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PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT AND DISMISSAL OF THE ABOVE-CAPTIONED
SHAREHOLDER DERIVATIVE ACTION (THE ACTIONS ) AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS. YOUR RIGHTS MAY BE AFFECTED BY THESE LEGAL PROCEEDINGS. IF THE COURT APPROVES THE SETTLEMENT, YOU WILL BE FOREVER BARRED FROM
CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE RELEASED CLAIMS.
IF YOU HOLD BIO-RAD COMMON STOCK FOR THE
BENEFIT OF ANOTHER, PLEASE PROMPTLY TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL OWNER.
Notice is hereby provided to you of the proposed
settlement (the Settlement ) of this shareholder derivative litigation and a shareholder derivative action pending in the Delaware Chancery Court. This Notice is provided by Order of the Superior Court of California for the County of
Contra Costa (the Court ). It is not an expression of any opinion by the Court with respect to the truth of the allegations in the litigation or merits of the claims or defenses asserted by or against any party. It is solely to notify you
of the terms of the proposed Settlement, and your rights related thereto. The terms of the proposed Settlement are set forth in a written Stipulation and Agreement of Settlement dated November 4, 2016 ( Stipulation ).1 A link to the Form 8-K filed with the SEC containing the text of the Stipulation may be found on Bio-Rad s website at the Investor Relations page at
Your rights may be affected by the settlement of
the actions styled City of Riviera Beach General Employees Retirement System v. Schwartz, et al., Case No. C-15-00140, pending before the Superior Court of California for the County of Contra Costa; and In re Bio-Rad Laboratories,
Inc. Stockholder Litigation, Consol. Case No. 11387-VCS, pending before the Chancery Court of the State of Delaware (together, the Actions ). Plaintiffs (on behalf of themselves and derivatively on behalf of Bio-Rad), the
Individual Defendants and Nominal Defendant Bio-Rad have agreed upon terms to settle the above-referenced litigation and have signed the Stipulation setting forth those settlement terms.
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
On March 2, 2017, at 9:00 a.m., the Court will hold a hearing (the Settlement
Hearing ) in the Actions. The purpose of the Settlement Hearing is to determine: (i) whether the Settlement is fair, reasonable and adequate, including the separately negotiated amount of attorneys fees and expenses for
Plaintiffs Counsel, and should be finally approved; (ii) whether a final judgment should be entered and the Actions dismissed with prejudice pursuant to the Stipulation; and (iii) such other matters as may be necessary or proper
under the circumstances.
These shareholder derivative actions arise out of the
Individual Defendants alleged breaches of fiduciary duty. In particular, while the Individual Defendants served as directors of Bio-Rad, Bio-Rad violated the books and records provisions of the FCPA with respect to certain aspects of its
operations in Russia, Thailand and Vietnam, resulting in enforcement action by the United States Securities and Exchange Commission and the United States Department of Justice. Ultimately, Bio-Rad paid $55 million to resolve the FCPA enforcement
On April 13, 2011, plaintiff City of Riviera Beach General
Employees Retirement System ( City of Riviera Beach ) commenced its shareholder derivative action on behalf of Bio-Rad for alleged breaches of fiduciary duty by certain Bio-Rad directors. Based on Bio-Rad s violations of the
FCPA, the complaint alleged, among other things, that the Individual Defendants breached their fiduciary duties by failing to implement internal control for compliance with the FCPA. The Court dismissed the complaint filed by City of Riviera Beach
in 2011 for failure to plead demand futility under Delaware law, but granted City of Riviera Beach leave to amend.
City of Riviera Beach
filed its second complaint on January 23, 2015. On April 23, 2015, the Individual Defendants and Bio-Rad demurred to City of Riviera Beach s second complaint, arguing that a pre-suit demand upon the Bio-Rad Board of Directors was not
excused. On June 8, 2015, City of Riviera Beach opposed the demurrer, arguing that a demand was unnecessary because the Board failed to adopt any FCPA controls.
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
On August 17, 2015, the Court dismissed City of Riviera Beach s second complaint
without prejudice and with leave to amend. The Court concluded, among other things, that the complaint alleged only that Bio-Rad lacked sufficient FCPA controls and did not allege a sustained or systemic failure of oversight. The Court therefore
held Bio-Rad s directors did not face a risk of liability that excused a pre-suit demand.
On September 4, 2015, to address the
pleading issues, City of Riviera Beach made a demand upon the Bio-Rad Board to investigate the Individual Defendants culpability for the Company s FCPA violations. On September 4, 2015, City of Riviera Beach also filed a third
complaint, alleging, among other things, that it had made a demand upon the Bio-Rad Board. Further, on September 8, 2015, City of Riviera Beach filed a motion to stay the California action pending the completion of the investigation into the
On October 6, 2015, the Individual Defendants and Bio-Rad demurred to the Amended Complaint and filed an opposition to
plaintiff s motion to stay. City of Riviera Beach subsequently responded to both pleadings in writing.
Thereafter, the Court
scheduled a hearing on the demurrer and motion to stay for November 19, 2015. However, before the hearing, the parties agreed to explore a potential resolution of the derivative claims.
In January 2015, pursuant to 8 Del. C. 220, each of the
plaintiffs, International Brotherhood of Electrical Workers Local No. 38 Pension Fund and Wayne County Employees Retirement System (together, Delaware Plaintiffs ), lodged a books and records inspection demand upon Bio-Rad,
requesting documents designed to reveal the Board s role in Bio-Rad s FCPA violations. The Company denied both requests. As a result, on April 21, 2015, and May 1, 2015, respectively, each of the Delaware Plaintiffs then filed a
lawsuit in the Delaware Court alleging that Bio-Rad had wrongfully denied the Delaware Plaintiffs access to the demanded materials. These two cases were consolidated on May 26, 2015. After further discussions, the Delaware Plaintiffs and the
Company reached an agreement requiring Bio-Rad to produce some of the requested documents, and the consolidated books and records action was voluntarily dismissed on July 27, 2015. Attorneys for the Delaware Plaintiffs
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
reviewed the materials Bio-Rad produced in response to their books and records demand. After their review, the Delaware Plaintiffs determined that it was in the best interests of the Company to
file shareholder derivative actions against the directors responsible for the corporate misconduct at Bio-Rad.
2015, the Delaware Plaintiffs each filed a shareholder derivative action against the Individual Defendants for breach of fiduciary duty and unjust enrichment. See Int l Bhd. of Elec. Workers Local 38 Pension Fund v. Schwartz, et al.,
C.A. No. 11387-VCN (Del. Ch.); Wayne Cnty. Emps. Ret. Sys. v. Schwartz, et al., C.A. No. 11390-VCN (Del. Ch.). On August 27, 2015, the Delaware Court consolidated the two Delaware derivative lawsuits into the current
consolidated Delaware Action. Before the Individual Defendants answer or other response to Delaware Plaintiffs complaint was due, the parties to the Delaware Action represented to the Delaware Court that they had planned mediation. The
parties to the Delaware Action requested a stay of the Delaware Action, which the Delaware Court granted on November 2, 2015. The parties to the Delaware Action have provided regular status updates to the Delaware Court during the pendency of
settlement discussions.
Beginning in October 2015, representatives of
Plaintiffs, the Individual Defendants and Bio-Rad commenced negotiations regarding possible resolution of the Actions. Ultimately, these parties engaged in a formal mediation process before the Honorable Layn R. Phillips, U.S. District Court Judge
(Ret.), which culminated in an all-day, in-person mediation session on March 1, 2016, in Newport Beach, California. Although the mediation did not produce a resolution, the settlement negotiations continued, with the assistance of Judge
Phillips. As a result of these arm s-length settlement negotiations, Plaintiffs, the Individual Defendants and Bio-Rad reached an agreement-in-principle for the resolution of the Actions.
Derivative Litigation Mediation Committee of the Board, which is composed of independent Bio-Rad directors, exercised their business judgment and have unanimously approved the Settlement and each of its terms, including the attorneys fees and
expenses provision as in the best interest of Bio-Rad and its shareholders.
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
The principal terms, conditions and other
matters that are part of the Settlement, which is subject to approval by the Court, are summarized below. This summary should be read in conjunction with, and is qualified in its entirety by reference to, the text of the Stipulation, which has been
filed with the Court and is available at a link on Bio-Rad s website at the Investor Relations page at http://www.bio-rad.com/en-us/corporate/investor-relations.
In connection with the Settlement of the Actions, Bio-Rad shall adopt and maintain the corporate governance measures described below within
sixty (60) days after the Court s approval of the proposed Settlement. The corporate governance reforms shall remain in effect for not fewer than five (5) years from that date and shall not be altered without a Court order.
Bio-Rad and the Individual Defendants acknowledge and agree that the corporate governance policies set forth below confer substantial benefits
upon Bio-Rad and its shareholders. Bio-Rad and the Individual Defendants also acknowledge that the commencement, prosecution, and settlement of the Actions were material and substantial factors in the Company s decision to adopt, implement, and
maintain the corporate governance reforms set forth below.
CORPORATE GOVERNANCE POLICIES
Bio-Rad shall establish and operate a Compliance Committee of the Bio-Rad Board of Directors consistent with the terms set
forth in the Compliance Committee Charter (Subsection III.B below) and the Compliance Committee Policies and Procedures (Subsection II.C below). The Compliance Committee shall be comprised of three (3) independent non-executive directors,
provided that at least four (4) members of the Bio-Rad Board are independent. If at any time the Bio-Rad Board has fewer than four (4) independent directors, the Compliance Committee may consist of two (2) Members.
The Compliance Committee shall adopt policies and procedures that will have the purpose of establishing the legal, regulatory
and ethical compliance practices and policies of the Company to be in accordance with the applicable laws and regulations.
No later than twenty (20) calendar days before the date of the Settlement Hearing, Bio-Rad shall inform Plaintiffs
Counsel of the identity of the independent non-executive directors to be appointed to the Compliance Committee. Plaintiffs Counsel shall inform Bio-Rad s Counsel of their consent to the appointments within three (3) days of notice by
Bio-Rad s Counsel. The initial members of the Compliance Committee shall serve for a minimum term of one-year from the date of the Committee s establishment.
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
The membership of the Legal and Regulatory
Compliance Committee (the Compliance Committee ) shall be determined by the board of directors of the Company (the Board ) and shall consist of at least three (3) independent nonexecutive members, each of whom is a member
of the Board and provided at least four members of the Board are independent (each, a Member ). If the Board has fewer than four independent members, the Compliance Committee may consist of two (2) independent nonexecutive Members.
In such event, both members must be present to establish a quorum. To be considered independent, a Member must meet the applicable independence requirements of the New York Stock Exchange. The Compliance Committee shall be operative for at least
five (5) years from implementation.
The Board shall elect or appoint a Member to be the chairperson of the
Compliance Committee (the Chairperson ). The Board may remove a Member at any time, with or without cause, provided however that the initial members of the Compliance Committee shall serve for a minimum of one year from the
Committee s establishment.
The purpose of the Compliance Committee is to assist
the Board with its oversight of the Company s compliance with the Foreign Corrupt Practice Act of 1977 ( FCPA ) and other anti-corruption, anti-kickback and false-claims laws, as well as the Company s Compliance Program and
related compliance policies, as further described in the Authority and Process section below.
authority delegated to the Compliance Committee in this Charter, the Compliance Committee may exercise any other powers delegated to it by the Board from time to time consistent with the Company s bylaws. The authority delegated by the Board to
the Compliance Committee in this Charter or otherwise shall be exercised and carried out by the Compliance Committee as it deems appropriate without requirement of Board approval. While acting within the scope of the powers delegated to it, the
Compliance Committee shall have and may exercise all the powers and authority of the Board.
The Compliance Committee shall adopt the Legal
and Regulatory Compliance Committee Policies and Procedures (set forth below) to carry out the responsibilities set forth in this Charter. Such policies and procedures will have the purpose of causing the legal, regulatory and ethical compliance
practices and policies of the Company to be in accordance with all applicable laws and regulations.
Committee may retain independent counsel, experts or advisors that the Compliance Committee believes to be necessary or appropriate. The Compliance Committee may request and meet privately with any member of the Company s senior management team
or any other Company employee. The Compliance Committee will also have the right to use the services of the Company s regular legal counsel or other advisors to the Company. The Company shall provide for appropriate funding, to pay the
Compliance Committee s expenses in conducting its operations. The Compliance Committee may conduct or authorize investigations into any matters within the scope of the authority delegated it.
NOTICE OF PROPOSED DERIVATIVE SETTLEMENT
The Compliance Committee shall have the authority to: