Indemnity Escrow Agreement

INDEMNITY ESCROW AGREEMENT


INDEMNITY ESCROW AGREEMENT, dated as of October 31, 1997 (this "Escrow Agreement"), by and among Beckman Instruments, Inc., a Delaware corporation ("Buyer"), the Persons listed on Annex A hereto ("Sellers") and The First National Bank of Chicago, a national banking association, as escrow agent (the "Escrow Agent"). Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to them in that certain Stock Purchase Agreement (the "Agreement"), dated as of August 29, 1997, by and among Buyer, Sellers and Coulter Corporation, a Delaware corporation (the "Company").


W I T N E S S E T H


WHEREAS the Agreement provides, among other things, for the purchase by Buyer from each of the Sellers of all outstanding shares of common stock of the Company owned by such Seller;


WHEREAS, pursuant to the Agreement, Sellers and Buyer have agreed to enter into this Escrow Agreement with the Escrow Agent for the purposes of securing certain of Buyer's rights under the Agreement;


WHEREAS, pursuant to the terms of the Agreement, Buyer is depositing $50,000,000 (the "Escrow Deposit" and together with all interest thereon not paid from the escrow pursuant hereto, the "Escrow Fund") with the Escrow Agent on the Closing Date, to be held in escrow pursuant to the terms and subject to the conditions set forth in this Escrow Agreement; and


NOW, THEREFORE, in consideration of the consummation of the transactions contemplated by the Agreement and the mutual covenants and agreements set forth herein and therein, each of the Sellers and Buyer agree as follows, and, in consideration of the mutual covenants set forth herein, the Escrow Agent agrees as follows:


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1. The Escrow Fund.


Set forth opposite each Seller's name on Annex A is a dollar amount equal to such Seller's portion of the Escrow Deposit. Upon the execution of this Escrow Agreement, Buyer is delivering to the Escrow Agent $50,000,000, constituting, in the aggregate, the Escrow Deposit. The receipt of the Escrow Deposit will be acknowledged by the Escrow Agent in the form of a receipt. An additional amount may be deposited in the Escrow Fund by each of the Sellers in the proportions set forth on Annex A hereto to replenish any payment made from the Escrow Fund pursuant to the purchase price adjustment set forth in the Agreement. The Escrow Agent will acknowledge any such deposit in the form of a receipt, but shall have no duty to determine the sufficiency thereof.


2. Investments.


The Escrow Agent will hold the Escrow Fund. Each of the Sellers shall be responsible for all tax reporting with respect to the Escrow Fund and shall pay any and all tax liabilities arising with respect to the Escrow Deposit, if any, and income generated by the Escrow Fund pro rata in proportion to such Seller's percentage interest in the Total Purchase Price as set forth on Annex A. By execution and delivery hereof the Sellers hereby direct the Escrow Agent to invest the Escrow Deposit only in, or in money market or mutual funds invested exclusively in, securities or direct obligations of, or obligations the timely payment of the principal and interest on which is fully guaranteed by, the United States of America or its Agencies, and which have an ending maturity of 397 days or less. On April 30, 1998 and on each six-month anniversary of the date of this Escrow Agreement thereafter (each, an "Income Calculation Date"), the Escrow Agent will calculate the amount of distributable income (the "Distributable Income") included in the Escrow Fund as of such Income Calculation Date. On any applicable Income Calculation Date the Distributable Income shall be any positive sum calculated in accordance with the following formula:


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Distributable Income = Aggregate Balance -- ($50,000,000 -
Payout Amounts)


where:


"Aggregate Balance" means the aggregate value of the Escrow
Fund as of the Income Calculation Date, with the value of any
securities in the Escrow Fund being determined on a
marked-to-market basis as of such Income Calculation Date.


"Payout Amounts" means the aggregate amount of any funds paid
out of the Escrow Fund to, as applicable, (i) Buyer, pursuant
to a Final Determination, and (ii) Seller pursuant to Section
3(a) hereof. The foregoing notwithstanding, no amount paid out
of the Escrow Fund pursuant to the provisions of Section
2.5(b) of the Agreement shall be considered a "Payout Amount"
for purposes of this definition or this Escrow Agreement.


If an Income Calculation Date is not a Business Day, the next following Business Day shall be deemed to be the Income Calculation Date. On the third Business Day following each Income Calculation Date, the Escrow Agent shall pay to each Seller pro rata in proportion to such Seller's percentage interest in the Total Purchase Price as set forth on Annex A, any Distributable Income.


3. Release of the Escrow Fund. The Escrow Agent will hold the Escrow Fund in its possession until authorized hereunder to distribute any specified portion thereof, as follows:


(a) On the second anniversary of the Closing Date, the Escrow Agent shall distribute to the Sellers in accordance with each such Seller's pro rata share of the


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4 Total Purchase Price one-half (1/2) of the amount of the funds in the Escrow Fund, and on the third anniversary of the Closing Date, the Escrow Agent shall distribute to the Sellers in accordance with each such Seller's pro rata share of the Total Purchase Price the total amount remaining in the Escrow Fund, in each case less any amounts then reserved pursuant to clause (b) below with respect to any unresolved or disputed claims for Damages made by Buyer hereunder.


(b) Notwithstanding the provisions of Section 3(a) hereof, upon written notice from Buyer to the Escrow Agent and the Sellers that, pursuant to Section 10.2 of the Agreement, Buyer is asserting against Sellers a right of indemnity with respect to Damages (which notice shall state whether or not such Damages arise from the assertion of liability by a third party (a "Third Party Claim")) (each a "Claim for Damages"), the Escrow Agent shall reserve an amount of the Escrow Fund as shall be reasonably necessary (taking into account the potential amount of the likely exposure) to pay the Damages as so specified in the Claim for Damages (or, if such amount exceeds the remaining balance in the Escrow Fund, the entire balance of the Escrow Fund) and continue to hold such amount in escrow in accordance with paragraphs (c) and (d) below; provided, however, that, should the Buyer and the Sellers agree, as evidenced by written instructions to the Escrow Agent signed by each of them, that a specified amount be reserved in settlement of any contingent claim, the Escrow Agent shall reserve that specified amount in accordance with such instructions and such specified amount shall be deemed to be the "reasonably necessary" amount to be reserved. The Escrow Agent shall have no liability to either Buyer or Sellers for any shortfall resulting from an incorrect reservation of moneys in the Escrow Fund unless such shortfall is caused by the gross negligence or willful misconduct of the Escrow Agent with respect to such estimation. Buyer shall deliver any notice hereunder to the Sellers in accordance with Section 9 hereof and with the notice provisions in Section 11.9 of the Agreement.


(c) Upon delivery by Buyer of a Claim for Damages to the Escrow Agent and the Sellers in accordance with


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5 paragraph (b) above, the Sellers shall have thirty calendar days from the date such notice is deemed to be received hereunder to notify the Escrow Agent and Buyer that the Sellers dispute (i) whether the Agreement provides Buyer with a contractual right to indemnity for the claims asserted in such Claim for Damages and (ii) in the case of a claim other than a Third Party Claim, the amount of Damages set forth in such Claim for Damages. Notwithstanding the foregoing, any notice by the Sellers under clause (i) shall be deemed withdrawn if the Sellers deliver notice to Buyer of their intent to undertake, conduct or control the proceedings related to the Third Party Claim which is the subject of such Claim for Damages. The Escrow Agent shall keep reserved, and not distribute, that part of the Escrow Fund equal to the amount reserved pursuant to paragraph (b) above with respect to any Claims for Damages until such dispute has been resolved in accordance with Section 5 hereof or there has been a Final Determination, as applicable, and notice of such resolution or Final Determination, as the case may be, including the amount, if any, to be distributed or remain reserved in respect of such disputed Claim for Damages, has been delivered to the Escrow Agent.


(d) Upon notice to the Escrow Agent of a Final Determination setting forth the amount of the Damages, the Escrow Agent shall promptly distribute to Buyer from the Escrow Fund an amount, if any, equal to such Final Determination of Damages.


4. Final Determination. For the purpose of this Escrow Agreement, a "Final Determination" shall mean (a) in the case of Damages resulting from a Third Party Claim, a written compromise or settlement signed by the parties thereto, an arbitration award, or an order, decree, or judgment of a court of competent jurisdiction, or (b) in the case of Damages not resulting from a Third Party Claim, (i) if the Sellers have not delivered a notice of dispute of a Claim for Damages in accordance with Section 3(c) or does not dispute a portion of the Damages set forth therein, such Claim for Damages with respect to the Damages or portion thereof; provided that such Claim for Damages sets forth the


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6 Damages with specificity, and if not, such later notice which sets forth the Damages with specificity, or (ii) if the Sellers have delivered a notice of dispute of a ...