Period and within the Territory: (a) Be employed by, or provide consulting services to: (i) a Prohibited Company; or (ii) any business that is otherwise in competition with the Employer; provided that this restriction shall not extend to any employment the performance of which could not involve the Employee in competition with the Employer; (b) Entice away or solicit any person who is employed or engaged by the Employer either: (i) as a director or in a managerial, executive or senior technical capacity; or (ii) who is in possession of confidential information belonging to the Employer; and (c) Entice away or solicit a customer of the Employer with whom the Employee has had business dealings or personal contact during his employment with the Employer. 3. Remedies If the Employee shall breach, or threaten to commit a breach of any of the covenants set forth in this Agreement, the Employer shall have the right, in addition to, and not in lieu of, any other rights and remedies available to the Employer under law or in equity, to: 4 (a) have the covenants specifically enforced by any court, including, without limitation, the right to seek entry against the Employee of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of the covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Employer and that money damages will not provide an adequate remedy to the Employer; and (b) cease making any payments then otherwise due to the Employee. The parties hereby acknowledge and agree that any such payments are conditioned upon the Employee's compliance with the terms of this Agreement. 4. Blue-Penciling If any court determines that any of the covenants contained in this Agreement, or any part thereof, are unenforceable because of the duration or scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced. 5. Miscellaneous (a) This Agreement supersedes all previous agreements between the Employee and the Employer, or any affiliate or subsidiary of the Employer, in relation to the matters addressed herein. This Agreement represents the entire understanding between the parties hereto with respect to the subject matter hereof. The Employee acknowledges and agrees that he has not entered into this Agreement in reliance upon any representation, warranty or undertaking which is not set out or referred to in this Agreement. (b) The invalidity or unenforceability of any provisions of this Agreement shall not affect the other provisions, and the Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. (c) Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if delivered at the addresses first above stated by: (a) personal delivery; (b) registered or certified mail, return receipt requested; or (c) Federal Express or other similar nationally known overnight delivery service. (d) The rights and obligations of the Employee under this Agreement shall inure to the benefit and shall be binding upon the successors and assigns of the Employer, including any successors by merger, purchase or otherwise. The Agreement may not be assigned by the Employee. Any attempted assignment in breach of this provision shall be null and void. (e) This Agreement shall be governed by the laws of the State of New Jersey, except for its conflicts of law rules, and all disputes arising from or relating to this Agreement shall be resolved in the state or federal courts located in the State of New Jersey. (f) This Agreement cannot be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any such other right, power or privilege. (g) The headings herein are for reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. AMERSHAM PHARMACIA BIOTECH INC. WILLIAM J. SULINSKI By: /s/ Glenn R. Melrose /s/ William J. Sulinski ---------------------------------- ------------------------------- (Signature) (Signature) Name: Glenn R. Melrose -------------------------------- (Please Print) Title: Vice President, Human Resources ------------------------------- EX-10.21 12 y42738a1ex10-21.txt EMPLOYMENT CONTRACT RE PETER EHRENHAM 1 Exhibit 10.21 EMPLOYMENT CONTRACT Agreement has this day been made between Amersham Pharmacia Biotech, hereinafter called "the Company", and Mr. Peter Ehrenheim hereinafter called "the Employee". SECTION 1 EMPLOYMENT AND EMPLOYEE'S OBLIGATIONS The Company promotes the Employee to the position as vice president, Separations. The Employee takes up his new position as from 1 January, 2000. In this capacity the Employee shall perform his duties as specified by the Deputy CEO. The Employee shall devote the whole of his working time to his duties under this agreement and may not undertake any other duties without a written consent form the Company. The employment is open ended. LAS - Lagen om Anstellningsskydd - is not applicable. SECTION 2 REMUNERATION 2.1 Base salary The Employee's annual base salary shall be SEK 960,000 (nine hundred and sixty thousand) payable according to local practice. The salary will be reviewed annually, and change will be effective 1 January. First review will be effective 1 January, 2001. On this occasion, the annual base salary shall be increased with 8,5% in excess of the average management increase for Swedish senior managers, excluding members of the Executive Management Team, providing satisfactory performance has been achieved by the Employee. Any bonuses, gifts or other payments which the Company may grant or make to the Employee from time to time, to the extent that they are not required by law or by this contract, shall be treated as having been granted or made at the Company's absolute discretion and shall not be considered a part of the employee's contractual remuneration. 2.2 Bonus payments The Employee will be entitled to a payment based upon performance by the Employee. Associated conditions will be in line with Group policy. Maximum bonus amount is 30 per cent of the base salary. Details regarding objectives and incentives will be settled in a separate agreement. 2 2.3 Company car The Employee is entitled to a Company car for business and private use. All conditions related to the car will be in line with the Company car policy. SECTION 3 EXPENSES The Company will reimburse the Employee for all reasonable business expenses incurred by him during the course of the employment. The Employee must provide receipts and other evidence of such business expenses. SECTION 4 PENSION AND INSURANCE COVERAGE The Employee is retained in the ITP plan. SECTION 5 HOLIDAY ENTITLEMENT The Employee is entitled to 30 days holiday in any calendar year. SECTION 6 SOCIAL SECURITY CONTRIBUTIONS AND INCOME TAXES The Employee will pay tax and social security contributions in accordance with Swedish regulations and the Company will withhold the necessary deductions for this. SECTION 7 TERMINATION OF CONTRACT The contract may be terminated by either party giving to the other 6 months advance notice in writing. The Company reserves the right to remove the Employee from his position during the time of notice or part of it. During the time of notice the Employee is entitled to the conditions of this agreement with the exception of bonus. Should the contract be terminated by the Employer during the period 1 January 2000 to 31 December 2002, the Employee shall receive in addition to time of notice a severance pay amounting to 24 months salary as per date the day before giving notice. Should the contract be terminated by the Employer on 1 January 2003 or later, the severance shall amount to 12 months salary as per date the day before giving notice. The severance pay shall, unless otherwise agreed upon, be paid every month starting the first month after the expiry of the employment. The Company reserves the right to terminate this contract at any time without advance notice in the event of serious breach of contract, including act of gross negligence or gross misconduct by the Employee and willful failure to perform his duties with the Company. 3 SECTION 8 CONFIDENTIALITY The Employee shall not at any time other than in the course of his duties without the previous consent in writing of the Company divulge or make known to anyone any secrets or any technical, commercial, financial or other information of a confidential nature unless such information is already in the public domain relating to the business or customers of the Group so as to the extent that all such information has become a matter of public record. All papers and documents used by the Employee in the course of his employment are and will remain the property of the Company and will be delivered up to the Company on the termination of the Employee's agreement with the Company or any of its subsidiaries. This clause operates independently of the existence of this Agreement. SECTION 9 PATENT, SECRET PROCESSES AND IMPROVEMENTS Any discovery or invention or secret process or improvement in procedure made or discovered by the Employee while in the service of the Company whether before or after the date of this Agreement in any way affecting or relating to the business of the company or of any subsidiary company or capable of being used or adapted for use therein or in connection therewith shall forthwith be disclosed to the Company and should belong to and be the absolute property of the Company. SECTION 10 RESTRICTIVE COVENANT The Employee hereby agrees during his employment not to solicit business from any person, firm or company who is or at any time has been a customer or done business with or attempt to persuade away from the Company any person who is or has been employed by the Company. SECTION 11 JURISDICTION Any dispute about the Agreement shall be submitted to a Swedish Arbitration court if the parties cannot come to a consensus as to the interpretation of the conditions. The costs for the arbitration proceedings shall be defrayed by the Company provided the Employee has not unduly instigated the arbitration procedure. In such case, the arbitrators shall determine the distribution of arbitration costs. SECTION 12 OTHER EMPLOYMENT CONDITIONS This contract supersedes all previous agreements between the Company and the Employee. As regards employment conditions that are not regulated in this contract the policies of the Company shall apply. 4 Section 13 COUNTERPARTS The agreement has been drawn up in duplicate of which the parties have taken one copy each. Signed /s/ Arne Forsell /s/ Peter Ehrenheim ------------------------------ ---------------------------- Arne Forsell Peter Ehrenheim Deputy CEO Amersham Pharmacia Biotech 23/11 '99 24/11-99 -------------------------- ---------------------------- date date EX-10.22 13 y42738a1ex10-22.txt EMPLOYMENT CONTRACT PER-ERIK SANDLUND 1 Exhibit 10.22 EMPLOYMENT CONTRACT Agreement has this day been made between Amersham Pharmacia Biotech AB hereinafter called "the Company" and Mr. Par-Erik Sandlund hereinafter called "the Employee". SECTION 1 EMPLOYMENT AND EMPLOYEE'S OBLIGATIONS The Company appoints the Employee Chief Financial Officer of Amersham Pharmacia Biotech, entrusted with all powers of daily management, as delegated by the Chief Executive Officer. In this capacity the Employee shall perform his duties as specified by the Chief Executive Officer. The Employee shall devote the whole of his working time to his duties under this agreement and may not undertake any other duties without a written consent from the Company. The Employee is based in Uppsala, Sweden. A relocation of headquarters to another location is subject to a new agreement. SECTION 2 FIRST DAY OF EMPLOYMENT This agreement shall run from the 5th of August 1997. The employment shall be considered to be for an indefinite period. The Employee's employment with the Company shall be considered continuous as from 1 August 1991. SECTION 3 REMUNERATION 3.1 Base Salary The Employee's annual base salary shall as from 1 October 1997 be SEK 1,017,750 payable in arrears in twelve instalments per annum. With effect from 1 January 1998, the annual base salary shall be SEK 1,053,371 and with effect from 1 January 1999 the annual base salary shall be SEK 1,250,000. The salary will be reviewed annually, any change will be effective January 1. Next review will be made in 2000. 2 Any bonuses, gifts or other payments which the Company may grant or make to the Employee from time to time, to the extent that they are not required by law or by this agreement, shall be treated as having been granted or made at the Company's absolute discretion and shall not be considered a part of the Employee's contractual remuneration. 3.2 Short Term Incentives The Employee will be entitled to a payment based upon individual performance and performance of Amersham Pharmacia Biotech, provided predetermined objectives are met. The maximum amount is 40 per cent of the basic salary and associated conditions will be in line with Group policy. Details regarding objectives and incentives will be settled in a separate agreement. 3.3 Long Term Incentives The Employee will be eligible for an allocation of Nycomed Amersham shares, provided certain predetermined objectives related to the performance of Amersham Pharmacia Biotech are met. The Company will pay employer's contribution on any allocation. Objectives are set and evaluation of performance will be made at the absolute discretion of the Company. Other associated conditions are described in a separate document. Shares will be purchased by the Company and held in a trust. 3.4 Share Option Scheme The Employee will be eligible for inclusion in the share option scheme of Nycomed Amersham. Income tax levied on any gain will be borne by the Employee and Employer's contribution by the Company. All conditions related to the Share Option Scheme are set and decisions made at the Company's absolute discretion. Any change of conditions shall not constitute breach of this agreement. 3.5 International Relocation Allowance In the event of relocation of the headquarters of Amersham Pharmacia Biotech within a three year period following the start of the Company, a lump sum will be paid to the Employee, provided the Employee is willing to relocate and is offered a similar position. In case the Employee declines to relocate, no allowance will be paid. 2 3 In case Amersham Pharmacia Biotech decides not to relocate, the lump sum will be paid to the Employee. Income tax levied on the payment will be borne by the Employee and employer's contribution by the Company. The annual report set aside for a future lump sum payment is GBP 37,923. With effect from 1 January 1999 the amount is 27,844. The amount is based on a possible relocation to the United Kingdom. The amount will reviewed annually and any decision to revise it will be at the discretion of the Company. Should Amersham Pharmacia Biotech decide to relocate to another location and country than the United Kingdom, the same arrangement and similar conditions shall apply. 3.6 Company Car The Employee is entitled to a Company car for business and private use. Standard of car shall be in line with a Volvo S70. The Company shall meet all expenses, except fuel for private mileage. Other conditions related to the car will be in line with the Company car policy as amended from time to time. The Employee can alternatively elect to receive a car allowance in cash, paid out per month. SECTION 4 EXPENSES The Company will reimburse the Employee for all reasonable business expenses incurred by him in the course of the employment. The Employee must provide receipts and other evidence of such business expenses. SECTION 5 PENSION AND INSURANCE COVERAGE The Company will annually contribute towards a pension scheme selected and designed by the Employee, "Ordinary Retirement Scheme". Company contribution shall be equal to 20 per cent of base pay and average bonus over a three-year period, but in no case above the maximum contribution deductible according to the tax rules. Earnings in excess of 50 base amounts will not be taken into account (base amount: SEK 36,400, 50 base amounts currently 1,820,000). Disability coverage and survivor's benefits shall be a part of the arrangement and be on a satisfactory level. Retirement age is 60. The Company will in addition to the Ordinary Retirement Scheme arrange for early retirement benefits covering the period 60 to 65 years of age (enclosure). Subject to separate agreement between Company and the Employee, early retirement may be postponed and start at any other age between 60 and 65. 4 Funding of early retirement benefits will be decided at the discretion of the Company. Social charges on levied on contributions to pension arrangements will be paid by the Company. SECTION 6 HOLIDAY ENTITLEMENT The Employee is entitled to 30 days of holiday. Entitlement shall accrue month by month on a pro rata basis. SECTION 7 SOCIAL SECURITY CONTRIBUTIONS AND INCOME TAXES The Employee will pay tax and social security contributions in accordance with Swedish regulations and the Company will withhold the necessary deductions for this. The Company pays Employer's Contribution according to local rules. SECTION 8 TERMINATION OF AGREEMENT The agreement may be terminated by either party giving to the other six months advance notice in writing. The Company reserves the right to remove the Employee from his position during the time of notice or part of it. During the time of notice the Employee is entitled to the conditions of this agreement. Should the agreement be terminated by the Company for other reason than material breach of agreement, the Employee shall receive in addition to time of notice a severance pay amounting to twelve months salary as per date the day before giving notice. The severance pay shall, unless otherwise agreed upon, be paid every month starting the first month after the effective date of employment. Full vesting to date of early retirement benefits accrued to date shall apply. Should the agreement be terminated by the Employee, entitlement to early retirement benefits shall be forfeited. The Company reserves the right to terminate this agreement at any time without advance notice or severance pay in the event of material breach of contract, including act of gross negligence or gross misconduct by the Employee and wilful failure to perform his duties with the Company. Material breach of contract after the termination of employment may result in the immediate cessation of severance pay and other benefits. This clause together with other clauses will be reviewed in connection with a relocation of headquarters to another location. Relocation is subject to a new agreement. 4 5 SECTION 9 CONFIDENTIALLY The Employee shall not at any time other than the course of his duties without the previous consent in writing of the Company divulge or make known to anyone any secrets or any technical, commercial, financial or other information of a confidential nature unless such information is already in the public domain relating to the business or customers of the Group so as to the extent that all such information has become a matter of public record. All papers and documents used by the Employee in the course of his employment are and will remain the property of the Company and will be delivered up to the Company on the termination of the Employee's agreement with the Company or any of its subsidiaries. This clause operates independently of the existence of this Agreement. SECTION 10 PATENT, SECRET PROCESSES AND IMPROVEMENTS Any discovery or invention or secret process or improvement in procedure made or discovered by the Employee while in the service of the Company whether before or after the date of this Agreement in any way affecting or relating to the business of the Company or of any subsidiary company or capable of being used or adapted for use therein or in connection therewith shall forthwith be disclosed to the Company and should belong to and be the absolute property of the Company. SECTION 11 RESTRICTIVE COVENANT The Employee hereby agrees during his employment and twelve months after the effective date of termination of employment not to directly or indirectly (i) solicit or approach any person for the purpose of offering to supply or procure the supply of goods of services similar to those then sold or supplied by Amersham Pharmacia Biotech where that person was one to whom the Employee knows Amersham Pharmacia Biotech sold or supplied goods or services. (ii) incite or procure the breach or amendment of any contract for the supply of goods or services, agreement or pattern of dealing to which Amersham Pharmacia Biotech is party or by which Amersham Pharmacia Biotech benefits. (iii) entice or solicit, or endeavour to entice or solicit any employee of Amersham Pharmacia Biotech to leave such employment. (iv) entice of solicit, or endeavour to entice or solicit any contract worker or independent contractor to terminate or not renew his/her contract for services with Amersham Pharmacia Biotech. (v) neither personally or by an agent directly or indirectly either on the Employee's own account or for any other person, firm or company carry on or be engaged or interested in any business which competes with any business carried out at the date of termination of employment by Amersham Pharmacia Biotech. 5 6 SECTION 12 OTHER EMPLOYMENT CONDITIONS As regards employment conditions that are not regulated in this contract the policies of Amersham Pharmacia Biotech AB shall apply. SECTION 13 OTHER CLAUSE This agreement supersedes all earlier written or oral agreements between the Employee and Amersham Pharmacia Biotech. The agreement constitutes the entire agreement between the parties and it may only be changed by a written agreement between the parties, except for areas explicitly mentioned in this agreement. SECTION 14 JURISDICTION This contract is construed according to and governed by Swedish law. Any dispute about the agreement shall be submitted to a Swedish Arbitration court if the parties cannot come to a consensus as to the interpretation of the conditions. Cost for the arbitration proceedings shall be defrayed by the Company provided the Employee has not unduly instigated the arbitration procedure. In such case, the arbitrators shall determine the distribution of arbitration cost. SECTION 15 COUNTERPARTS The agreement has been drawn up in duplicate of which the parties have taken one copy each. Signed /s/ Arne Forsell /s/ Per Erik Sandlund --------------------------------- ---------------------------------- Arne Forsell Per Erik Sandlund Acting CEO Amersham Pharmacia Biotech 18 February 1999 18 February 1999 ---------------- ---------------- date date 6 7 enclosure EARLY RETIREMENT BENEFITS 1. BENEFITS Enhanced Company benefits are: -- early retirement pensions (retirement benefits prior to the normal retirement age of 65), and -- survivors' pensions Early retirement pension amounts to 70 per cent of pensionable earnings up to a maximum of earnings equivalent to 50 base amounts ("basbelopp", currently SEK 36,400) will be paid from the age 60 until the age of 65. Any Disability pension received from Social Security or Ordinary Retirement Scheme shall reduce the Early Retirement Pension to such an extent that the total resulting pension does not exceed 70 per cent of pensionable earnings up to 50 base amounts. The contributions that would have been made to the Employee's Ordinary Retirement Arrangement had the Employee stayed in service until 65, will be made by the Company. Survivors' pension amount relating to early retirement benefits in the entire accrued entitlement at the time of death, should the Employee die prior to payment commencing. Payment will be made over a five-year period. If the Employee dies between 60 and 65, during the period under which the early retirement pension is being paid, the Company will continue payment under the same terms. Any Survivor's pension received from Social Security and/or Ordinary Retirement Scheme shall reduce the Early Retirement Pension to such an extent that the total resulting pension does not exceed 70 per cent of pensionable earnings up to 50 base amounts. 2. VESTING AND ACCRUAL Benefits are deemed to accrue uniformly over the period up to the retirement age. Vesting Service is service in the current position. Consequences for early retirement benefits of termination of employment are set out in the employment agreement. 7 8 enclosure 3. INCREASE OF BENEFITS The Company shall make an annual review of benefits in payment and accrued benefits for the Employee and will normally increase these in line with the increase in ITP pensions. In the event of changes to ITP arrangements invalidating this approach, the Company shall identify a suitable alternative comparator. Decisions on benefit increases are made at the discretion of the Company. Review for possible increases of accrued benefits also applies after termination of employment, provided benefits are vested. 4. FUNDING Decision on funding, including change of funding will be made at the discretion of the Company. 8 EX-10.23 14 y42738a1ex10-23.txt EMPLOYMENT AGREEMENT RE LARS ERIC UTTERMAN 1 Exhibit 10.23 Amersham Pharmacia Biotech Europe GmbH Tel +49 (0) 761/4519 Munzinger Qtr. 9 Fax +49 (0) 761/4510 D-79111 Frelburg Agreement has this day been made between Pharmacia Biotech Europe GmbH, hereinafter called "the Company" and Mr Lars Erik Utterman (430815), hereinafter called "the Employee". SECTION 1 EMPLOYMENT AND EMPLOYEE'S OBLIGATIONS The Company hires the Employee for the position as President, entrusted with all powers of daily management, as delegated by the Board of Directors. As President the Employee shall perform his duties as specified yearly by the Board of Directors and ensure that the Company is being managed in accordance with the law and decrees of Germany and the different countries in which the company operates in Europe. The Employee shall devote the whole of his working time to his duties under this agreement and may not undertake any other duties without a written consent from the Chairman of the Board. Upon termination of this contract or upon earlier request, the Employee shall return all documents, correspondence, reports, material and equipment which were available to him during the course of employment. SECTION 2 FIRST DAY OF EMPLOYMENT AND CONTRACT PERIOD This agreement shall run from the 1st of July 1994. The employment shall be considered to be for an undefinite period. If the Employee is made redundant due to restructuring, the Company will use its best endeavours to provide the Employee with a position within the Pharmacia group commensurate to his level of experience and previous status. 2 [PHARMACIA BIOTECH LOGO] SECTION 3 REMUNERATION 3.1 Base Salary The Employee's annual base salary shall be DEM 475.000 payable according to local practise. The salary will be reviewed yearly, starting on January 1, 1995. Any bonuses, gifts or other payments which the Company may grant or make to the Employee from time to time, to the extent that they are not required by law, by a collective bargaining agreement or by this contract, shall be treated as having been granted or made at the Company's absolute discretion and shall not be considered a part of the Employee's contractual remuneration. 3.3 Bonus Payments The Employee will be entitled to a payment based upon individual and local company performance. The maximum bonus amount is 25 per cent of the basic annual salary and is calculated in accordance with the achievement of predetermined objectives. Details regarding objectives and incentives will be settled in a separate agreement. SECTION 4 HOLIDAY ENTITLEMENT The Employee shall be entitled to 30 days of holiday in any calendar year which will accrue pro-rated month by month from the date of commencement. In addition to holiday entitlement, the Employee shall be entitled to all statutory, national and public holidays and will be paid in accordance with local regulations relating to holiday pay. SECTION 5 COMPANY CAR The Employee is entitled to a Company car in accordance with his position as Geschaftsfuhrer and the local Company car scheme as published and amended by the Company. 3 [PHARMACIA BIOTECH LOGO] SECTION 6 EXPENSES The Company will reimburse the Employee for all reasonable business expenses incurred by him during the course of the employment. The Employee must provide receipts and other evidence of such business expenses. SECTION 7 PENSION The Company shall yearly pay NLG 42,000 premiums to a pension insurance owned by the Employee. The Company's contribution will be reviewed in conjunction with the salary review. SECTION 8 MEDICAL COVER AND INCAPACITY FOR WORK In the event of the Employee being prevented from discharging his duties, the Company will pay his full salary up to three months. Long-term disability is covered through a separate insurance. SECTION 9 HOME LEAVE The Employee and his accompanying family shall be entitled to be reimbursed for one trip home for each year of service. The air fare of economy class or air travel will be paid the first five years of service. SECTION 10 LANGUAGE TRAINING As part of the preparation for this employment the Company agrees to pay the cost of basic language courses for the Employee and his spouse up to a negotiated amount. 4 [PHARMACIA BIOTECH LOGO] Section 11 TELEPHONE COST AND DAILY NEWSPAPER Costs for business calls and subscription fee for a daily newspaper to the Employee's home are paid by the Company. Section 12 SOCIAL SECURITY INCOME AND LOCAL TAXES The Employee will pay tax and social security contributions in accordance with local regulations in each country and the Company will withhold the necessary deductions herefor. Section 13 TERMINATION OF CONTRACT This contract may be terminated by either party giving to the other six months' notice in writing. The Company reserves the right to remove the Employee from his position during the time of notice or part of it. During the time of notice the Employee is entitled to the conditions of this agreement with the exception of bonus. Should the contract be terminated by the Employer, the Employee shall receive in addition to time of notice a severance pay amounting to twelve months' salary as per date the day before giving the notice. The severance pay shall, unless otherwise agreed upon, be paid every month starting the first month after the expiry of the contract period. An additional six months severance pay will be paid when the Employee has reached the age of 55 years. The Company will furthermore pay expenses to cover removal transportation and insurance of personal belongings to country of choice within Europe. Any statutory severance pay/indemnities which may be granted the Employee shall be deducted from the severance pay stated in this contract. The Company reserves the right to terminate this contract at any time, without prior notice, in the event of misconduct by the Employee, including subordination, use of physical violence, unjustified absence or tardiness, refusal to carry out duties properly assigned to him, disclosure or confidential information relating to the Company or giving false or misleading information to the Company either before or after the date of this agreement. 5 [PHARMACIA BIOTECH LOGO] SECTION 14 CONFIDENTIALITY The Employee shall not at any time other than in the course of his duties without the previous consent in writing of the Company divulge or make known to anyone any secrets or any technical, commercial, financial or other information of a confidential nature unless such information is already in the public domain relating to the business or customers of the Group so as to the extent that all such information has become a matter of public record. All papers and documents used by the Employee in the course of his employment are and will remain the property of the Company and will be delivered up to the Company on the termination of the Employee's agreement with the Company or any of its subsidiaries. This clause operates independently of the existence of this Agreement. SECTION 15 PATENT, SECRET PROCESSES AND IMPROVEMENTS Any discovery or Inventory secret process or improvement in procedure made or discovered by the Employee while in the service of the Company whether before or after the date of this Agreement in any way affecting or relating to the business of the Company or of any subsidiary company or capable of being used or adapted for use therein or in connection therewith shall forthwith be disclosed to the Company and should belong to and be the absolute property of the Company. SECTION 16 RESTRICTIVE COVENANT The Employee hereby agrees during his employment not to solicit business from any person, firm or company who at any time has been a customer of the company or done business with or attempt to persuade away from the Company any person who has been employed by the Company. SECTION 17 OTHER EMPLOYMENT CONDITION As to the rest the general employment conditions of Pharmacia Biotech Europe GmbH will apply. 6 [PHARMACIA BIOTECH LOGO] SECTION 18 JURISDICTION Any dispute about the agreement shall be submitted to a Swedish Arbitration Court if the parties cannot come to a consensus as to the interpretation of the conditions. The costs of the arbitration proceedings shall be defrayed by the Company provided that the Employee has not unduly instigated the arbitration procedure. In such case, the arbitrators will determine the distribution of arbitration costs. SECTION 19 OTHER CLAUSE This contract supersedes all earlier written or oral agreements between the Employee and different entities within Pharmacia Biotech. SECTION 20 COUNTERPARTS The agreement has been drawn up in duplicate, of which the parties have taken one copy each. Uppsaala, Signed /s/ Arne Forsell Signed /s/ Lars Eric Utterman ------------------------- ---------------------------- Arne Forsell Lars Eric Utterman Chairman of the Board Date: April 12, 1994 Date: April 12, 1994 ------------------------- ---------------------------- EX-10.24 15 y42738a1ex10-24.txt CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT 1 Exhibit 10.24 29 DECEMBER 2000 AMERSHAM PHARMACIA BIOTECH LIMITED GOLDARTIST LIMITED (TRADING AS AEOMICA) _______________________________________ CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT _______________________________________ Page 13 2 THIS AGREEMENT is made on 29 December 2000 BETWEEN: 1. AMERSHAM PHARMACIA BIOTECH LIMITED whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (APBiotech); and 2. GOLDARTIST LIMITED (trading as AEOMICA) whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (Aeomica). WHEREAS: (A) Nycomed Amersham plc ("NA") and Pharmacia Corporation ("PHA") have formed a joint venture company, Aeomica Limited, to provide molecular disease profiles, targets and leads to the pharmaceutical industry for the enablement of personalised medicine. (B) NA and PHA also own APBiotech which possesses and has access to technologies, experience and expertise relating to the business Aeomica wishes to develop. (C) Aeomica is desirous and APBiotech is willing that APBiotech conduct and perform research and development services for Aeomica on the terms and conditions set out below. NOW IT IS AGREED as follows: INTERPRETATION 1.1 In this Agreement, unless the context otherwise requires: APBIOTECH YEAR END is, in any one year, 31 December (or such other date as APBiotech may select from time to time); BUSINESS DAY means any day other than Saturday or Sunday or a Bank or Public Holiday; BUSINESS HOURS means the hours of 8:30 a.m. to 5:30 p.m.; DEVELOPMENTS means any development, enhancement or derivative of any Product, or its design or manufacturing process or services which arise out of the Research and Development; FORCE MAJEURE means in relation to either party, any circumstances beyond the reasonable control of that party (including, without limitation, any strike, lockout or similar form of industrial action); INTELLECTUAL PROPERTY RIGHTS means patents, trade marks, service marks, trade names, design rights, copyright (including rights in computer software), rights in know-how 3 and other intellectual property rights, in each case whether registered or unregistered and including applications for the grant of any such rights and all rights or forms of protection having equivalent or similar affect anywhere in the world: LIBOR means the arithmetic mean (rounded upward to five decimal places) of the rates quoted by the principal office in London of Lloyds Bank plc and National Westminster Bank plc to leading banks in the London Interbank market at or about 11:00 a.m. on the relevant date for the offering of deposits in sterling for a one-month period; NII means the United Kingdom Nuclear Installations Inspectorate; PRODUCTS means any genes and primer sets, proteins, gene and protein chips, imaging or other data and databases, targets, markers, and pathway analysis data for use in disease profiling of clinical samples and clinical research generally, together with any services or Developments related thereto (or any other product or services as may be agreed between the parties); RESEARCH AND DEVELOPMENT means the research into and the development of the Products carried on at the Site by APBiotech under the terms of this Agreement as described in Schedule 2; SITE means any and all sites at which the parties may agree Research and Developments shall be carried on and shall initially include Sunnyvale, Cardiff, Amersham and Uppsala; SUBSIDIARY means a subsidiary company as defined in the UK Companies Act 1985 (as amended). 1.2 References to statutory provisions shall, except where the context requires otherwise, be construed as references to those provisions as respectively amended or re-enacted or as their application is modified by other statutory provisions (whether before or after the date hereof) from time to time. 1.3 Headings are inserted for convenience only and shall not affect the construction of this Agreement or the Schedules hereto. SUPPLY OF RESEARCH AND DEVELOPMENT SERVICES 2.1 Following the execution of this Agreement, both parties shall nominate suitably qualified employees acceptable to each other to liaise on a continuing basis on matters concerning Research and Development and APBiotech shall, as a result of such meetings, undertake such Research and Development for Aeomica as Aeomica may (through such nominee) reasonable request. APBiotech shall be obliged to employ such additional manpower as Aeomica may request in order to carry out the Research and Development. 2.2 APBiotech shall use all reasonable endeavours to ensure that the personnel supplying the Research and Development services are suitably qualified. In connection with the supply of the Research and Development services Page 2 4 hereunder, APBiotech will comply in all material respects with all applicable laws, regulations and safety guidelines of all governmental entities. 2.3 APBiotech and Aeomica agree that APBiotech may nominate any Subsidiary of APBiotech to provide the Research and Development services in favour of such Subsidiary of Aeomica as Aeomica may correspondingly nominate. 2.4 APBiotech shall not supply Research and Development services at the Site to any party other than Aeomica or such other parties as Aeomica may direct. 2.5 Without prejudice to the generality of clause 2.3: (a) Aeomica shall provide APBiotech with details of any Development belonging to Aeomica which it wishes to be incorporated into Products or any other modification which it wishes to be made to the Products from time to time as a result of any Development and (b) APBiotech shall provide Aeomica with details of any Development which is made, developed or acquired by APBiotech from time to time and, in particular, any such Development which improves any Product or extends the range of Products. 2.6 The title to and all Intellectual Property Rights in respect of any Development made, developed or acquired shall belong to Aeomica. For the avoidance of doubt, costs associated with patenting (include acquiring, filing and defending any patents or patent applications) or otherwise protecting any Intellectual Property Rights to which Aeomica is entitled (and which APBiotech undertakes on behalf of Aeomica) under this Agreement shall be borne by Aeomica. 2.7 This Agreement shall be deemed to have come into effect on and shall include all Research and Development carried out from, 1 January 2001. COSTS 3.1 o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o calculated consistently with the criteria set out in Schedule 1. All prices quoted shall be exclusive of VAT or any other taxes or customs/ cxcise duties and APBiotech shall be entitled to charge these items to Aeomica at the rate applicable at the date of invoice. Subject to any special terms agreed in writing between APBiotech and Aeomica: (a) APBiotech shall involve Aeomica at the end of the following calendar month in respect of the Research and Development undertaken pursuant to this Agreement in the previous calendar month; and (b) Subject to Aeomica's rights under this clause Aeomica shall pay the price stated in each invoice submitted by APBiotech pursuant to subclause (a) above within 30 days of the date of the invoice. Page 3 5 3.2 If Aeomica shall not pay any amount on the due date therefrom in accordance with this Agreement, any amount unpaid shall bear interest at a rate of 1% above the rate from time to time of LIBOR from the date of due payment to and including the date of payment, whether before or after judgement. 3.3 In the event that Aeomica disagrees with any one invoice delivered by APBiotech pursuant to clause 3.1 above. APBiotech shall, upon request, supply Aeomica with such information as is reasonably necessary to support the calculations contained in such invoice. APBiotech shall also permit Aeomica to have such access as it may reasonably request on reasonable notice to the books and records maintained by APBiotech in connection with the provision of the Research and Development services to enable Aeomica to verify such information. The parties shall use all reasonable endeavours (in conjunction with their appropriate professional advisers) to meet and discuss the basis of the calculations contained in such invoice but if they fail to reach agreement within twenty Business Days of delivery of the invoice, then, unless the parties agree otherwise, the dispute shall be referred to a partner of an independent internationally recognised firm of chartered accountants agreed upon by the parties or, failing agreement, to be selected by the president for the time being of the Institute of Chartered Accountants in England and Wales. The terms of reference set out in Clause 12 shall apply. 3.4 Aeomica shall have no right to set off any amounts owing to or alleged to be owing to it by APBiotech against unpaid invoices due to APBiotech. 3.5 Where Research and Development is conducted at the Cardiff site the related overhead would not include any element related to the costs of maintaining an NII licensed site. PLANT AND EQUIPMENT 4.1 Aeomica may request APBiotech to install new plant and equipment at the Site or make alterations to and improvements of the premises at the Site (the Premises). 4.2 APBiotech shall agree to any request of Aeomica made under Clause 4.1 unless it has reasonably determined that complying with such request would not be feasible or would be materially adverse to APBiotech as a result of APBiotech's obligations to comply with the requirements of the NII, any safety regulations or any relevant statutes (together, the Requirement Obligations). In that event, APBiotech shall, upon request, supply to Aeomica the details of such Requirement Obligations. The parties shall use all reasonable endeavours to meet and discuss the Requirement Obligations, but if they fail to reach agreement within twenty Business Days of APBiotech's refusal, then, unless the parties agreed otherwise, the dispute shall be referred to a partner of an independent internationally recognised firm of chartered accountants agreed upon by the parties or, failing agreement, to be selected by the president for the time being of the Institute of Chartered Accountants in England and Wales. The terms of reference set out in Clause 12 shall apply. Page 4 6 4.3 All cost of any new plant and equipment requested by Aeomica under Clause 4.1 and its installation and the cost of any capital expenditure at the Premises shall be borne by, and shall be the property of, Aeomica. LIABILITY 5.1 Without prejudice to any other limitation or exclusion of liability under this Agreement (and without prejudice to the rights of either party to sue the other for damages for breach of this Agreement): (a) APBiotech shall not be liable to Aeomica for any loss of profits or other indirect or consequential loss of any kind, as a result of the provision of the Research and Development services (excluding, for the avoidance of doubt, any loss or liability arising from death or personal injury due to the negligence of APBiotech); (b) the total liability of APBiotech to Aeomica in respect of any one event, or series of connected events, shall not exceed the total charges paid by Aeomica to APBiotech for the provision of the Research and Development services in the twelve month period prior to the occurrence of such event or series of events less any amount already paid in that period to Aeomica by APBiotech under any warranty, indemnity or other obligation under this Agreement or in respect of any breach of this Agreement. 5.2 Subject to Clause 6.1, APBiotech will indemnify Aeomica and hold it harmless from and against any claim or action (including reasonable litigation costs and expenses including reasonable legal fees), brought by any third party against Aeomica arising from any negligent or reckless act or omission on the part of APBiotech or any of the personnel of APBiotech. 5.3 Aeomica will indemnify APBiotech for any loss or damage (including reasonable litigation costs and expenses including reasonable legal fees) which APBiotech suffers as a result of any claim or action brought by a third party against APBiotech in respect of any Research and Development services provided by APBiotech hereunder, which claim or action has not arisen from any negligent or reckless act or omission on the part of APBiotech or any of the personnel of APBiotech. 5.4 Where Research and Development services are provided to Aeomica, Aeomica shall satisfy itself that Research and Development services are suitable for its use and, subject to clause 5.1, APBiotech shall not be liable in any way for the suitability of quality of any Research and Development services provided. CONFIDENTIALITY 6.1 Neither party shall, either during the period of this Agreement or at any subsequent time, disclose to any other person any information disclosed to it by the other party pursuant to this Agreement, and shall use its best Page 5 7 endeavours to keep the same confidential (whether marked as such or not), except as provided by clause 6.2 or 6.3. 6.2 Any of the information referred to in clause 6.1 may be disclosed to: (a) any governmental or other authority or regulatory body; or (b) any directors or employees of the party in question; to such extent only as is necessary for the purposes contemplated by this Agreement or as required by law. 6.3 Any of the information referred to in clause 6.1 may be used by the party in question for any purpose, or disclosed by that party to any other person, to the extent only that any part of it is now, or hereafter becomes, public knowledge through no fault of the party in question, provided that in doing so that party does not disclose any information which is not public knowledge. DURATION AND TERMINATION 7.1 This Agreement shall come into force with effect from 1 January 2001 and shall continue in force unless and until terminated in accordance with the following provisions of this clause 7. 7.2 Either party shall be entitled forthwith to terminate this Agreement by written notice to the other if: (a) that other party commits any material breach of any of the provisions of this Agreement (save for any breach which is caused by the party seeking to rely on it) and, in the case of such a breach which is capable of remedy, fails to remedy the same within 30 days after receipt of a written notice giving reasonable information concerning the breach; (b) an encumbrancer takes possession of, or a receiver is appointed over, a substantial proportion of the property or assets of that other party; (c) that other party makes any voluntary arrangement with its creditors or becomes subject to an administration order; or (d) that other party goes into liquidation (except for the purposes of an amalgamation, reconstruction or other reorganisation and in such manner that the company resulting from the reorganisation effectively agrees to be bound by or to assume the obligations imposed on that other party under this Agreement); or (e) that other party ceases, or is likely to cease, to carry on business. 7.3 For the purpose of Clause 7.2 (a), a breach shall be considered capable of remedy if the party in breach can comply with the provision in question in all respects other than as to the time of performance. Page 6 8 7.4 This Agreement may terminate at any time with the written agreement of all parties. 7.5 The obligation on APBiotech to provide Research and Development services to Aeomica subject to the other provisions of this clause 7, shall continue until 30 June 2001 (the Initial R&D Term) and thereafter until either party gives not less than six (6) months written notice to the other at any time after the Initial R&D Term. EFFECT OF TERMINATION 8.1 Upon the termination of this Agreement for any reason APBiotech shall cease all Research and Development and: (a) forthwith return to Aeomica any documents in its possession or control which contain or record any part of any Intellectual Property; (b) consent to the cancellation of any formal licence granted to it, or of any record of it in any register, in respect of any Intellectual Property of Aeomica; and, subject as provided in this clause and except in respect of any accrued rights, neither party shall have any further obligation to the other. 8.2 Subject (i) to the remainder of this clause 8 and to the obligations of the parties under Clauses 5.1, 5.2 and 6 which shall continue to have effect following termination; (ii) to any rights or obligations which have accrued prior to termination; and (iii) as otherwise expressly provided in this Agreement, upon the termination of this Agreement for any reason, neither party shall have any further obligation to the other under this Agreement. 8.3 Aeomica will reimburse APBiotech for such sums as may be certified by APBiotech as equal to any costs, expenses or other liabilities incurred by APBiotech as a result of the termination of the employment of any person involved in providing the Research and Development services. Any amounts payable by Aeomica under this clause shall be paid within twenty Business Days of delivery of invoice. 8.4 In the event that Aeomica disagrees with the amount of the actual costs referred to in clause 8.3 or any amount certified under clause 8.3, APBiotech shall upon request, supply Aeomica with such information as is reasonably necessary to support the calculations of such costs. APBiotech shall allow Aeomica to have such access as it may reasonably request on reasonable notice to the books and records maintained by APBiotech in connection with providing the Research and Development services to enable it to verify such information. The parties shall use all reasonable endeavours (in conjunction with their respective accountants) to meet and discuss the basis of the calculations of each cost but if they fail to reach agreement within twenty Business Days of delivery of the invoice, then, unless the parties agree otherwise, the dispute shall be referred to a partner of an independent Page 7 9 internationally recognised firm of chartered accountants agreed upon by the parties or, failing agreement, to be selected by the president for the time being of the Institute of Chartered Accountants in England and Wales. The terms of reference set out in clause 12 shall apply. NOTICES 9.1 All notices, requests, demands, or other communications made pursuant to this Agreement shall be made by telefax, overnight express courier or hand delivered against receipt to the applicable party as indicated below: (a) if to APBiotech, to: Fax No: 01494 542242 Address: Amersham Place Little Chalfont Buckinghamshire HP7 9NA For the attention of: J.A. Cooper (Company Secretary) (b) if to Aeomica, to: Fax No: 01494 542242 Address: Amersham Place Little Chalfont Buckinghamshire HP7 9NA For the attention of: R.E.B. Allnutt (Group Legal Adviser) 9.2 Communications shall be deemed to have been made upon receipt if by telefax, overnight express courier or by hand delivery, except that if any such communication is received on a day which is not a Business Day or after Business Hours shall be deemed to have been made at the opening of business on the first following day that is a Business Day. NATURE OF AGREEMENT 10.1 Nothing in this Agreement shall create, or be deemed to create, a partnership or joint venture between the parties. 10.2 Nothing in this Agreement shall constitute one party as the agent of any other party. 10.3 Nothing in this Agreement shall make any of the employees of one party the employees of any other party. 10.4 Any provision of this Agreement may be modified or amended or waived only by an instrument in writing signed by duly authorised representatives of each Page 8 10 of the parties, in the case of a modification or an amendment, or by the party against whom the waiver is to be effective, in the case of a waiver. 10.5 If any of the provisions of this Agreement is or becomes invalid, illegal or unenforceable, the validity, legality, or enforceability of the remaining provisions shall not in any way be affected or impaired. If any provision of this Agreement, or the application thereof to any person or entity or any circumstance, is invalid or unenforceable, the parties shall make suitable and equitable provision therefore in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision. TERMS OF REFERENCE FOR DISPUTES 11. In the event of a dispute arising under this Agreement, the following terms of reference shall apply: (a) the parties shall each use all reasonable endeavours to assist the firm to resolve the matter and to ensure that the independent firm has such access to all relevant working papers of each party as are reasonably necessary for the purpose; (b) any such independent firm shall act as an expert (and not as an arbitrator) in making any such determination which shall be binding on the parties; (c) the expenses of any such determination by an independent firm shall be borne between the parties in such proportions as the firm shall in its discretion determine. ARBITRATION AND GOVERNING LAW 12.1 In the event of any dispute between APBiotech and Aeomica arising in connection with this Agreement, the parties, shall use all reasonable endeavours to resolve the matter on an amicable basis. If one party serves formal written notice on the other that a material dispute of such a description has arisen and the parties are unable to resolve the dispute within a period of thirty (30) days from the service of such notice, then the dispute shall be referred to the respective chief executive officers of APBiotech and Aeomica with a view to the dispute being resolved as early as possible. 12.2 If any dispute is unresolved by the chief executive officers within a period of thirty (30) days from the date such referral of such dispute to them, such dispute may after the expiry of such period of thirty (30) days be referred by either party to and finally settled by arbitration under the Rules of the London Court of International Arbitration by one or more arbitrators appointed in accordance with those Rules. The place of arbitration shall be London. The language of arbitration proceedings shall be English. 12.3 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. Page 9 11 AS WITNESS this Agreement has been signed by the duly authorised representatives of the parties the day and year first before written. SIGNED by /s/ R E LONG ) for and on behalf of ) AMERSHAM PHARMACIA BIOTECH LIMITED ) in the presence of: ) SIGNED by /s/ R E LONG ) for and on behalf of ) GOLDARTIST LIMITED (trading as AEOMICA) ) in the presence of: ) Page 10 12 SCHEDULE 1 COSTS CRITERIA FOR CALCULATING THE COST OF RESEARCH AND DEVELOPMENT All expenditure related to discovery, development, clinical trials and regulatory approval of: (a) new products or services (b) new or extended indications for existing products or services together with expenditure associated with the acquisition, filing and defence of patents and other intellectual property up to the date of product launch. In the case of products which require a marketing licence to be granted by a regulatory authority before they can be sold, all expenditure incurred in order to obtain (but not to maintain) such a licence is considered shall be a Research and Development cost (other than consumables manufactured by APBiotech for resale). Expenditure includes payroll and related costs of employees; payments to third parties for extra-mural contract work; laboratory supplies and consumables; depreciation and expenses relating to laboratory facilities, equipment and pilot plants; costs associated with dossier preparation, translation and submission to regulatory agencies; payments to third parties for access to know-how, compounds, designs and technology; patent agent fees; costs or patent filing and of defending patents. For the purposes of this Agreement "Research and Development" will also include "Technical Support" which is defined as any expenditure which does not fall under the definition of Research and Development or Selling cost but which is related to:-- (a) the generation (other than by clinical trials) of supplementary information on products which have already been granted a marketing licence (in the case of products subject to licensing controls) or which have already been launched (in the case of all other products). (b) The technical promotion of such products. In the case of products which require a marketing licence to be granted by a regulatory authority before they can be sold, all expenditure incurred in order to maintain the validity of an existing licence is considered to be Technical Support Expense. Note that all clinical trial expenditure is considered to be Research and Development expense. Page 11 13 SCHEDULE 2 RESEARCH AND DEVELOPMENT THE R&D PROGRAM COMPRISES: o Research and Development in the fields of gene discovery and disease profiling using proteomics and genomics tools. o Project management and Research and Development activities regarding development and optimisation of experimental protocols for 2D protein gel and MS analysis of human tissue samples. Page 12 EX-10.25 16 y42738a1ex10-25.txt CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT 1 Exhibit 10.25 29 DECEMBER 2000 AMERSHAM PHARMACIA BIOTECH UK LIMITED NYCOMED AMERSHAM PLC _________________________________ CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT _________________________________ Page 13 2 THIS AGREEMENT is made on 29 December 2000 BETWEEN: 1. AMERSHAM PHARMACIA BIOTECH UK LIMITED whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (APBIOTECH); and 2. NYCOMED AMERSHAM PLC whose registered office is at Amersham Place, Little Chalfont, Buckinghamshire HP7 9NA (NYCOMED AMERSHAM). WHEREAS: APBiotech has been conducting and will continue to conduct research on behalf of Nycomed Amersham plc into the metabolic applications of Carbon 13 via the DMP method on the terms and conditions set out below. NOW IT IS AGREED as follows: INTERPRETATION 1.1 In this agreement, unless the context otherwise requires: APBIOTECH YEAR END is, in any one year, 31 December (or such other date as APBiotech may select from time to time); BUSINESS DAY means any day other than Saturday or Sunday or a Bank or Public Holiday; BUSINESS HOURS means the hours of 3:30 a.m. to 5:30 p.m.; DEVELOPMENTS means any development, enhancement or derivative of any Product, or its design or manufacturing process or services which arise out of the Research and Development; FORCE MAJEURE means in relation to either party, any circumstances beyond the reasonable control of that party (including, without limitation, any strike, lockout or similar form of industrial action); INTELLECTUAL PROPERTY RIGHTS means patents, trade marks, service marks, trade names, design rights, copyright (including rights in computer software), rights in know-how and other intellectual property rights, in each case whether registered or unregistered and including applications for the grant of any such rights and all rights or forms of protection having equivalent or similar effect anywhere in the world; LIBOR means the arithmetic mean (rounded upward to five decimal places) of the rates quoted by the principal office in London of Lloyds Bank plc and National Westminster Bank plc to leading banks in the London Interbank market at or about 11:00 a.m. on the relevant date for the offering of deposits in sterling for a one-month period; 3 NII means the United Kingdom Nuclear Installations Inspectorate; Products means any product for use in metabolic toxicology studies in drug development processes; Research and development means the research into and the development of the Products carried on at the Site by APBiotech under the terms of this Agreement as described in Schedule 2; Site means Cardiff Laboratories; Subsidiary means a subsidiary company as defined in the UK Companies Act 1985 (as amended). 1.2 References to statutory provisions shall, except where the context requires otherwise, be construed as references to those provisions as respectively amended or re-enacted or as their application is modified by other statutory provisions (whether before or after the date hereof) from time to time. 1.3 Headings are inserted for convenience only and shall not affect the construction of this Agreement or the Schedules hereto. SUPPLY OF RESEARCH AND DEVELOPMENT SERVICES 2.1 Following the exception of this Agreement, both parties shall nominate suitably qualified employees acceptable to each other to liaise on a continuing basis on matters concerning Research and Development and APBiotech shall, as a result of such meetings, undertake such Research and Development for Nycomed Amersham as Nycomed Amersham may (through such nominee) reasonably request. APBiotech shall be obliged to employ such additional manpower as Nycomed Amersham may request in order to carry out the Research and Development. 2.2 APBiotech shall use all reasonable endeavours to ensure that the personnel supplying the Research and Development services are suitably qualified. In connection with the supply of the Research and Development services hereunder, APBiotech will comply in all material respects with all applicable laws, regulations and safety guidelines of all governmental entities. 2.3 APBiotech and Nycomed Amersham agree that APBiotech may nominate any Subsidiary of APBiotech to provide the Research and Development services in favour of such Subsidiary of Nycomed Amersham as Nycomed Amersham may correspondingly nominate. 2.4 APBiotech shall not supply Research and Development services at the Site to any party other than Nycomed Amersham or such other parties as Nycomed Amersham may direct. 2.5 Without prejudice to the generality of clause 2.3: Page 2 4 (a) Nycomed Amersham shall provide APBiotech with details of any Development belonging to Nycomed Amersham which it wishes to be incorporated into Products or any other modification which it wishes to be made to the Products from time to time as a result of any Development; and (b) APBiotech shall provide Nycomed Amersham with details of any Development which is made, developed or acquired by APBiotech from time to time and, in particular, any such Development which improves any Product or extends the range of Products. 2.6 The title to and all Intellectual Property Rights in respect of any Development made, developed or acquired shall belong to Nycomed Amersham. For the avoidance of doubt, costs associated with patenting (including acquiring, filing and defending any patents or patent applications) or otherwise protecting any Intellectual Property Rights to which Nycomed Amersham is entitled (and which APBiotech undertakes on behalf of Nycomed Amersham) under this Agreement shall be borne by Nycomed Amersham. 2.7 This Agreement shall be deemed to have come into effect on, and shall include all Research and Development carried out from 1 July 1999. COSTS 3.1 o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o All prices quoted shall be exclusive of VAT or any other taxes or customs/excise duties and APBiotech shall be entitled to charge these items to Nycomed Amersham at the rate applicable at the date of invoice. Subject to any special terms agreed in writing between APBiotech and Nycomed Amersham; (a) APBiotech shall invoice Nycomed Amersham at the end of the following calendar month in respect of the Research and Development undertaken pursuant to this Agreement in the previous calendar month; and (b) Subject to Nycome Amersham's rights under this clause, Nycomed Amersham shall pay the price stated in each invoice submitted by APBiotech pursuant to sub-clause (a) above within 30 days of the date of the invoice. 3.2 If Nycomed Amersham shall not pay any amount on the due date therefrom in accordance with this Agreement, any amount unpaid shall bear interest at a rate of 1% above the rate from time to time of LIBOR from the date of due payment to and including the date of payment, whether before or after judgement. 3.3 In the event that Nycomed Amersham disagrees with any one invoice delivered by APBiotech pursuant to clause 3.1 above, APBiotech shall, upon Page 3 5 request, supply Nycomed Amersham with such information as is reasonably necessary to support the calculations contained in such invoice. APBiotech shall also permit Nycomed Amersham to have such access as it may reasonably request on reasonable notice to the books and records maintained by APBiotech in connection with the provision of the Research and Development services to enable Nycomed Amersham to verify such information. The parties shall use all reasonable endeavours (in conjunction with their appropriate professional advisers) to meet and discuss the basis of the calculations contained in such invoice but if they fail to reach agreement within twenty Business Days of delivery of the invoice, then, unless the parties agree otherwise, the dispute shall be referred to a partner of an independent internationally recognised firm of chartered accountants agreed upon by the parties or, failing agreement, to be selected by the president for the time being of the Institute of Chartered Accountants in England and Wales. The terms of reference set out in Clause 12 shall apply. 3.4 Nycomed Amersham shall have no right to set off any amounts owing to or alleged to be owing to it by APBiotech against unpaid invoices due to APBiotech. 3.5 Where Research and Development is conducted at the Cardiff site the related overhead would not include any element related to the cost of maintaining an NII licensed site. PLANT AND EQUIPMENT 4.1 Nycomed Amersham may request APBiotech to install new plant and equipment at the Site or make alterations to and improvements of the premises at the Site (the Premises). 4.2 APBiotech shall agree to any request of Nycomed Amersham made under Clause 4.1 unless it has reasonably determined that complying with such request would not be feasible or would be materially adverse to APBiotech as a result of APBiotech's obligations to comply with the requirements of the NII, any safety regulations or any relevant statutes (together, the Requirement Obligations). In that event, APBiotech shall, upon request, supply to Nycomed Amersham the details of such Requirement Obligations. The parties shall use all reasonable endeavours to meet and discuss the Requirement Obligations, but if they fail to reach agreement within twenty Business Days of APBiotech's refusal, then, unless the parties agreed otherwise, the dispute shall be referred to a partner of an independent internationally recognised firm of chartered accountants agreed upon by the parties or, failing agreement, to be selected by the president for the time being of the Institute of Chartered Accountants in England and Wales. The terms of reference set out in Clause 12 shall apply. 4.3 All cost of any new plant and equipment requested by Nycomed Amersham under Clause 4.1 and its installation and the cost of any capital expenditure at the Premises shall be borne by, and shall be the property of, Nycomed Amersham. Page 4 6 LIABILITY 5.1 Without prejudice to any other limitation or exclusion of liability under this Agreement (and without prejudice to the rights of either party to sue the other for damages for breach of this Agreement): (a) APBiotech shall not be liable to Nycomed Amersham for any loss of profits or other indirect or consequential loss of any kind, as a result of the provision of the Research and Development services (excluding, for the avoidance of doubt, any loss or liability arising from death or personal injury due to the negligence of APBiotech); (b) the total liability of APBiotech to Nycomed Amersham in respect of any one event, or series of connected events, shall not exceed the total charges paid by Nycomed Amersham to APBiotech for the provision of the Research and Development services in the twelve month period prior to the occurrence of such event or series of events less any amount already paid in that period to Nycomed Amersham by APBiotech under any warranty, indemnity or other obligation under this Agreement or in respect of any breach of this Agreement. 5.2 Subject to Clause 6.1, APBiotech will indemnify Nycomed Amersham and hold it harmless from and against any claim or action (including reasonable litigation costs and expenses including reasonable legal fees), brought by any third party against Nycomed Amersham arising from any negligent or reckless act or omission on the part of APBiotech or any of the personnel of APBiotech. 5.3 Nycomed Amersham will indemnify APBiotech for any loss or damage (including reasonable litigation costs and expenses including reasonable legal fees) which APBiotech suffers as a result of any claim or action brought by a third party against APBiotech in respect of any Research and Development services provided by APBiotech hereunder, which claim or action has not arisen from any negligent or reckless act or omission on the part of APBiotech or any of the personnel of APBiotech. 5.4 Where Research and Development services are provided to Nycomed Amersham, Nycomed Amersham shall satisfy itself that Research and Development services are suitable for its use and, subject to clause 5.1, APBiotech shall not be liable in any way for the suitability of quality of any Research and Development services provided. CONFIDENTIALITY 6.1 Neither party shall, either during the period of this Agreement or at any subsequent time, disclose to any other person any information disclosed to it by the other party pursuant to this Agreement, and shall use its best endeavours to keep the same confidential (whether marked as such or not), except as provided by clause 6.2 or 6.3. Page 5 7 6.2 Any of the information referred to in clause 6.1 may be disclosed to: (a) any governmental or other authority or regulatory body; or (b) any directors or employees of the party in question; to such extent only as is necessary for the purposes contemplated by this Agreement or as required by law. 6.3 Any of the information referred to in clause 6.1 may be used by the party in question for any purpose, or disclosed by that party to any other person, to the extent only that any part of it is now, or hereafter becomes, public knowledge through no fault of the party in question, provided that in doing so that party does not disclose any information which is not public knowledge. DURATION AND TERMINATION 7.1 This Agreement shall be deemed to have come into force on 1 July 1999 and shall continue in force unless and until terminated in accordance with the following provisions of this clause 7. 7.2 Either party shall be entitled forthwith to terminate this Agreement by written notice to the other if: (a) that other party commits any material breach of any of the provisions of this Agreement (save for any breach which is caused by the party seeking to rely on it) and, in the case of such a breach which is capable of remedy, fails to remedy the same within 30 days after receipt of a written notice giving reasonable information concerning the breach; (b) an encumbrancer takes possession of, or a receiver is appointed over, a substantial proportion of the property or assets of that other party; (d) that other party goes into liquidation (except for the purposes of an amalgamation, reconstruction or other reorganisation and in such manner that the company resulting from the reorganisation effectively agrees to be bound by or to assume the obligations imposed on that other party under this Agreement); or (e) that other party ceases, or is likely to cease, to carry on business. 7.3 For the purpose of Clause 7.2 (a), a breach shall be considered capable of remedy if the party in breach can comply with the provision in question in all respects other than as to the time of performance. 7.4 The Agreement may terminate at any time with the written agreement of all parties. Page 6 8 EFFECT OF TERMINATION 8.1 Upon the termination of this Agreement for any reason APBiotech shall cease all Research and Development and: (a) forthwith return to Nycomed Amersham any documents in its possession or control which contain or record any part of any Intellectual Property; (b) consent to the cancellation of any formal licence granted to it, or of any record of it in any register, in respect of any Intellectual Property of Nycomed Amersham; and, subject as provided in this clause and except in respect of any accrued rights, neither party shall have any further obligation to the other. 8.2 Subject (i) to the remainder of this clause 8 and to the obligations of the parties under Clauses 5.1, 5.2 and 6 which shall continue to have effect following termination; (ii) to any rights or obligations which have accrued prior to termination; and (iii) as otherwise expressly provided in this Agreement, upon the termination of this Agreement for any reason, neither party shall have any further obligation to the other under this Agreement. 8.3 Nycomed Amersham will reimburse APBiotech for such sums as may be certified by APBiotech as equal to any costs, expenses or other liabilities incurred by APBiotech as a result of the termination of the employment of any person involved in providing the Research and Development services. Any amounts payable by Nycomed Amersham under this clause shall be paid within twenty Business Days of delivery of invoice. 8.4 In the event that Nycomed Amersham disagrees with the amount of the actual costs referred to in clause 8.3 or any amount certified under clause 8.3, APBiotech shall upon request, supply Nycomed Amersham with such information as is reasonably necessary to support the calculations of such costs. APBiotech shall allow Nycomed Amersham to have such access as it may reasonably request on reasonable notice to the books and records maintained by APBiotech in connection with providing the Research and Development services to enable it to verify such information. The parties shall use all reasonable endeavours (in conjunction with their respective accountants) to meet and discuss the basis of the calculations of each cost but if they fail to reach agreement within twenty Business Days of delivery of the invoice, then, unless the parties agree otherwise, the dispute shall be referred to a partner of an independent internationally recognised firm of chartered accountants agreed upon by the parties or, failing agreement, to be selected by Page 7 9 the president for the time being of the Institute of Chartered Accountants in England and Wales. The terms of reference set out in clause 12 shall apply. NOTICES 9.1 All notices, requests, demands, or other communications made pursuant to this Agreement shall be made by telefax, overnight express courier or hand delivered against receipt to the applicable party as indicated below: (a) if to APBiotech, to: Fax No: 01494 542242 Address: Amersham Place Little Chalfont Buckinghamshire HP7 9NA For the attention of: J.A. Cooper (Company Secretary) (b) if to Nycomed Amersham, to: Fax No: 01494 542242 Address: Amersham Place Little Chalfont Buckinghamshire HP7 9NA For the attention of: R.E.B. Allnutt (Group Legal Adviser) 9.2 Communications shall be deemed to have been made upon receipt if by telefax, overnight express courier or by hand delivery, except that if any such communication is received on a day which is not a Business Day or after Business Hours shall be deemed to have been made at the opening of business on the first following day that is a Business Day. NATURE OF AGREEMENT 10.1 Nothing in this Agreement shall create, or be deemed to create, a partnership or joint venture between the parties. 10.2 Nothing in this Agreement shall constitute one party as the agent of any other party. 10.3 Nothing in this Agreement shall make any of the employees of one party the employees of any other party. 10.4 Any provision of this Agreement may be modified or amended or waived only by an instrument in writing signed by duly authorised representatives of each of the parties, in the case of a modification or an amendment, or by the party against whom the waiver is to be effective, in the case of a waiver. Page 8 10 10.5 If any the provisions of this Agreement is or becomes invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired. If any provision of this Agreement, or the application thereof to any person or entity or any circumstance, is invalid or unenforceable, the parties shall make suitable and equitable provision therefore in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision. TERMS OF REFERENCE FOR DISPUTES 11. In the event of a dispute arising under this Agreement, the following terms of reference shall apply: (a) the parties shall each use all reasonable endeavours to assist the firm to resolve the matter and to ensure that the independent firm has such access to all relevant working papers of each party as are reasonably necessary for the purpose; (b) any such independent firm shall act as an expert (and not as an arbitrator) in making any such determination which shall be binding on the parties; (c) the expenses of any such determination by an independent firm shall be borne between the parties in such proportions as the firm shall in its discretion determine. ARBITRATION AND GOVERNING LAW 12.1 In the event of any dispute between APBiotech and Nycomed Amersham arising in connection with this Agreement, the parties, shall use all reasonable endeavours to resolve the matter on an amicable basis. If one party serves formal written notice on the other that a material dispute of such a description has arisen and the parties are unable to resolve the dispute within a period of thirty (30) days from the service of such notice, then the dispute shall be referred to the respective chief executive officers of APBiotech and Nycomed Amersham with a view to the dispute being resolved as early as possible. 12.2 If any dispute is unresolved by the chief executive officers within a period of thirty (30) days from the date such referral of such dispute to them, such dispute may after the expiry of such period of thirty (30) days be referred by either party to and finally settled by arbitration under the Rules of the London Court of International Arbitration by one or more arbitrators appointed in accordance with those Rules. The place of arbitration shall be London. The language of arbitration proceedings shall be English. 12.3 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. Page 9 11 AS WITNESS this Agreement has been signed by the duly authorised representatives of the parties the day and year first before written. SIGNED by /s/ R.E.B. Allnutt ) for and on behalf of ) AMERSHAM PHARMACIA BIOTECH UK LIMITED ) in the presence of: ) SIGNED by /s/ R.E.B. Allnutt ) for and on behalf of ) NYCOMED AMERSHAM PLC ) in the presence of: ) Page 10 12 SCHEDULE 1 COSTS CRITERIA FOR CALCULATING THE COST OF RESEARCH AND DEVELOPMENT All expenditure related to discovery, development, clinical trials and regulatory approval of: (a) new products or services (b) new or extended indications for existing products or services together with expenditure associated with the acquisition, filing and defence of patents and other intellectual property up to the date of product launch. In the case of products which require a marketing licence to be granted by a regulatory authority before they can be sold, all expenditure incurred in order to obtain (but not to maintain) such a licence is considered shall be a Research and Development cost (other than consumables manufactured by APBiotech for resale). Expenditure includes payroll and related costs of employees; payments to third parties for extra-mural contract work; laboratory supplies and consumables; depreciation and expenses relating to laboratory facilities, equipment and pilot [plants; costs associated with dossier preparation, translation and submission to regulatory agencies; payments to third parties for access to know-how, compounds, designs and technology; patent agent fees; costs or patent filling and of defending patents. For the purposes of this Agreement "Research and Development" will also include "Technical Support" which is defined as any expenditure which does not fall under the definition of Research and Development or Selling cost but which is related to:-- (a) the generation (other than by clinical trials) of supplementary information on products which have already been granted a marketing licence (in the case of products subject to licensing controls) or which have already been launched (in the case of all other products). (b) The technical promotion of such products. In the case of products which require a marketing licence to be granted by a regulatory authority before they can be sold, all expenditure incurred in order to maintain the validity of an existing licence is considered to be Technical Support Expense. Note that all clinical trial expenditure is considered to be Research and Development expense. Page 11 13 SCHEDULE 2 RESEARCH AND DEVELOPMENT THE R&D PROGRAM COMPRISES: o Proof of concept studies of molecular detection using o techniques and development of algorithms for the assignment of structure to decomposition products or metabolics of target substrates. o NMR structural analysis. Page 12 EX-21 17 y42738a1ex21.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT(1)
NAME COUNTRY OF INCORPORATION - ------------------------------------------------------------ ------------------------ Amersham Pharmacia Biotech Limited.......................... England Amersham Pharmacia Biotech Inc.............................. United States Amersham Pharmacia Biotech Holding AB....................... Sweden Amersham Pharmacia Biotech UK Limited....................... England Amersham Pharmacia Biotech Holdings Inc..................... Canada Praelux Inc................................................. United States Amersham Nederland BV....................................... The Netherlands Amersham Pharmacia Biotech Asia Pacific Limited............. Hong Kong Amersham Pharmacia Biotech AB............................... Sweden Amersham Pharmacia Biotech Australia Pty Ltd................ Australia Imaging Research Inc (51%).................................. Canada Molecular Dynamics Inc...................................... United States PK Chemicals A/S............................................ Denmark Amersham Pharmacia Biotech Limited.......................... China Amersham New Zealand Limited................................ New Zealand Cimarron Inc (20%).......................................... United States Amersham Pharmacia Biotech Korea Limited.................... Korea Amersham Pharmacia Biotech do Brazil Limitada............... Brazil United States Biochemical Corporation....................... United States Amersham Pharmacia Biotech KK............................... Japan Hoefer Pharmacia Biotech Inc................................ United States Amersham Pharmacia Biotech Canada Inc....................... Canada Amersham Pharmacia Biotech AS............................... Norway Amersham Pharmacia Biotech Export GmbH...................... Austria Amersham Pharmacia Biotech (Shanghai) Co Ltd................ China Amersham Pharmacia Biotech Europe GmbH...................... Germany Amersham Pharmacia Biotech Argentina SA..................... Argentina
- ------------ (1) All subsidiaries are 100% owned, except where stated. EX-23.1 18 y42738a1ex23-1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-1 of our report dated February 23, 2001 relating to the financial statements of Amersham Pharmacia Biotech Ltd. and subsidiaries, which appear in such Registration Statement. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Registration Statement. /s/ PRICEWATERHOUSECOOPERS LLP - --------------------------------------------------------- Florham Park, NJ February 26, 2001 EX-23.2 19 y42738a1ex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-1 of our report dated February 23, 2001, relating to the balance sheet of APBiotech Inc., which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PRICEWATERHOUSECOOPERS LLP - --------------------------------------------------- Florham Park, New Jersey February 26, 2001 -----END PRIVACY-ENHANCED MESSAGE-----