<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1996
REGISTRATION NO. 333-02953
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERISOURCE HEALTH CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 23-2546940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
------------------------
300 CHESTER FIELD PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 296-4480
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
TERESA T. CICCOTELLI, ESQ.
AMERISOURCE HEALTH CORPORATION
300 CHESTER FIELD PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 296-4480
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
CRAIG L. GODSHALL, ESQ. JOHN J. SCHUSTER, ESQ.
DECHERT PRICE & RHOADS CAHILL GORDON & REINDEL
4000 BELL ATLANTIC TOWER 80 PINE STREET
1717 ARCH STREET NEW YORK, NEW YORK 10005
PHILADELPHIA, PENNSYLVANIA 19103
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED MAY 21, 1996
4,800,000 SHARES
LOGO
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
------------------------
Of the 4,800,000 shares of Common Stock offered, 3,800,000 shares are being
offered hereby in the United States and 1,000,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
Of the 4,800,000 shares of Common Stock offered, 1,500,000 shares are being
sold by the Company and 3,300,000 shares are being sold by the Selling
Stockholders. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of the shares being sold by the Selling Stockholders.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "AAS", subject to official notice of issuance. The
Company expects the Common Stock to commence trading on the New York Stock
Exchange on May 28, 1996, or shortly thereafter. Currently, the Common Stock is
quoted on the Nasdaq National Market under the symbol "ASHC". On April 25, 1996,
the last reported sale price for the Company's Common Stock on the Nasdaq
National Market was $37.50 per share. See "Price Range of Common Stock and
Dividend Policy".
SEE "RISK FACTORS" ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
Total (3)......................... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) A Selling Stockholder has granted the U.S. Underwriters an option for 30
days to purchase up to an additional 570,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, a Selling Stockholder has granted the
International Underwriters a similar option with respect to an additional
150,000 shares as part of the concurrent international offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Selling Stockholders will be
$ , $ and $ , respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that certificates for the shares will be
ready for delivery in New York, New York on or about May , 1996, against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
WHEAT FIRST BUTCHER SINGER
------------------------
The date of this Prospectus is May , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE> 3
LOGO
[INSERT MAP ON INSIDE FRONT COVER]
<TABLE>
<S> <C> <C>
NORTHEAST REGION WESTERN REGION
Harrisburg, PA Idaho Falls, ID
Springfield, MA Joplin, MO
Thorofare, NJ Minneapolis, MN
Phoenix, AZ
SOUTHERN REGION Portland, OR
Chattanooga, TN Sacramento, CA
Dallas, TX
Johnson City, TN CENTRAL REGION SPECIALTY PRODUCTS FACILITIES
Lynchburg, VA Columbus, OH Baltimore, MD
Miami, FL Louisville, KY Columbus, OH
Orlando, FL Mishawaka, IN
Paducah, KY Toledo, OH
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR THE
NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10B-6a OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and related notes thereto included
elsewhere or incorporated by reference in this Prospectus. Investors should
carefully consider the information set forth under the heading "Risk Factors."
Unless otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment options will not be exercised. The term "Common
Stock" referred to in this Prospectus is the Class A Common Stock, $0.01 par
value per share, Class B Common Stock, $0.01 par value per share, and Class C
Common Stock, $0.01 par value per share, of AmeriSource Health Corporation
("AmeriSource" or the "Company"). Investors will be purchasing shares of Class A
Common Stock, the Company's only class of voting stock. The Company conducts its
business through wholly-owned subsidiaries. Unless otherwise indicated, all
references in this Prospectus to the Company or AmeriSource shall mean the
Company and its subsidiaries on a consolidated basis. All industry statistics in
this Prospectus were obtained from data prepared or provided by the National
Wholesale Druggists' Association, an independent market research company and
other recognized industry sources.
THE COMPANY
AmeriSource is the fifth largest full-service wholesale distributor of
pharmaceutical products and related health care services in the United States.
The Company serves its customers nationwide through 20 drug distribution
facilities and two specialty products distribution facilities. AmeriSource is
typically the primary source of supply to its customers and offers a broad range
of services designed to enhance the operating efficiencies and competitive
position of its customers and suppliers. The Company benefits from a diverse
customer base that includes hospitals and managed care facilities (45%),
independent community pharmacies including retail drug stores, nursing homes and
clinics (36%), and chain drug stores including pharmacy departments of
supermarkets and mass merchandisers (19%).
Over the past five years, AmeriSource has significantly expanded its
national presence as a leading, innovative wholesale distributor, and has
achieved significant growth in revenues and adjusted operating income (as
defined herein). The Company's revenues have increased from $2.5 billion in the
fiscal year ended September 30, 1990 to $4.7 billion in the fiscal year ended
September 30, 1995, a compound annual growth rate of 13.5%, while adjusted
operating income increased from $43.8 million in fiscal 1990 to $98.0 million in
fiscal 1995, a compound annual growth rate of 17.5%. The Company's growth is
primarily the result of market share gains in existing markets, geographic
expansion, and overall industry growth. The Company believes it is well-
positioned to continue its revenue growth and increase operating income through
the execution of the following key elements of its business strategy:
- Expansion into New Geographic Markets. Since October 1993, the Company
has opened six new distribution facilities and has acquired two others.
These openings and acquisitions have substantially increased its
geographic coverage and its access to potential markets. In October 1993,
the Company opened a facility in Dallas, Texas, and in November 1994, the
Company opened two additional facilities in Portland, Oregon and
Springfield, Massachusetts. The Company opened facilities in Sacramento,
California, Phoenix, Arizona, and Orlando, Florida in June, October, and
December 1995, respectively. While each of these new facilities began
operations with an existing customer base in its regional marketplace,
the Company believes there is substantial opportunity to grow these
operations. The Company has also sought to expand geographically by
making selective acquisitions. In July 1995, the Company acquired Newbro
Drug Company, a regional wholesale pharmaceutical distributor based in
Idaho Falls, Idaho, and in February 1996, the Company acquired Gulf
Distribution Inc., a regional wholesale pharmaceutical distributor based
in Miami, Florida. Prior to the Acquisition (as defined herein) in 1988,
AmeriSource's management team completed 18
3
<PAGE> 5
acquisitions over a 10-year period. The Company believes that as industry
consolidation pressures continue, additional opportunities may arise to
selectively acquire local and regional drug wholesale companies
facilitating expansion into new geographic areas and enhancement of its
competitive position in existing markets.
- Increasing Market Share in Existing Markets. The Company believes that
it is well positioned to continue to grow in its existing markets by: (i)
providing superior distribution services and specialty value-added
programs that reduce its customers' and suppliers' cost of operations;
(ii) maintaining its low cost operating structure to ensure that the
Company's services are priced competitively in the marketplace; (iii)
continuing to focus on the higher growth hospital and managed care market
segment through the use of dedicated facilities and advanced information
systems; and (iv) maintaining its decentralized operating structure to
respond to customers' needs more quickly and efficiently and to ensure
the continued development of local and regional management talent. These
factors have allowed AmeriSource to compete effectively in the
marketplace, generate above industry average sales growth over the last
four years, and develop new customers, such as the federal government.
- Continuing Growth of Specialty Services. AmeriSource works closely with
both customers and suppliers to develop an extensive range of specialty
services. In addition to enhancing the Company's growth and
profitability, these services assist customers and suppliers in
maintaining and improving their market positions and strengthen the
Company's overall role in the health care distribution channel. These
services include:
-- ECHO(TM), the Company's proprietary software system, provides
sophisticated ordering and inventory management assistance to its
hospital and retail customers. In fiscal 1995, the Company acquired
LDS Liberty Drug Systems, a software developer based in Greensboro,
North Carolina. The technology acquired with this acquisition is
being combined with the ECHO(TM) systems to provide customers with a
complete system for tracking usage, reordering products, and managing
records. Since the introduction of ECHO(TM) in early fiscal 1991, the
Company has installed approximately 3,100 systems nationwide and
believes that its installed base of systems is one of the largest in
the wholesale drug industry.
-- Family Pharmacy(R) enables small chain and independent community
pharmacies to compete more effectively by providing innovative
marketing and merchandising programs and enhancing access to
pharmaceutical benefit programs of large health care provider groups.
Family Pharmacy(R) has grown dramatically in recent years, and as of
March 31, 1996 its 2,133 member-stores would in effect constitute one
of the largest drugstore chains in the United States.
-- Income Rx(R) provides an integral value-added service to hospital and
retail pharmacist customers by continually reviewing the marketplace
for generic pharmaceutical products that offer the best price,
quality, and availability.
-- American Health Packaging(SM) repackages pharmaceuticals from bulk
quantities into smaller units of use and unit dose measurements
thereby providing both hospital and retail customers with lower
product, inventory, and dispensing (labor) costs. The Company
recently expanded its packaging capacity with the opening of a new
53,000 square foot state-of-the-art packaging facility in Columbus,
Ohio. In recent months, the Company has begun packaging
pharmaceutical product for other drug wholesale distributors, in
addition to marketing products directly through its Income RePax(R)
program.
-- Health Services Plus distributes oncology and other specialty
products to clinics and physician groups on a national basis. Rita
Ann Distributors markets cosmetics and fragrances to chain drugstores
and other retail customers.
4
<PAGE> 6
- Maintaining Low Cost Operating Structure. AmeriSource has the lowest
operating cost structure among its four major national competitors. Over
the past five years, the Company has reduced its selling and
administrative expenses and depreciation as a percentage of revenues from
4.78% in fiscal 1990 to 3.61% in fiscal 1995. The Company continues to
achieve productivity and operating income gains from continued
investments in advanced management information systems, warehouse
automation technology, and from operating leverage due to above industry
average volume per facility. In fiscal 1995, the Company's average
revenue per pharmaceutical distribution facility was $258 million
compared to a calendar 1994 industry average of approximately $213
million.
The wholesale drug industry in the United States continues to experience
significant growth. Industry sales grew from $30 billion in 1990 to an estimated
$57 billion in 1995, a compound annual growth rate of 13.7%. Factors
contributing to this growth include an aging population, new product
introductions, the increased use of outpatient drug therapies, a higher
concentration of distribution through wholesalers by both manufacturers and
customers, and rising pharmaceutical prices. In response to rising health care
costs, governmental and private payors have adopted cost containment measures
that encourage the use of efficient drug therapies to prevent or treat diseases
instead of expensive prolonged hospital stays and surgical procedures. In
addition, drug wholesalers offer their customers and suppliers more efficient
distribution and inventory management. As a result, from 1980 to 1995, the
percentage of total pharmaceutical sales through wholesale drug distributors
increased from approximately 46% to approximately 61%. At the same time that
sales through the wholesale drug industry have grown, the number of
pharmaceutical wholesalers in the United States has decreased from 139 at the
end of 1980 to approximately 48 as of December 31, 1995. Industry analysts
expect this consolidation trend to continue, with the industry's largest
companies increasing their percentage of total industry sales. In 1995, the five
largest wholesale pharmaceutical distributors accounted for approximately 76% of
industry sales by pharmaceutical wholesalers.
The Company was formed to acquire Alco Health Services Corporation, a
public company listed on Nasdaq, in 1988 through a leveraged buy-out (the
"Acquisition"). The Company changed its name from Alco Health Distribution
Corporation to AmeriSource Distribution Company on July 15, 1994, and
subsequently to AmeriSource Health Corporation on March 30, 1995. In connection
with the Acquisition, the Company incurred approximately $545 million of
indebtedness, with a resulting high level of interest expense. Since the
Acquisition, the Company has refinanced all such indebtedness at substantially
lower interest rates. See "Risk Factors" and "Capitalization."
The address of the principal executive office of the Company is 300 Chester
Field Parkway, Malvern, Pennsylvania 19355, and its telephone number is (610)
296-4480.
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data and
other operating data of the Company for each of the five years in the period
ended September 30, 1995 and for the interim six-month periods ended March 31,
1996 and 1995. The summary financial data should be read in conjunction with
"Use of Proceeds," "Capitalization," "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the unaudited pro forma financial statements and related notes
thereto, and the audited and unaudited consolidated financial statements and
related notes thereto included elsewhere or incorporated by reference in this
Prospectus. Historical Statement of Operations Data, Earnings (Loss) Per Share,
and Balance Sheet Data for each of the five years in the period ended September
30, 1995 have been derived from audited financial statements. Historical
financial information for the interim six-month periods ended March 31, 1996 and
1995 has been derived from unaudited financial statements; however, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information have been
included. The interim results of operations may not be indicative of the results
for the full fiscal year or for any other interim period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994(1) 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................... $2,743,828 $3,237,708 $3,658,871 $4,182,193 $4,668,948 $2,307,131 $2,644,569
Gross profit................ 178,769 199,723 209,438 235,191 266,355 128,875 147,883
Operating expenses(2)....... 120,921 131,080 136,147 149,137 168,343 81,490 96,093
Operating income (loss)..... 45,887 60,850 65,601 (101,992) 97,835 47,305 51,674
Interest expense............ 72,208 71,025 66,696 62,611 52,288 31,989 19,002
Income (loss) before
extraordinary items and
cumulative effect of
accounting changes in
1994...................... (23,319) (12,824) (7,474) (172,417) 28,218 7,559 18,950
Net income (loss)........... (23,319) (6,476) (18,618) (207,671) 10,181 (4,316) 18,950
EARNINGS (LOSS) PER SHARE
(FULLY DILUTED):
Income (loss) per share
before extraordinary items
and cumulative effect of
accounting changes in
1994...................... $ (1.58) $ (0.87) $ (0.51) $ (11.69) $ 1.53 $ 0.51 $ 0.84
Net income (loss) per
share..................... $ (1.58) $ (0.44) $ (1.26) $ (14.08) $ 0.55 $ (0.29) $ 0.84
Weighted average common
shares outstanding (fully
diluted).................. 14,750 14,750 14,750 14,750 18,396 14,765 22,504
PRO FORMA DATA(3):
Operating income............ $ 97,835 $ 47,305 $ 51,674
Interest expense............ $ 37,442 $ 19,809 $ 17,200
Income before extraordinary
items..................... $ 37,452 $ 15,259 $ 20,022
Income per share before
extraordinary items (fully
diluted)(4),(5)........... $ 1.58 $ 0.64 $ 0.83
Weighted average common
shares outstanding (fully
diluted).................. 23,772 23,702 24,004
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994(1) 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
Gross profit as a % of
revenues.................. 6.52% 6.17% 5.72% 5.62% 5.70% 5.59% 5.59%
Adjusted operating
income(6)................. $ 57,848 $ 68,643 $ 73,291 $ 86,054 $ 98,012 $ 47,385 $ 51,790
Adjusted operating income as
a % of revenues........... 2.11% 2.12% 2.00% 2.06% 2.10% 2.05% 1.96%
Return on committed
capital(7)................ 23.6% 23.3% 26.0% 24.8% 25.0% 24.9% 25.0%
Number of Rx distribution
facilities at end of
period.................... 18 17 15 14 18 15 20
Average revenue per Rx
distribution facility..... $ 151,539 $ 189,718 $ 242,966 $ 297,136 $ 257,783 -- --
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------
AS
ACTUAL ADJUSTED(8)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Current assets...................................................................... $1,004,596 $1,004,596
Working capital..................................................................... 319,455 319,455
Total assets........................................................................ 1,083,132 1,083,132
Long-term debt...................................................................... 500,850 447,991
Stockholders' equity (deficit)...................................................... (110,377) (57,518)
</TABLE>
- ---------------
(1) Includes the effect of the $179.8 million write-off of the excess of cost
over net assets acquired ("goodwill"), the cumulative effect of accounting
changes for income taxes of $33.4 million and post-retirement benefits other
than pensions of $1.2 million.
(2) Represents selling and administrative expenses and depreciation, and
excludes amortization and unusual items.
(3) The pro forma data represents the historical data for the fiscal year ended
September 30, 1995 and the six months ended March 31, 1996 and 1995 adjusted
to give effect to the Offering, the refinancing transactions completed in
December 1994, the issuance of shares and use of proceeds from the initial
public offering of the Company's Common Stock in April 1995, and the option
exercises which occurred in April 1995, as if each transaction had occurred
on October 1, 1994. See "Use of Proceeds" and the unaudited pro forma
financial statements and related notes thereto included elsewhere in this
Prospectus.
(4) Assuming the current 1996 effective tax rate of 42%, pro forma income per
share before extraordinary items on a fully diluted basis would be $1.47 for
the fiscal year ended September 30, 1995.
(5) The $52,859 proceeds from the 1996 Offering are assumed to be used to repay
borrowings under the Credit Agreement. If the proceeds were assumed to be
used to purchase and retire Senior Debentures at a price of 112.75% of the
principal amount thereof (including fees) plus accrued interest, income per
share before extraordinary items on a fully diluted basis would be $1.61,
$0.66, and $0.86 for the year ended September 30, 1995 and the six months
ended March 31, 1995 and 1996, respectively. On May 20, 1996, the Company
commenced a tender offer and related consent solicitation with respect to
all of the outstanding Senior Debentures, whereby the Company has offered to
pay to tendering holders, subject to the fulfillment of certain conditions,
110.25% of the principal amount plus accrued interest thereof and a consent
fee equal to two percent of the principal amount thereof. There can be no
assurances that the Company will be able to purchase the Senior Debentures
pursuant to the tender offer or otherwise. See "Use of Proceeds."
(6) Adjusted operating income is defined as operating income plus amortization
of intangibles for each period, plus a $5.5 million stock option
compensation charge in fiscal 1991, a $2.2 million non-recurring charge
primarily relating to facility consolidation costs in each of fiscal 1992
and fiscal 1993, a $4.1 million environmental remediation charge in fiscal
1994, and the $179.8 million write-off of goodwill in fiscal 1994. Adjusted
operating income is not an alternative to operating income or cash flows (as
determined under generally accepted accounting principles) as an indicator
of operating and cash flow performance and should be read in conjunction
with the Selected Consolidated Financial Data and the Company's audited and
unaudited consolidated financial statements and related notes thereto
included elsewhere or incorporated by reference in this Prospectus. The
Company believes adjusted operating income provides investors with an
evaluation of the Company's historical results of operations on a comparable
basis, since the unusual items noted above were incurred in some historical
periods, but not in others. The presentation of adjusted operating income
should not be interpreted to suggest that the Company will not incur similar
unusual items in the future.
(7) Adjusted operating income divided by rolling 12 month average balances of
major working capital accounts (cash, accounts receivable, inventory, and
accounts payable) and property and equipment(net).
(8) Represents the historical data as of March 31, 1996 adjusted to give effect
to the Offering as if it occurred on March 31, 1996, and assuming the sale
in the Offering of 1,500,000 shares of Common Stock offered by the Company
at an initial public offering price of $37.50 per share (based on the last
reported sale price for the Common Stock on the Nasdaq National Market on
April 25, 1996), after deducting estimated underwriting discounts and
commissions and estimated offering expenses. See "Use of Proceeds,"
"Capitalization," and the unaudited pro forma financial statements and
related notes thereto included elsewhere in this Prospectus.
7
<PAGE> 9
THE OFFERING
<TABLE>
<CAPTION>
SELLING
COMPANY STOCKHOLDERS(1)(2) TOTAL
---------- ------------------ ----------
<S> <C> <C> <C>
Common Stock offered by:
U.S. Offering (number of shares)........... 1,200,000 2,600,000 3,800,000
International Offering (number of
shares)................................. 300,000 700,000 1,000,000
--------- --------- ---------
TOTAL.............................. 1,500,000 3,300,000 4,800,000
Common Stock to be outstanding after the
Offering(3)................................ 23,670,686 shares
Use of Proceeds(2)........................... To repay or repurchase certain long-term
indebtedness and for general corporate
purposes, including working capital. See "Use
of Proceeds."
Nasdaq National Market Symbol(4)............. ASHC
</TABLE>
- ---------------
(1) Does not include up to 720,000 shares of Common Stock that may be sold by a
Selling Stockholder pursuant to the over-allotment options granted to the
Underwriters. See "Underwriting."
(2) The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. See "Selling Stockholders."
(3) Based on shares outstanding as of March 31, 1996. Does not include up to
1,186,500 shares of Common Stock that may be issued upon the exercise of
outstanding options granted under the Company's employee and director stock
option plans. Also does not include 37,036 shares of Common Stock reserved
for issuance upon exercise of options available for future grant under the
Company's employee and director stock option plans. The Company expects,
subject to stockholder approval, to amend its current stock option plans to
increase the number of shares that may be issued under such plans.
(4) The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "AAS," subject to official notice of issuance. The
Company expects the Common Stock to commence trading on the New York Stock
Exchange on May 28, 1996, or shortly thereafter.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors.
------------------------
Family Pharmacy(R), Income Rx(R), and Income RePax(R) are registered
trademarks, ECHO(TM) is a trademark, and American Health PackagingSM is a
service mark of the Company.
This Prospectus does not constitute an offer to sell or the solicitation of
an offer to buy the shares of Common Stock in any jurisdiction in which such
offer or solicitation is unlawful. There are restrictions on the offer and sale
of the shares of Common Stock in the United Kingdom. All applicable provisions
of the Financial Services Act 1986 and the Companies Act 1985 with respect to
anything done by any person in relation to the shares of Common Stock in, from,
or otherwise involving the United Kingdom must be complied with. See
"Underwriting."
In this Prospectus, reference to "dollars," "U.S. $" and "$" are United
States dollars.
8
<PAGE> 10
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully the specific risk factors set forth below as well as the other
information set forth elsewhere and incorporated by reference in this
Prospectus. Certain information set forth elsewhere or incorporated by reference
herein contains forward-looking statements as such term is defined in Section
27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"). Certain factors as
discussed herein could cause actual results to differ materially from those in
the forward-looking statements.
FINANCIAL LEVERAGE
In connection with the Acquisition, the Company incurred approximately $545
million of indebtedness, with a resulting high level of interest expense. Since
the Acquisition, the Company has refinanced all its indebtedness at
substantially lower interest rates. As of March 31, 1996, the Company's
aggregate long-term indebtedness was $501 million and its stockholders' deficit
was $110 million. After giving effect to the Offering, on a pro forma basis as
of March 31, 1996, the Company's aggregate long-term indebtedness would have
been approximately $448 million. Although the application of the proceeds of the
Offering will reduce the Company's indebtedness, the terms of the Company's
financing agreements contain numerous financial and operating covenants and
prohibitions, including requirements that the Company satisfy certain financial
ratios and maintain certain specified levels of net worth. In addition, the
Company is more highly leveraged than certain of its competitors, which may
place the Company at a competitive disadvantage, and certain of the Company's
borrowings are at a floating rate of interest, which causes the Company to be
more vulnerable to increases in interest rates. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
The wholesale distribution of pharmaceuticals, health and beauty aids, and
other healthcare products is highly competitive. The Company competes with
numerous national and regional distributors, some of which are larger and have
substantially greater financial resources than the Company. The Company's
national competitors include Bergen Brunswig Corporation, Cardinal Health, Inc.,
FoxMeyer Health Corporation, and McKesson Corporation. In addition, the Company
competes with local distributors, direct-selling manufacturers, and other
specialty distributors. Competitive factors include price, service and delivery,
credit terms, breadth of product line, customer support, and marketing programs.
In part due to competitive pressures, the Company's gross profit margins have
declined from 6.52% in fiscal 1991 to 5.70% in fiscal 1995. There can be no
assurance that the Company will not encounter increased competition in the
future that could adversely affect the Company's business. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on its senior and regional management, the loss of
certain of whom could adversely affect the Company. No member of the Company's
management is currently subject to an employment contract. There can be no
assurance that, over time, the Company will be able to retain all of its senior
and regional managers.
EXPANSION THROUGH ACQUISITIONS
The Company intends to expand into new and contiguous geographic markets
and to expand its market share in existing markets, in part through selected
acquisitions of drug wholesalers. Since the initial public offering of the
Company's Common Stock on April 4, 1995, the Company has acquired the capital
stock of Gulf Distribution Inc. and substantially all of the assets of Newbro
Drug
9
<PAGE> 11
Company, regional wholesale pharmaceutical distributors based in Miami, Florida
and Idaho Falls, Idaho, respectively. There can be no assurance that additional
suitable acquisition candidates will be identified in the future, that
acquisitions can be consummated on acceptable terms or that any acquired
companies can be integrated successfully into the Company's operations. No
substantive acquisition negotiations by the Company are currently pending, and
the Company currently has no commitments, understandings or arrangements with
respect to any specific acquisition. In addition, the Amended and Restated
Credit Agreement dated December 13, 1994 among the Company and its senior
lenders providing for the Company's $380 million revolving credit facility (the
"Credit Agreement") contains restrictions on the Company's ability to make
acquisitions.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect prevailing market prices of the Common Stock. VPI and certain
holders of Common Stock (collectively, the "Registration Rights Holders") were
granted piggyback registration rights with respect to the Common Stock when they
purchased their shares. After the Offering, of the 23,670,686 shares of Common
Stock outstanding, an aggregate of approximately 7.0 million shares of Common
Stock owned by the Registration Rights Holders will be entitled to piggyback
registration rights. In addition, VPI, which will hold in the aggregate
approximately 6.7 million shares of Common Stock after the Offering, has been
granted demand rights to require the registration of its shares. In addition,
the Company, VPI, and certain executive officers and directors of the Company
which will hold in the aggregate approximately 7.8 million shares of Common
Stock after the Offering have agreed, except as described below, that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 90 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
the Common Stock or which are convertible or exchangeable into securities which
are substantially similar to the shares of Common Stock without the prior
written consent of the Underwriters, except for the shares of Common Stock
offered in connection with the concurrent U.S. and international offerings. Such
consent may be provided without prior notice to holders of the Common Stock or
to the markets where such securities are traded. The Underwriters have agreed
that Messrs. McNamara, Flowers, Hilzinger and Yost may sell up to 150,000,
32,000, 25,000 and 35,000 shares, respectively, after 30 days following the date
of the Prospectus. See "Shares Eligible for Future Sale."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,500,000 shares of Common
Stock offered by the Company hereby are estimated to be approximately $52.9
million at a public offering price of $37.50 per share (based on the last
reported sale price for the Common Stock on the Nasdaq National Market on April
25, 1996) and after deduction of estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. The Company
will not receive any proceeds from the sale of shares of Common Stock by the
Selling Stockholders.
The Company intends to utilize the net proceeds from the Offering to reduce
its long-term indebtedness. The Company will use the net proceeds initially to
reduce indebtedness incurred under the Credit Agreement. Subject to market
conditions, the Company may use the net proceeds to repurchase some or all of
the outstanding 11 1/4% Senior Debentures due 2005 (the "Senior Debentures")
through open market purchases, private transactions, or by tender offer. On May
20, 1996, the Company commenced a tender offer and related consent solicitation
with respect to all of the outstanding Senior Debentures, whereby the Company
has offered to pay to tendering holders, subject to the fulfillment of certain
conditions, 110.25% of the principal amount thereof plus accrued interest and a
consent fee equal to two percent of the principal amount thereof. There can be
no assurances that the Company will be able to purchase the Senior Debentures
pursuant to the tender offer or otherwise. The Senior Debentures mature on
August 1, 2005, and are first redeemable on July 15, 1998 at a price of 105.62%
of the aggregate principal amount thereof plus accrued and unpaid interest
thereon.
As of April 25, 1996, $195 million was outstanding under the Credit
Agreement. Borrowings under the Credit Agreement mature on January 3, 2000 and
currently accrue interest at the rate of approximately 6.7% per annum. Amounts
will be drawn under the Credit Agreement for general corporate purposes,
including working capital.
The pro forma capitalization table set forth herein (see "Capitalization")
reflects the Company's expectation that all of the net proceeds of the Offering
will initially be applied to repay a portion of the indebtedness outstanding
under the Credit Agreement.
11
<PAGE> 13
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol AAS, subject to official notice of issuance. The
Company expects the Common Stock to commence trading on the New York Stock
Exchange on May 28, 1996, or shortly thereafter. The Common Stock has been
traded in the over-the-counter market and quoted on the Nasdaq National Market
under the symbol ASHC since April 4, 1995. Prior to that there was no public
market for the Common Stock. The following table sets forth the high and low
closing sale prices of the Common Stock as reported on the Nasdaq National
Market for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1995
Third Quarter (April 4 through June 30).................................... $24 1/2 $20 3/4
Fourth Quarter............................................................. 27 3/4 19 3/4
YEAR ENDED SEPTEMBER 30, 1996
First Quarter.............................................................. $34 1/4 $25 1/4
Second Quarter............................................................. 34 28
Third Quarter (through April 25)........................................... 37 1/2 32 1/2
</TABLE>
See the cover page of this Prospectus for a recent last reported sale price
for the Common Stock on the Nasdaq National Market. As of March 31, 1996, the
Common Stock was held by approximately 2,700 stockholders of record or through
nominee or street name accounts with brokers.
Payment of dividends is within the discretion of the Company's Board of
Directors and will depend, among other factors, upon the Company's earnings,
financial condition and capital requirements, and the terms of the Company's
financing agreements. The Company plans to retain future earnings for use in the
business and, accordingly, the Company does not anticipate paying dividends in
the foreseeable future. The Company has not paid any cash dividends to its
stockholders. Moreover, the terms of the Credit Agreement restrict the ability
of the Company to make dividend payments unless certain financial tests are met.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 31, 1996 on an actual basis and as adjusted to reflect the sale in
the Offering of 1,500,000 shares of Common Stock offered by the Company at an
initial public offering price of $37.50 per share (based on the last reported
sale price for the Common Stock on the Nasdaq National Market on April 25,
1996), and after deduction of estimated underwriting discounts and estimated
offering expenses payable by the Company. This table should be read in
conjunction with the audited and unaudited consolidated financial statements of
the Company and related notes thereto, the unaudited pro forma financial
statements and related notes thereto, and "Use of Proceeds" included elsewhere
or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Revolving credit facility..................................... $ 215,000 $ 162,141
Receivables securitization financing(2)....................... 209,860 209,860
11 1/4% Senior Debentures(3).................................. 74,293 74,293
Other debt.................................................... 1,697 1,697
--------- ---------
Total long-term debt.................................. $ 500,850 $ 447,991
Stockholders' equity (deficit):
Common stock, $0.01 par value per share:
Class A (voting and convertible): 50,000,000 shares
authorized; 12,346,288 shares issued, 17,146,288 as
adjusted ................................................ $ 124 $ 172
Class B (non-voting and convertible): 15,000,000 shares
authorized; 12,846,041 shares issued, 9,546,041 as
adjusted................................................. 128 95
Class C (non-voting and convertible): 2,000,000 shares
authorized; 279,439 shares issued, as adjusted........... 3 3
Capital in excess of par value................................ 171,441 224,285
Retained earnings (deficit)................................... (275,853) (275,853)
Cost of common stock in treasury(4)........................... (6,220) (6,220)
--------- ---------
Total stockholders' equity (deficit)....................... $(110,377) $ (57,518)
--------- ---------
Total capitalization.................................. $ 390,473 $ 390,473
========= =========
</TABLE>
- ---------------
(1) Adjusted to reflect the Offering. Assumes the application of $52.9 million
of the net proceeds from the Offering to repay borrowings under the Credit
Agreement.
(2) Comprises the Certificates (as defined herein) outstanding under the
Receivables Program (as defined herein), which represent fractional
undivided interests in the Receivables (as defined herein) and other assets
of the master trust, and do not otherwise represent recourse obligations of
the Company.
(3) In April 1996, the Company repurchased an aggregate principal amount of
approximately $27 million of 11 1/4% Senior Debentures in the open market.
Subject to market conditions, the Company may use the net proceeds of the
Offering to repurchase some or all of the remaining outstanding Senior
Debentures through open market purchases, private transactions, or by tender
offer. On May 20, 1996, the Company commenced a tender offer and related
consent solicitation with respect to all of the outstanding Senior
Debentures, whereby the Company has offered to pay to tendering holders,
subject to the fulfillment of certain conditions, 110.25% of the principal
amount thereof plus accrued interest and a consent fee equal to two percent
of the principal amount thereof. See "Use of Proceeds."
(4) Includes 351,082 shares of Class A and 2,950,000 shares of Class B Common
Stock, respectively.
13
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data and
other operating data of the Company. The statement of operations data and
balance sheet data are derived from the audited and unaudited consolidated
financial statements of the Company. The selected consolidated financial and
operating data for the interim six-month periods ended March 31, 1996 and 1995
are unaudited; however, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information have been included. The interim results of
operations may not be indicative of the results for the full fiscal year or for
any other interim period. The selected consolidated financial data should be
read in conjunction with the audited and unaudited consolidated financial
statements and related notes thereto and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994(1) 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $2,743,828 $3,237,708 $3,658,871 $4,182,193 $4,668,948 $2,307,131 $2,644,569
Gross profit......................... 178,769 199,723 209,438 235,191 266,355 128,875 147,883
Operating expenses(2)................ 120,921 131,080 136,147 149,137 168,343 81,490 96,093
Operating income (loss).............. 45,887 60,850 65,601 (101,992) 97,835 47,305 51,674
Interest expense..................... 72,208 71,025 66,696 62,611 52,288 31,989 19,002
Income (loss) before extraordinary
items and cumulative effect of
accounting changes in 1994......... (23,319) (12,824) (7,474) (172,417) 28,218 7,559 18,950
Net income (loss).................... (23,319) (6,476) (18,618) (207,671) 10,181 (4,316) 18,950
EARNINGS (LOSS) PER SHARE (FULLY
DILUTED):
Income (loss) per share before
extraordinary items and cumulative
effect of accounting changes in
1994............................... $ (1.58) $ (0.87) $ (0.51) $ (11.69) $ 1.53 $ 0.51 $ 0.84
Net income (loss) per share.......... $ (1.58) $ (0.44) $ (1.26) $ (14.08) $ 0.55 $ (0.29) $ 0.84
Weighted average common shares
outstanding (fully diluted)........ 14,750 14,750 14,750 14,750 18,396 14,765 22,504
OTHER OPERATING DATA:
Adjusted operating income(3)......... $ 57,848 $ 68,643 $ 73,291 $ 86,054 $ 98,012 $ 47,385 $ 51,790
Adjusted operating income as a % of
revenues........................... 2.11% 2.12% 2.00% 2.06% 2.10% 2.05% 1.96%
Number of Rx distribution facilities
at end of period................... 18 17 15 14 18 15 20
Average revenue per Rx distribution
facility........................... $ 151,539 $ 189,718 $ 242,966 $ 297,136 $ 257,783 -- --
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
-------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and
restricted cash.................... $ 33,796 $ 13,806 $ 27,136 $ 25,311 $ 46,809 $ 63,097 $ 69,935
Accounts receivable -- net........... 221,383 249,070 251,999 272,281 318,652 286,474 340,272
Merchandise inventories.............. 270,977 336,025 346,371 351,676 404,522 424,121 590,675
Property and equipment -- net........ 36,203 38,105 36,106 41,182 45,244 42,073 50,553
Total assets......................... $ 783,145 $ 848,474 $ 867,944 $ 711,644 $ 838,673 $ 840,339 $1,083,132
Accounts payable..................... $ 254,013 $ 308,097 $ 379,826 $ 449,991 $ 462,804 $ 424,231 $ 609,607
Long-term debt....................... 570,939 587,983 549,220 487,575 435,764 645,209 500,850
Stockholders' equity................. (68,271) (74,747) (93,040) (300,726) (135,724) (306,198) (110,377)
Total liabilities and stockholders'
equity............................. $ 783,145 $ 848,474 $ 867,944 $ 711,644 $ 838,673 $ 840,339 $1,083,132
</TABLE>
- ---------------
(1) Includes the effect of: the $179.8 million write-off of the excess of cost
over net assets acquired ("goodwill"), the cumulative effect of accounting
changes for income taxes of $33.4 million and post-retirement benefits other
than pensions of $1.2 million.
(2) Represents selling and administrative expenses and depreciation, and
excludes amortization and unusual items.
(3) Adjusted operating income is defined as operating income plus amortization
of intangibles for each period, plus a $5.5 million stock option
compensation charge in fiscal 1991, a $2.2 million non-recurring charge
primarily relating to facility consolidation costs in each of fiscal 1992
and fiscal 1993, a $4.1 million environmental remediation charge in fiscal
1994, and the $179.8 million write-off of goodwill in fiscal 1994. Adjusted
operating income is not an alternative to operating income or cash flows (as
determined under generally accepted accounting principles) as an indicator
of operating and cash flow performance and should be read in conjunction
with the Company's audited and unaudited consolidated financial statements
and related notes thereto incorporated by reference in this Prospectus. The
Company believes adjusted operating income provides investors with an
evaluation of the Company's historical results of operations on a comparable
basis, since the unusual items noted above were incurred in some historical
periods, but not in others. The presentation of adjusted operating income
should not be interpreted to suggest that the Company will not incur similar
unusual items in the future.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain information set forth or incorporated by reference herein contains
forward-looking statements as such term is defined in Section 27A of the
Securities Act and Section 21E of the Exchange Act. Certain factors as discussed
in "Risk Factors" could cause actual results to differ materially from those in
the forward-looking statements.
The following discussion should be read in conjunction with the Company's
audited consolidated financial statements and related notes thereto incorporated
by reference in this Prospectus.
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1995
For the six months ended March 31, 1996, revenues were $2.6 billion, an
increase of $337.4 million or 15% compared to the prior year. The year-to-year
revenue gains reflect increases across all customer groups, the impact of the
Company's expansion into new geographic markets, especially in the western and
northeastern United States, and price increases. Revenues of the Company's
western region increased by 43% in the first six months of fiscal 1996. The
acquisitions of Newbro Drug Company in July 1995 and Gulf Distribution Inc. in
February 1996 accounted for 2% of the 15% increase in revenues for the first six
months of fiscal 1996. During the six months ended March 31, 1996, sales to
hospitals increased 5%, sales to independent drug store customers increased 24%,
and sales to the chain drug store customer group increased 21%, as compared with
the prior fiscal year. During the six months ended March 31, 1996 sales to
hospitals accounted for 43% of total revenues, while sales to independent drug
stores accounted for 37% and sales to chain drug stores 20% of the total.
Gross profit of $147.9 million in the first six months of fiscal 1996
increased by 14.8% over 1995 due to the increase in revenues and gross profit
margin expansion. As a percentage of revenues, the gross profit margin in the
second fiscal quarter of fiscal 1996 was 5.74% as compared to 5.57% in the prior
year. For the six months ended March 31, 1996, the gross margin percentage of
5.59% was unchanged from the prior year. The increase in gross profit margin
percentage from the prior year second quarter was due to increased sales of
higher margin generic drugs, the continued introduction of new marketing
programs with manufacturers, the growth of higher margin specialty businesses
such as pharmaceutical repackaging, and an increase in inventory investment
buying activity, offset in part by a decline in selling margin due to continuing
price competition throughout the industry.
For the first six months of fiscal 1996, operating expenses increased $14.6
million or 18% compared to the prior year and represented 3.64% of revenues
versus 3.54% of revenues in the prior year. The increase as a percentage of
revenue in fiscal 1996 is primarily due to the cost of opening new distribution
facilities in Orlando, Florida, and Phoenix, Arizona, integration costs related
to Newbro Drug Company and Gulf Distribution Inc., above average growth of the
higher cost to service independent drug store segment, and the cost of
developing new value added marketing programs. These costs have been offset in
part by continued economies of scale at the Company's established locations.
Operating income of $27.3 million in the second quarter of fiscal 1996
increased by 8% over the prior year. For the six months ended March 31, 1996
operating income increased by $4.4 million or 9% compared to the prior year. As
a percentage of revenues, the Company's operating margin declined to 1.95% in
fiscal 1996 from 2.05% in fiscal 1995 due to the increase in expenses discussed
above. The Company is evaluating its distribution network to identify
opportunities for increased efficiencies and cost reduction necessary to
maintain and grow its operating margin.
For the six month period ended March 31, 1996 interest expense declined by
$13.0 million or 41% versus the prior year six month period. The decrease was
due to the redemption, in January
16
<PAGE> 18
1995 of the $166.1 million of 14 1/2% senior subordinated notes, the redemption,
in May 1995, of $74.3 million of 11 1/4% senior debentures, and lower average
borrowing rates due to the implementation of the receivables securitization
financing in December 1994 and reductions in the borrowing rates of the
Company's revolving credit facility which was amended in December 1994. Average
borrowings during the quarter ended March 31, 1996 were $522 million as compared
to average borrowings of $673 million in the prior year second quarter. For the
six months ended March 31, 1996, average borrowings were $486 million versus
average borrowings of $623 million in the prior year.
The income tax provisions for the six months ended March 31, 1996 were
computed based on an estimate of the full year effective tax rate. The
extraordinary charge in fiscal 1995 of $15.6 million, net of a tax benefit of
$3.7 million, relates to the amendment of the revolving credit facility and the
redemption of the 14 1/2% senior subordinated notes and the consequent write-off
of unamortized financing fees and redemption premiums paid in the prior year.
YEAR ENDED SEPTEMBER 30, 1995 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1994
Revenues of $4.7 billion for the fiscal year ended September 30, 1995
represented an increase of 11.6% over the $4.2 billion in revenues for the
fiscal year ended September 30, 1994. The year-to-year revenue gains reflect
increases across all customer groups, the impact of the Company's expansion into
new geographic markets, especially in the northeastern and western United
States, and price increases. During the fiscal year ended September 30, 1995,
sales to hospitals increased 11%, sales to independent drug store customers
increased 13%, and sales to the chain drug store customer group increased 11%,
as compared with the prior fiscal year. During the twelve months ended September
30, 1995, sales to hospitals, independent drug stores and chain drug stores
accounted for 47%, 35% and 18%, respectively, of total revenues.
Gross profit of $266.4 million for fiscal 1995 increased by 13.3% over
fiscal 1994, primarily due to the increase in revenues. As a percentage of
revenues, the Company's gross profit margin expanded to 5.70% from 5.62% in
fiscal 1994. The gross profit margin improvement was a result of increased sales
of higher margin generic drugs, the continued introduction of new marketing
programs with manufacturers, and growth of higher margin specialty businesses,
such as pharmaceutical packaging. Increased purchase discounts and a greater
level of price increases from manufacturers resulted in greater inventory
appreciation which also benefited the gross profit margin.
Selling and administrative expenses and depreciation for fiscal 1995 were
$168.3 million compared to $149.1 million for fiscal 1994, an increase of 12.9%.
The increase in fiscal 1995 is due primarily to increases in warehouse and
delivery expenses relating to the volume increases, development expenses of
value-added programs, and one-time costs associated with the opening of new
distribution facilities in Springfield, Massachusetts, Portland, Oregon,
Sacramento, California, and Phoenix, Arizona. As a result of these factors,
selling and administrative expenses and depreciation increased slightly to 3.61%
of revenues compared to 3.57% in fiscal 1994.
The decrease in amortization in fiscal 1995 was a result of the write-off
of the value of the excess of cost over net assets acquired ("goodwill") which
the Company recorded in the third quarter of fiscal 1994.
Operating income, excluding unusual items and amortization, of $98.0
million for fiscal 1995 increased 13.9% over fiscal 1994. As a percentage of
revenues, the Company's operating margin, excluding unusual items and
amortization, expanded to 2.10% in fiscal 1995 from 2.06% in fiscal 1994.
Interest expense (excluding the amortization of deferred financing costs)
for the year ended September 30, 1995 was $49.8 million, a decrease of $8.8
million, or 15.1% as compared with the year ended September 30, 1994. The
decrease was due to the redemption, in January 1995, of the
17
<PAGE> 19
$166.1 million of 14 1/2% senior subordinated notes; the redemption, in May
1995, of $74.3 million of Senior Debentures; and the lower average interest
rates due to the implementation of the Receivables Program (as defined herein)
and the Credit Agreement providing for an amended revolving credit facility with
a lower interest rate than the previous facility. Average borrowings were $536
million during fiscal 1995 versus $562 million in fiscal 1994.
Income tax expense of $17.3 million in fiscal 1995 was based upon an annual
effective tax rate of 38%, which recognizes the utilization, for financial
reporting purposes, of operating loss carryforwards. The provision for income
taxes in fiscal 1994 represents the estimated taxes payable due to the
application of the alternative minimum tax. The extraordinary charge of $25.2
million in fiscal 1995, net of a tax benefit of $7.2 million, relates to the
amendment of the Credit Agreement, the redemption premium on the 14 1/2% senior
subordinated notes, the redemption premium on the Senior Debentures, and the
consequent write-off of unamortized deferred financing fees. The extraordinary
charge of $679,000 in fiscal 1994, net of a tax benefit of $23,000, relates to
the purchase and retirement of an aggregate principal amount of $4.4 million of
14 1/2% senior subordinated notes.
LIQUIDITY AND CAPITAL RESOURCES
During the six-month period ended March 31, 1996, the Company's operating
activities generated $4.2 million in cash despite the increase of $153.8 million
in merchandise inventories which was offset in part by the $119.0 million
increase in accounts payables and reflects the Company's growth as well as
increased purchases in anticipation of manufacturer price increases and other
deal buying opportunities. A portion of the increase in inventories during the
six month period was also due to the opening of the Phoenix, Arizona and
Orlando, Florida distribution facilities. Operating cash uses during the six
month period ended March 31, 1996 included $18.5 million in interest payments
and $4.3 million in income tax payments.
During the fiscal year ended September 30, 1995, the Company's operating
activities consumed $35.6 million in cash. The use of funds was primarily the
result of the increases in restricted cash, accounts and notes receivable, and
merchandise inventories, offset by an increase in accounts payable, accrued
expenses, and income taxes. Restricted cash represents amounts temporarily
deposited in the master trust pursuant to the Receivables Program. The net
increase in other working capital items was the result of opening distribution
facilities in Springfield, Massachusetts, Portland, Oregon, and Sacramento,
California. Operating cash uses during the year ended September 30, 1995
included $43.6 million in interest payments and $2.8 million in income tax
payments.
Capital expenditures for the six months ended March 31, 1996 were $9.7
million and are primarily equipment purchases related to the expansion of the
Company's pharmaceutical repackaging operation, the opening of the Orlando,
Florida and Phoenix, Arizona distribution centers, and additional investments in
information technology. Investments in information technology and warehouse
improvements are expected to continue throughout the year, and total capital
expenditures are expected to be $15.0 million for the fiscal year.
Capital expenditures for fiscal 1995 were $13.7 million and relate
principally to the opening of five new distribution centers, continuing
investments in management information systems, and warehouse improvements.
During fiscal 1995, the Company acquired substantially all of the assets of LDS
Liberty Drug Systems and Newbro Drug Company for approximately $4.9 million.
Liberty Drug Systems provides pharmacy dispensing hardware and software systems
in retail pharmacies. Newbro Drug Company is a full-service wholesale
pharmaceutical distributor in Idaho. The Company intends to continue its
investments in information systems and warehouse improvements and will continue
to evaluate acquisitions and other business opportunities.
In February, 1996, the Company purchased all of the stock of Gulf
Distribution Inc. in a cash transaction. The transaction was funded by
borrowings under the revolving credit facility. Gulf
18
<PAGE> 20
Distribution Inc. is a Miami, Florida-based wholesaler with annualized revenues
of approximately $180.0 million. The purchase price was $28.3 million.
Cash provided by financing activities during the first six months of fiscal
1996 represents borrowings under the Company's revolving credit facility and its
receivable securitization financing primarily to fund its working capital
requirements. As a result of the Company's initial public offering in April 1995
and its financial results, the borrowing rate alternatives under the Credit
Agreement were reduced by 1.0% to LIBOR plus 1.25% and the prime rate plus zero
beginning in October 1995. At March 31, 1996, borrowings under the Company's
$380 million revolving credit facility were $215 million (at an average interest
rate of 6.9%) and borrowings under the $285 million Receivables Program were
$210 million (at an average interest rate of 5.8%).
In December 1994, the Company sold substantially all of its trade accounts
receivable and notes receivable (the "Receivables") and continues to sell its
Receivables to AmeriSource Receivables Corporation ("ARC"), an indirect
wholly-owned special purpose subsidiary of the Company, pursuant to a trade
receivables securitization program (the "Receivables Program"). Pursuant to the
Receivables Program, ARC continuously transfers Receivables to a master trust in
exchange for, among other things, certain trade receivables-backed certificates
(the "Certificates") representing a right to receive a variable principal
amount. The cash generated by collections on the Receivables is used to
purchase, among other things, additional Receivables originated by the Company
and/or repay the Certificates. Contemporaneous with the consummation of the
Receivables Program, the Company executed the Credit Agreement to amend its
former revolving credit facility with its senior lenders, and in January 1995,
redeemed all of the outstanding 14 1/2% senior subordinated notes at a
redemption price of 106% of the principal amount plus accrued interest through
the redemption date totaling $176.2 million. In April 1995, the Company
completed an initial public offering of 7,590,000 common shares at $21.00 per
share, the net proceeds (approximately $148.2 million) of which were used to
redeem, in May 1995, one-half of the outstanding Senior Debentures for 110% of
the principal amount plus accrued interest through the date of redemption
(approximately $84.4 million) and to pay down borrowings under the Credit
Agreement. The Company also incurred approximately $10.1 million in fees
connected with the refinancings.
An increase in interest rates would adversely affect the Company's
operating results and the cash flow available after debt service to fund
operations and any expansion and, if permitted to do so under its revolving
credit facility, the Company's ability to pay dividends on its capital stock.
The Company's operating results have generated sufficient cash flows which,
together with borrowings under its debt agreements and credit terms from
suppliers, have provided sufficient capital resources to finance working capital
and cash operating requirements, and fund capital expenditures and interest
currently payable on outstanding debt. The Company's primary ongoing cash
requirements will be to fund payment of interest on indebtedness, finance
working capital, and fund capital expenditures, routine business growth and
expansion through new business opportunities. Future cash flows from operations
and borrowings under the debt agreements are expected to be sufficient to fund
the Company's ongoing cash requirements.
The Company is subject to contingencies pursuant to environmental laws and
regulations at one of its former distribution centers in Charleston, South
Carolina that may require remediation efforts. In fiscal 1994, the Company
accrued a liability of $4.1 million to cover future consulting, legal,
remediation, and ongoing monitoring costs. The accrued liability, which is
reflected in other long-term liabilities on the audited consolidated balance
sheet incorporated by reference herein, is based on an estimate of the extent of
contamination and choice of remedy, existing technology, and presently enacted
laws and regulations; however, changes in remediation standards, improvements in
cleanup technology, and discovery of additional information concerning the site
could affect the estimated liability in the future. The Company is investigating
the possibility of asserting claims against responsible parties for recovery of
these costs. Whether or not any recovery may be forthcoming is unknown at this
time. See "Business -- Regulatory Matters."
19
<PAGE> 21
In fiscal 1994, the Company concluded that the carrying value of goodwill
which was recorded at the time of the Acquisition could not be recovered from
expected future operations and accordingly wrote off its remaining goodwill
balance of $179.8 million. In fiscal 1994, the Company determined that its then
poor operating results since the Acquisition and its expectations for future
operating results were being adversely affected by its then current capital
structure, price competition for market share, health care industry
consolidation, and the impact of group purchasing organizations and health care
reform on drug prices. As these factors became clear, the Company assessed the
recoverability of its goodwill through projected operations. It was determined
that unless the Company was able to develop successful strategic operating or
financing initiatives which would change the assumptions used in those
projections, those projections were the best estimate of the Company's projected
performance given the Company's then existing high leverage and industry trends.
More importantly, the projections indicated that the Company's long-term
viability required modification of its then current capital structure to reduce
indebtedness and increase its equity. As a result of the Company's initial
public offering in April 1995 and the initiation of the Receivables Program, the
Company has reduced its level of indebtedness, increased its equity, and reduced
the interest rates charged on its remaining indebtedness. The proceeds from this
Offering will further reduce the Company's indebtedness.
20
<PAGE> 22
BUSINESS
THE COMPANY
AmeriSource is the fifth largest full-service wholesale distributor of
pharmaceutical products and related health care services in the United States.
The Company serves its customers nationwide through 20 drug distribution
facilities and two specialty products distribution facilities. AmeriSource is
typically the primary source of supply to its customers and offers a broad range
of services designed to enhance the operating efficiencies and competitive
position of its customers and suppliers. The Company benefits from a diverse
customer base that includes hospitals and managed care facilities (45%),
independent community pharmacies including retail drug stores, nursing homes and
clinics (36%), and chain drug stores including pharmacy departments of
supermarkets and mass merchandisers (19%).
Over the past five years, AmeriSource has achieved significant growth in
revenues and adjusted operating income. The Company's revenues have increased
from $2.5 billion in fiscal 1990 to $4.7 billion in fiscal 1995, a compound
annual growth rate of 13.5%, while adjusted operating income increased from
$43.8 million in fiscal 1990 to $98.0 million in fiscal 1995, a compound annual
growth rate of 17.5%. The Company's growth is primarily the result of market
share gains in existing markets, geographic expansion, and overall industry
growth.
BUSINESS STRATEGY
Over the past five years, AmeriSource has significantly expanded its
national presence as a leading, innovative wholesale distributor of
pharmaceutical products and related health care services. The Company believes
it is well-positioned to continue its revenue growth and increase operating
income through the execution of the following key elements of its business
strategy:
- Expansion into New Geographic Markets. Since October 1993, the Company
has opened six new distribution facilities and has acquired two others.
These openings and acquisitions have substantially increased its
geographic coverage and its access to potential markets. In October 1993,
the Company opened a facility in Dallas, Texas, and in November 1994, the
Company opened two additional facilities in Portland, Oregon and
Springfield, Massachusetts. The Company opened facilities in Sacramento,
California, Phoenix, Arizona, and Orlando, Florida in June, October, and
December 1995, respectively. While each of these new facilities began
operations with an existing customer base in its regional marketplace,
the Company believes there is substantial opportunity to grow these
operations. The Company has also sought to expand geographically by
making selective acquisitions. In July 1995, the Company acquired Newbro
Drug Company, a regional wholesale pharmaceutical distributor based in
Idaho Falls, Idaho, and in February 1996, the Company acquired Gulf
Distribution, Inc., a regional wholesale pharmaceutical distributor based
in Miami, Florida. Prior to the Acquisition in 1988, AmeriSource's
management team completed 18 acquisitions over a 10-year period. The
Company believes that as industry consolidation pressures continue,
additional opportunities may arise to selectively acquire local and
regional drug wholesale companies facilitating expansion into new
geographic areas and enhancement of its competitive position in existing
markets.
- Increasing Market Share in Existing Markets. The Company believes that
it is well positioned to continue to grow in its existing markets by: (i)
providing superior distribution services and specialty value-added
programs that reduce its customers' and suppliers' cost of operations;
(ii) maintaining its low cost operating structure to ensure that the
Company's services are priced competitively in the marketplace; (iii)
continuing to focus on the higher growth hospital and managed care market
segment through the use of dedicated facilities and advanced information
systems; and (iv) maintaining its decentralized operating structure to
respond to customers' needs more quickly and efficiently and to ensure
the continued development of
21
<PAGE> 23
local and regional management talent. These factors have allowed
AmeriSource to compete effectively in the marketplace, generate above
industry average sales growth over the last four years, and develop new
customers, such as the federal government. For example, over the past two
years the Company has been awarded contracts to provide pharmaceuticals
to more than 75% of the hospitals and clinics operated by the Veterans
Administration. In addition, the Company continues to grow with its
existing customers. The Company was selected by VHA Inc. as one of its
three primary providers and has been chosen as the preferred provider for
SunHealth. Both customers are among the nation's largest hospital group
purchasing organizations. AmeriSource also recently signed a contract
with the University HealthSystem Consortium ("UHC") as one of two
alternate pharmaceutical wholesalers to the existing primary wholesaler
to supply UHC's member hospitals. UHC is an alliance of more than 70
academic medical centers and their network partners. Its committed volume
purchasing program is one of the nation's largest, with annual
pharmaceutical purchases in excess of $750 million.
- Continuing Growth of Specialty Services. AmeriSource works closely with
both customers and suppliers to develop an extensive range of specialty
services. In addition to enhancing the Company's growth and
profitability, these services assist customers and suppliers in
maintaining and improving their market positions and strengthen the
Company's overall role in the healthcare distribution channel. These
services include:
-- ECHO(TM), the Company's proprietary software system, provides
sophisticated ordering and inventory management assistance to its
hospital and retail customers. In addition to facilitating the
primary supply arrangement between the Company and its customers,
ECHO(TM) enables the Company's customers to reduce their costs
through ordering more efficiently, selecting from best price
alternatives, and maintaining formulary compliance. In fiscal 1995,
the Company acquired LDS Liberty Drug Systems, a software developer
based in Greensboro, North Carolina. The technology acquired with
this acquisition is being combined with the ECHO(TM) systems to
provide customers with a complete system for tracking usage,
reordering products, and managing records. Since the introduction of
ECHO(TM) in early fiscal 1991, the Company has installed
approximately 3,100 systems nationwide, and believes that its
installed base of systems is one of the largest in the wholesale drug
industry.
-- Family Pharmacy(R) enables small chain and independent community
pharmacies to compete more effectively through: (i) innovative
advertising, marketing, and promotional campaigns; (ii) value-added
merchandising programs including private label product lines; and
(iii) enhanced access to pharmaceutical benefit programs of large
health care groups, including third party payor programs. Family
Pharmacy(R) has grown dramatically in recent years. With 2,133 Family
Pharmacy(R) member-stores as of March 31, 1996, Family Pharmacy(R) in
effect constitutes one of the largest drugstore chains in the United
States.
-- The Company's Income Rx(R) program provides an integral value-added
service to hospital and retail pharmacist customers by continually
reviewing the marketplace for generic products that offer the best
price, quality, and availability. With the increasing importance of
generic pharmaceuticals, this program represents a significant
opportunity for growth and profitability. Revenues attributable to
AmeriSource's sale of generic pharmaceuticals (including through the
Income Rx(R) program) have increased to approximately $500 million in
fiscal 1995, more than twice what they were in fiscal 1992.
-- American Health Packaging(SM) repackages pharmaceuticals from bulk
quantities into smaller units of use and unit dose measurements
thereby providing both hospitals and retail customers with lower
product, inventory, and dispensing (labor) costs. The Company
recently expanded its packaging capacity with the opening of a new
53,000
22
<PAGE> 24
square foot state-of-the-art packaging facility in Columbus, Ohio. In
recent months, the Company has begun packaging pharmaceutical product
for other drug wholesale distributors, in addition to its marketing
of products directly through its Income RePax(R) program.
-- The Company's Health Services Plus business distributes oncology and
other specialty products to clinics and physician groups on a
national basis. Rita Ann Distributors markets cosmetics and
fragrances to chain drugstores and other retail customers.
- Maintaining Low Cost Operating Structure. AmeriSource has the lowest
operating cost structure among its four major national competitors. Over
the past five years, the Company has significantly reduced operating
expenses and investment in net working capital as a percentage of
revenues. Specifically, the Company has reduced its selling and
administrative expenses and depreciation as a percentage of revenues from
4.78% in fiscal 1990 to 3.61% in fiscal 1995. The Company continues to
achieve productivity and operating income gains from continued
investments in advanced management information systems, warehouse
automation technology, and from operating leverage due to above industry
average volume per facility. In fiscal 1995, the Company's average
revenue per pharmaceutical distribution facility was $258 million
compared to a calendar 1994 industry average of $213 million. The
addition of new facilities was accomplished with minimal incremental
investment in corporate overhead. If these facilities continue to expand
in their regional markets, the Company believes that its growth and
profitability will be further enhanced.
INDUSTRY OVERVIEW
The Company has benefited from the significant growth of the full-service
wholesale drug industry in the United States. Industry sales grew from $30
billion in 1990 to an estimated $57 billion in 1995, a compound annual growth
rate of 13.7%. The factors contributing to this growth, and the sources of
future growth for the industry, include (i) an aging population, (ii) the
introduction of new pharmaceuticals, (iii) the increased use of outpatient drug
therapies, (iv) a higher concentration of distribution through wholesalers by
both manufacturers and customers, and (v) rising pharmaceutical prices.
Aging Population. The number of individuals over age 65 in the United
States has grown 23% from approximately 26 million in 1980 to approximately 32
million in 1990 and is projected to increase an additional 9% to more than 35
million by the year 2000. This age group suffers from a greater incidence of
chronic illnesses and disabilities than the rest of the population and is
estimated to account for approximately two-thirds of total health care
expenditures in the United States.
Introduction of New Pharmaceuticals. Traditional research and development
as well as the advent of new research and production methods, such as
biotechnology, continue to generate new compounds that are more effective in
treating diseases. These compounds have been responsible for significant
increases in pharmaceutical sales. The Company believes that ongoing research
and development expenditures by the leading pharmaceutical manufacturers will
contribute to continued growth of the pharmaceutical wholesale distribution
industry.
Cost Containment Efforts. In response to rising health care costs,
governmental and private payors have adopted cost containment measures that
encourage the use of efficient drug therapies to prevent or treat diseases.
While national attention has been focused on the overall increase in aggregate
health care costs, the Company believes drug therapy has had a beneficial impact
on overall health care costs by reducing expensive surgeries and prolonged
hospital stays. Pharmaceuticals accounted for approximately 8% of overall U.S.
healthcare costs in calendar 1995, and manufacturers' emphasis on research and
development is expected to continue the introduction of cost-effective drug
therapies.
23
<PAGE> 25
Higher Concentration of Distribution Through Wholesalers. Over the past
decade, manufacturers of pharmaceuticals have significantly increased the
distribution of their products through wholesalers as the cost and complexity of
maintaining inventories and arranging for delivery of pharmaceutical products
has risen. Drug wholesalers offer their customers and suppliers more efficient
distribution and inventory management. As a result, from 1980 to 1995, the
percentage of pharmaceutical sales through wholesale drug distributors increased
from approximately 46% to approximately 61%. Order processing, inventory
management, and product delivery by wholesale drug distributors allow
manufacturers to allocate their resources to research and development,
manufacturing, and marketing their products. Customers benefit from this shift
by having a single source of supply for a full line of pharmaceutical products,
as well as lower inventory costs, more timely and efficient delivery, and
improved purchasing and inventory information. In addition, customers also
benefit from the range of value-added programs developed by wholesale drug
distributors that are targeted to the specific needs of these customers, which,
in turn, reduce their costs and increase their operating efficiencies.
Pharmaceutical Price Increases By Drug Manufacturers. The Company believes
that price increases by pharmaceutical manufacturers will continue to equal or
exceed the overall Consumer Price Index. The Company believes that this increase
will be due in large part to the relatively inelastic demand in the face of
higher prices charged for patented drugs as manufacturers have attempted to
recoup costs associated with the development, clinical testing, and Food and
Drug Administration ("FDA") approval of new products.
OPERATIONS
Decentralized Structure. The Company believes that operating economies of
scale exist principally at the distribution facility level. Beginning in fiscal
1989, the Company undertook an extensive consolidation program which closed 17
of the 31 facilities open on October 1, 1988. During the course of this
consolidation program, the Company continued to significantly increase its
revenues in each fiscal year. During fiscal 1995, the Company's average revenue
per pharmaceutical distribution facility was approximately $258 million,
compared to the calendar 1994 industry average of $213 million. Five AmeriSource
facilities each have annual volume of over $400 million and an additional five
facilities each have annual volume in excess of $213 million. The above-average
volume of these ten facilities provides significant leverage of fixed overhead
and other costs. Management believes that the opportunity exists for the Company
to further reduce its operating expenses as a percentage of sales to the extent
the Company's other distribution facilities, especially the six facilities
opened since October 1993, are able to increase their sales volume and utilize
available capacity.
To expand into new geographic markets, AmeriSource has opened six new
facilities since October 1993 and has acquired two regional wholesale
pharmaceutical distributors since April 1995. The Company currently operates 20
drug wholesale distribution facilities and two specialty products distribution
facilities, organized into four regions across the United States. Several
operating units of the Company have over 100 years of history in the business
and are among the nation's first drug distribution businesses. Unlike its more
centralized competitors, the Company is structured as an organization of locally
managed profit centers, primarily at the distribution facility level. Management
of each operating unit has fiscal responsibility for its unit, and each
operating unit has an established executive, sales, and operations staff. The
operating unit's results, including earnings and asset management goals, have a
direct impact on management compensation. The operating units utilize the
Company's corporate staff for marketing, financial, legal, and executive
management resources and corporate coordination of asset and working capital
management.
Sales and Marketing. The Company has an organization of approximately 220
sales professionals. A specially trained group of telemarketing/customer service
representatives makes regular contact with customers regarding special offers.
Within the sales organization, there is also a field force of approximately 75
hospital representatives, including regional hospital directors. The
24
<PAGE> 26
Company's corporate marketing department works with manufacturer suppliers to
develop national programs and promotions. Tailored to specific customer classes,
these programs can be further customized at the operating unit level to adapt to
local market conditions. The marketing department gathers and disseminates
information to each operating unit's purchasing and sales organization in order
to enhance their competitive effectiveness.
Facilities. Each of the Company's operating units carries an inventory
line necessary for its local market. The efficient distribution of small orders
is possible through the extensive use of computerization and modern warehouse
techniques. These include computerized warehouse product location, routing and
inventory replenishment systems, gravity-flow racking, mechanized order
selection, and efficient truck loading and routing. The Company delivers its
products on a scheduled basis, on a daily basis where required. It utilizes a
fleet of owned and leased vans and trucks and contract carriers. Night picking
operations in its distribution facilities have further reduced delivery time. To
meet customer needs, orders are typically delivered within one day.
The Company's 20 full service distribution facilities and two specialty
products facilities as of March 31, 1996 are organized into four regions
throughout the United States. The following table presents certain information
as of the end of the last five fiscal years regarding the Company's operating
units in the aggregate.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS EXCEPT REVENUE PER SQUARE FEET)
<S> <C> <C> <C> <C> <C>
Revenue................................... $2,743.8 $3,237.7 $3,658.9 $4,182.2 $4,668.9
Number of Rx distribution facilities...... 18 17 15 14 18
Average revenue/Rx distribution
facility................................ $151.5 $189.7 $243.0 $297.1 $257.8
Total square feet (000's) (Rx
facilities)............................. 1,404.5 1,414.0 1,372.3 1,322.1 1,446.9
Average revenue/square foot (Rx
facilities)............................. $1,942.0 $2,281.0 $2,656.0 $3,146.0 $3,207.0
</TABLE>
Customers and Markets. The Company has a diverse customer base that
includes hospitals and managed care facilities, independent community pharmacies
including retail drug stores, nursing homes and clinics, and chain drug stores
including pharmacy departments of supermarkets and mass merchandisers. The
Company offers a broad range of services designed to enhance the operating
efficiencies and competitive position of its customers and suppliers. In
addition, AmeriSource is typically the primary source of supply for its
customers, delivering on a daily basis. The table below summarizes how the
Company's customer sales mix has changed over the last five fiscal years and the
twelve months ended March 31, 1996.
<TABLE>
<CAPTION>
TWELVE
MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------------------------------- ------------
1991 1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hospitals and Managed
Care Facilities...... $1,001 36% $1,253 39% $1,554 42% $1,968 47% $2,182 47% $2,240 45%
Independents........... 1,203 44 1,356 42 1,397 38 1,450 35 1,636 35 1,824 36
Chains................. 540 20 629 19 708 20 764 18 851 18 942 19
------ ---- ------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Total.......... $2,744 100% $3,238 100% $3,659 100% $4,182 100% $4,669 100% $5,006 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
No single customer represented more than 4% of the Company's total revenues
during fiscal 1995 other than the federal government which, in the aggregate,
accounted for approximately 10%. Excluding the federal government, the Company's
top ten customers represented approximately 15% of total revenues during fiscal
1995. The Company believes it is less dependent on any single customer than its
four largest competitors. A profile of each customer segment follows:
- Hospitals and Managed Care Facilities. AmeriSource is one of the
nations' top three distributors in serving the hospital and managed care
market segment, which is currently the
25
<PAGE> 27
fastest growing customer segment in the industry. Because hospitals and
managed care facilities purchase large volumes of high priced, easily
handled pharmaceuticals, the Company benefits from quick turnover of both
inventory and receivables and lower than average operating expenses. The
Company intends to continue to focus on the higher growth hospital and
managed care market segment through the use of dedicated facilities and
advanced information systems such as ECHO(TM). As a percentage of total
revenues, sales to hospitals and managed care facilities increased from
36% in fiscal 1991 to 47% in fiscal 1995 (and have grown at a compound
annual rate of 21.5% over this period) and were 45% for the twelve-month
period ended March 31, 1996.
- Independents. Independent community pharmacy owners represent the
largest segment of the industry and provide the greatest opportunity for
the Company's value-added services. The Company's sales to independent
customers have risen at a compound annual rate of 8.0% from fiscal 1991
through fiscal 1995 due to the general growth of this customer segment
and the success of the Company's customized marketing and merchandizing
programs, such as its Family Pharmacy(R) program.
- Chains. This category includes chain drug stores, including pharmacy
departments of supermarkets and mass merchandisers. The Company's sales
to chains have risen at a compound annual rate of 12.0% from fiscal 1991
through fiscal 1995. This growth rate reflects the results from the
Company entering into new contracts with several drug store chains.
Suppliers. AmeriSource obtains pharmaceutical and other products from a
number of manufacturers, none of which accounted for more than approximately 6%
of its net sales in fiscal 1995. The five largest suppliers in fiscal 1995
accounted for approximately 23% of net sales. Historically, the Company has not
experienced difficulty in purchasing desired products from suppliers. The
Company has agreements with many of its suppliers which generally require the
Company to maintain an adequate quantity of a supplier's products in inventory.
The majority of contracts with suppliers are terminable upon 30 days notice by
either party. The loss of certain suppliers could adversely affect the Company's
business if alternative sources of supply were unavailable. The Company believes
that its relationships with its suppliers are good.
Management Information Systems. The Company has continually invested in
advanced management information systems and automated warehouse technology. In
fiscal 1994, AmeriSource introduced it BOSS warehouse automation system, a
paper-less warehouse production program customized to AmeriSource's unique
requirements. First installed at its Paducah, Kentucky distribution center, the
second BOSS system has been installed at the Company's newly opened facility in
Orlando, Florida and the Company may selectively introduce the BOSS system in
additional facilities. Under the BOSS system, merchandise is received, placed in
inventory, retrieved, and shipped utilizing customized radio frequency
equipment. The Company's management information systems also provide for, among
other things, electronic order entry by customers, invoice preparation, and
purchasing and inventory tracking. As a result of electronic order entry, the
cost of receiving and processing orders has not increased as rapidly as sales
volume. The Company's customized systems strengthen customer relationships by
allowing the customer to lower its operating costs and by providing the basis
for a number of the valueadded services the Company provides to its customers,
including marketing data, inventory replenishment, single-source billing,
computer price updates, and price labels. AmeriSource believes that its
management information systems are capable of serving its needs for the
foreseeable future.
COMPETITION
The Company engages in the wholesale distribution of pharmaceuticals,
health and beauty aids, and other products in a highly competitive environment.
The Company competes with numerous national and regional distributors, some of
which are larger and have substantially greater financial resources than the
Company. The Company's national competitors include Bergen Brunswig
26
<PAGE> 28
Corporation, Cardinal Health, Inc., FoxMeyer Health Corporation, and McKesson
Corporation. In addition, the Company competes with local distributors,
direct-selling manufacturers, and other specialty distributors. Competitive
factors include price, service and delivery, credit terms, breadth of product
line, customer support, and marketing programs. There can be no assurance that
the Company will not encounter increased competition in the future that could
adversely affect the Company's business. The drug wholesale industry continues
to undergo significant consolidation, with the number of wholesalers in the
continental United States reduced from 139 at the end of 1980 to approximately
48 as of December 31, 1995.
EMPLOYEES
As of March 31, 1996, the Company employed approximately 2,900 persons, of
which approximately 2,700 were full-time employees. Certain of the employees at
three distribution facilities are covered by collective bargaining agreements.
The Company believes that its relationship with its employees is good.
REGULATORY MATTERS
The United States Drug Enforcement Administration, the FDA, and various
state boards of pharmacy regulate the distribution of pharmaceutical products
and controlled substances, requiring wholesale distributors of these substances
to register for permits and to meet various security and operating standards. As
a wholesale distributor of pharmaceuticals and certain medical/surgical
products, the Company is subject to these regulations. The Company has received
all necessary regulatory approvals and believes that it is in substantial
compliance with all applicable wholesale distribution requirements.
The Company is aware that at the site of its former distribution center
located in Charleston, South Carolina there is evidence of residual soil
contamination remaining from a fertilizer manufacturing process operated there
over thirty years ago. The Company's environmental consulting firm conducted a
soil survey and a groundwater study during fiscal 1994 and 1995. The results of
the studies indicate that there is lead on-site at levels requiring further
investigation and potential remediation. A preliminary engineering analysis was
prepared by outside consultants during the third quarter of fiscal 1994, and
indicated that if both soil and groundwater remediation are required, the most
likely cost is estimated to be $4.1 million. Accordingly, a liability of $4.1
million was recorded during fiscal 1994 to cover future consulting, legal,
remediation, and ongoing monitoring costs. The Company is working with the
appropriate state regulatory agency regarding further tests and potential site
remediation. That negotiation, investigation, and remediation could take several
years and the actual costs may differ from the liability that has been recorded.
The accrued liability ($3.9 million at March 31, 1996), which is reflected in
other long-term liabilities on the Company's consolidated balance sheet, is
based on the present estimate of the extent of contamination, choice of remedy,
and enacted laws and regulations, including remedial standards; however, changes
in any of these could affect the estimated liability. The Company is
investigating the possibility of asserting claims against responsible parties
for recovery of these costs. Whether or not any recovery may be forthcoming is
unknown at this time, although the Company intends to vigorously enforce its
rights and remedies.
LEGAL PROCEEDINGS
In November 1993, the Company was named a defendant in the United States
District Court in the Southern District of New York, along with six other
wholesale distributors and twenty-four pharmaceutical manufacturers, in a series
of purported class action antitrust lawsuits alleging violations of various
antitrust laws associated with the chargeback pricing system. In addition, the
Company is a party to a parallel suit filed in state court in Minnesota. In
October 1994, the Company entered into a Judgment Sharing Agreement with other
wholesaler and pharmaceutical manufacturer defendants. Under the Judgment
Sharing Agreement: (a) the manufacturer defendants
27
<PAGE> 29
agreed to reimburse the wholesaler defendants for litigation costs incurred, up
to an aggregate of $9 million, and (b) if a judgement is entered into against
both manufacturers and wholesalers, the total exposure for joint and several
liability of the Company is limited to the lesser of 1% of such judgement or $1
million. In addition, the Company has released any claims that it might have had
against the manufacturers for the claims presented by the plaintiffs in these
lawsuits. The Judgment Sharing Agreement covers the federal court litigation as
well as the cases which have been filed in various state courts. On April 4,
1996, the federal court granted the wholesalers' motion for summary judgment.
In October 1995, a proceeding was instituted before the Massachusetts Board
of Registration in Pharmacy (the "Massachusetts Board") against the Company. The
Massachusetts Board alleges that the Company's application for the licensure of
its facility in Springfield, Massachusetts submitted in September 1994 was
inaccurate and insufficient. The Company is contesting this allegation. The
Company cannot predict the outcome of the proceeding; however, it does not
believe that the outcome will have a material adverse effect on its business or
financial condition.
The Company is a party to various lawsuits arising in the ordinary course
of business. The Company, however, does not believe that the outcome of these
lawsuits, individually or in the aggregate, will have a material adverse effect
on its business or financial condition.
28
<PAGE> 30
MANAGEMENT
DIRECTORS AND OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE TITLE
- --------------------------------- --- ---------------------------------------------------
<S> <C> <C>
John F. McNamara(3).............. 61 Chairman, President and Chief Executive Officer
David M. Flowers................. 49 Executive Vice President, Marketing
R. David Yost.................... 48 Executive Vice President, Operations
Kurt J. Hilzinger................ 36 Vice President, Chief Financial Officer and
Treasurer
John A. Aberant.................. 39 Vice President, Assistant Treasurer
Teresa T. Ciccotelli............. 44 Vice President, General Counsel and Secretary
Michael D. DiCandilo............. 35 Vice President, Controller
Robert E. McHugh................. 54 Vice President, Industry Affairs and Investor
Relations
J. Michael McNamara.............. 39 Senior Vice President, Sales
Bruce C. Bruckmann(1)............ 42 Director
Michael A. Delaney(1)............ 41 Director
Richard C. Gozon(1)(2)........... 57 Director
Lawrence C. Karlson(3)........... 53 Director
George H. Strong(2).............. 69 Director
James A. Urry(1)................. 42 Director
Barton J. Winokur(2)(3).......... 56 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee of the Company's Board of Directors.
(2) Member of Audit Committee of the Company's Board of Directors.
(3) Member of Capital Appropriations Committee of the Company's Board of
Directors.
John F. McNamara. Mr. McNamara has been Chairman, President and Chief
Executive Officer of the Company and of AmeriSource Corporation, the Company's
chief operating subsidiary, since 1989 and has been President of AmeriSource
Corporation since 1987. Prior to holding these positions, he was Chief Operating
Officer, from 1986 to 1989, and Executive Vice President, from 1985 to 1987, of
AmeriSource Corporation. He also served as Chairman, from 1986 to 1990, and
President, from 1981 to 1986, of the Kauffman-Lattimer Division of AmeriSource
Corporation. Mr. McNamara served on the executive committee of the National
Wholesale Druggists' Association from 1991 through 1994 and served as its
Chairman of the Board from November 1993 to November 1994. Mr. McNamara is a
member of the Capital Appropriations Committee of the Company's Board of
Directors.
David M. Flowers. Mr. Flowers has been Executive Vice President, Marketing
since December 1995. Prior to that he had held the positions of Group
President -- Eastern Region since 1989, President of the AmeriSource Southeast
Region from 1988 to 1989, and President of the Duff Brothers Division of
AmeriSource Corporation from 1984 to 1987.
R. David Yost. Mr. Yost has been Executive Vice President, Operations
since December 1995. Prior to that he had held the positions of Group
President -- Central Region since 1989, and President, from 1986 to 1989, and
Executive Vice President and General Manager, from 1984 to 1986, of the
Kauffman-Lattimer Division of AmeriSource Corporation.
Kurt J. Hilzinger. Mr. Hilzinger has served as Vice President, Chief
Financial Officer and Treasurer since February 1995. Prior to that, he served as
Vice President, Finance, and Treasurer since October 1993, and as Vice
President, Financial Planning since March 1991. Before joining the Company, he
was a Vice President in the Corporate Advisory Division of Citicorp from 1986 to
1991.
John A. Aberant. Mr. Aberant has served as Vice President, Assistant
Treasurer of the Company since October 1995. Previously, he served as Vice
President, Insurance and Benefits
29
<PAGE> 31
since September 1994, and Director of Insurance and Benefits since July 1992.
Prior to that he served as Assistant Controller of the Company from June 1989.
Before joining the Company, he was Controller of the Renal Care Centers division
of United Medical Corporation from August 1988 to May 1989.
Teresa T. Ciccotelli. Ms. Ciccotelli has served as Vice President, General
Counsel and Secretary since 1989. Prior to that, from 1985 to 1989, she was an
attorney with Alco Standard Corporation.
Michael D. DiCandilo. Mr. DiCandilo has served as Vice President,
Controller of the Company since November 1995. Previously, he served as Vice
President, Finance and Administration, of the North Eastern Region of
AmeriSource Corporation since October 1990. Prior to that he had been a Senior
Manager with Ernst & Young.
Robert E. McHugh. Mr. McHugh has served as Vice President, Industry
Affairs and Investor Relations since August 1995. Previously, he served as Vice
President, Marketing of the Company since August 1991. Prior to that he was
President of J.E. Goold from 1990 to 1991 and Vice President, Industry Affairs
of the National Wholesale Druggists' Association from 1983 to 1990.
J. Michael McNamara. Mr. McNamara has served as Senior Vice President,
Sales of the Company since November 1994. Previously, he served as Regional Vice
President of the West Central Region of AmeriSource Corporation since April
1991. Prior to that he was Vice President, Sales and Marketing of the Company
from 1990 to 1991, Vice President and General Manager of the Toledo Division of
AmeriSource Corporation from 1988 to 1990, and Director of Marketing of the
Columbus Division of AmeriSource Corporation from 1984 to 1988.
Bruce C. Bruckmann. Mr. Bruckmann previously served as a director of the
Company from 1989 to December 1991, and as a director of AmeriSource Corporation
from 1988 to December 1991, prior to his reelection as a director of the Company
in August 1992. Since February 1995, Mr. Bruckmann has been a Managing Director
of Bruckmann, Rosser, Sherrill & Co., Inc., an investment firm. Until January
1995, Mr. Bruckmann was a Managing Director of Citicorp Venture Capital Ltd. and
Court Square Capital Limited. Mr. Bruckmann serves as a director of Chromcraft
Revington, Inc., Cort Business Services Corporation, Jitney-Jungle Stores of
America, Inc. and Mohawk Industries, Inc. Mr. Bruckmann is a member of the
Compensation Committee of the Company's Board of Directors.
Michael A. Delaney. Mr. Delaney has been a director since January 1995.
Mr. Delaney has been a Vice President of Citicorp Venture Capital Ltd. since
1989. From 1986 through 1989 he was Vice President of Mergers and Acquisitions
at Citicorp. Mr. Delaney is also a director of Sybron Chemicals, Inc., GVC
Holdings, JAC Holdings, Delco Remy International, Inc., Delco Remy America,
Inc., Reman Holdings, Inc., Enterprise Media Inc., SC Processing, Inc., The
Triumph Group, FF Holdings Corporation, Cort Business Services Corporation, Cort
Furniture Rental Corporation, Palomar Technologies Corporation, and Palomar
Products, Inc. Mr. Delaney is a member of the Compensation Committee of the
Company's Board of Directors.
Richard C. Gozon. Mr. Gozon was elected to the Board of Directors in 1994.
Mr. Gozon has been Executive Vice President of Weyerhaeuser Company since June
1994. Mr. Gozon was formerly President and Chief Operating Officer of Alco
Standard Corporation from 1988 to 1993. He is also a director of UGI Corp. and
The Triumph Group. Mr. Gozon is Chairman of the Compensation Committee and a
member of the Audit Committee of the Company's Board of Directors.
Lawrence C. Karlson. Mr. Karlson was elected to the Board of Directors in
1994. Mr. Karlson is Chairman of Karlson Corporation, a private investment
company, and serves as a director of CDI Corporation. Mr. Karlson is a member of
the Capital Appropriations Committee of the Company's Board of Directors.
30
<PAGE> 32
George H. Strong. Mr. Strong was elected to the Board of Directors in
1994. Mr. Strong is a private investor and serves as a director of Corefunds,
Health South Rehabilitation Corp. and Integrated Health Services, Inc. Mr.
Strong is Chairman of the Audit Committee of the Company's Board of Directors.
James A. Urry. Mr. Urry has been a director since January 1995. Mr. Urry
has been with Citibank, N.A. since 1981, serving as a Vice President since 1986.
He has been a Vice President of Citicorp Venture Capital Ltd. since 1989. He is
also a director of FF Holdings Corporation, York International Corporation,
Hancor Holding Corp., Cort Furniture Rental Corporation, and Cort Business
Services Corporation. Mr. Urry is a member of the Compensation Committee of the
Company's Board of Directors.
Barton J. Winokur. Mr. Winokur has been a director since 1990. Mr. Winokur
is a partner in the law firm of Dechert Price & Rhoads and serves as a director
of CDI Corporation, FF Holdings Corporation, Farm Fresh, Inc., Davco
Restaurants, Inc., and The Bibb Company. Mr. Winokur is Chairman of the Capital
Appropriations Committee and a member of the Audit Committee of the Company's
Board of Directors.
Directors of the Company are elected to serve annual terms and until their
successors are elected and qualified. Each director is a citizen of the United
States. Officers are elected annually by the Board of Directors to serve for the
ensuing year and until their respective successors are elected. There are no
arrangements or understandings between any of the officers and any other person
pursuant to which he or she was elected an officer. There are no family
relationships between any directors and executive officers. An officer of the
Company, J. Michael McNamara, Senior Vice President, Sales, is the son of John
F. McNamara, Chairman, President and Chief Executive Officer of the Company.
31
<PAGE> 33
SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of each of the Selling Stockholders of
the Company's Common Stock as of March 31, 1996, and as adjusted to reflect the
sale of Common Stock in the Offering. As of March 31, 1996, there were
22,170,686 shares of the Company's Common Stock outstanding.
<TABLE>
<CAPTION>
OWNERSHIP PRIOR TO THE OFFERING(1)
---------------------------------------------------------------------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF
VOTING VOTING NON-VOTING NON-VOTING ALL ALL
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED OWNED OWNED OWNED OWNED OWNED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
399 Venture Partners, Inc.
("VPI")(2)(3)............ 234,926 1.1% 9,786,147 44.1% 10,021,073 45.2%
<CAPTION>
OWNERSHIP AFTER THE
OFFERING
---------------------------
NUMBER OF PERCENT OF
ALL ALL
NUMBER OF SHARES COMMON STOCK COMMON STOCK
TO BE SOLD IN BENEFICIALLY BENEFICIALLY
THE OFFERING OWNED OWNED
---------------- ------------ ------------
<S> <C> <C> <C>
399 Venture Partners, Inc.
("VPI")(2)(3)............ 3,300,000 6,721,073 28.4%
</TABLE>
- ---------------
* Less than 1%.
(1) Based on information furnished to the Company by the respective
stockholders. Except as indicated below, the Company is informed that the
beneficial owners have sole voting and investment power over the shares
shown opposite their names.
(2) Includes 9,786,147 shares of Class B Common Stock owned by VPI.
(3) VPI disclaims beneficial ownership as to shares of Common Stock held by
investors currently or previously affiliated with VPI. VPI's address is 1209
Orange Street, Wilmington, Delaware 19801. VPI is a wholly-owned, indirect
subsidiary of Citicorp.
The financing for the Acquisition consisted in part of the issuance by the
Company of $11.4 million principal amount of 18% Senior Subordinated Debentures
due October 31, 2001 (the "Senior Subordinated Debentures") and $20.0 million
principal amount of 19.5% Junior Subordinated Debentures due October 31, 2001
(the "Junior Subordinated Debentures") to Citicorp Investments Inc. ("CII"), the
predecessor company to VPI. The indentures governing the Senior Subordinated
Debentures and the Junior Subordinated Debentures permitted payment of interest
by issuance of additional debentures for the first five years following
issuance, at the Company's option. As of July 26, 1993, CII owned $21.3 million
principal amount of Senior Subordinated Debentures and $37.9 million principal
amount of Junior Subordinated Debentures, in each case including accrued and
unpaid interest. On July 26, 1993, the Company used the net proceeds from the
public offering of the Senior Debentures to, among other things, redeem the
Senior Subordinated Debentures and Junior Subordinated Debentures held by CII at
a redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest thereon to the date of redemption.
32
<PAGE> 34
SHARES ELIGIBLE FOR FUTURE SALE
Certain holders were granted piggyback registration rights with respect to
the Common Stock when they purchased their shares. After the Offering, of the
23,670,686 shares of Common Stock outstanding, an aggregate of approximately 7.0
million shares of Common Stock owned by such registration rights holders will be
entitled to piggyback registration rights. In addition, VPI, which will hold in
the aggregate approximately 6.7 million shares of Common Stock after the
Offering, has been granted demand rights to require the registration of its
shares. The Company, VPI, and certain executive officers and directors of the
Company which will hold, in the aggregate approximately 7.8 million shares of
Common Stock after the Offering, have agreed, except as described below, that,
during the period beginning from the date of this Prospectus and continuing to
and including the date 90 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
the Common Stock or which are convertible or exchangeable into securities which
are substantially similar to the shares of Common Stock without the prior
written consent of the Underwriters, except for the shares of Common Stock
offered in connection with the concurrent U.S. and international offerings. Such
consent may be provided without prior notice to holders of the Common Stock or
to the markets where such securities are traded. The Underwriters have agreed
that Messrs. McNamara, Flowers, Hilzinger and Yost may sell up to 150,000,
32,000, 25,000 and 35,000 shares, respectively, after 30 days following the date
of the Prospectus.
33
<PAGE> 35
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below and each of such U.S. Underwriters has severally agreed
to purchase from the Company and the Selling Stockholders, the respective number
of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
-------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co...........................................
Donaldson, Lufkin & Jenrette Securities Corporation...........
Smith Barney Inc. ............................................
Bear, Stearns & Co. Inc. .....................................
Wheat, First Securities, Inc. ................................
------------
Total............................................... 3,800,000
============
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the U.S. Underwriters.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 1,000,000 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the international offering, and vice versa. The International
Underwriters are Goldman Sachs International, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Smith Barney Inc., Bear, Stearns International
Limited and Wheat, First Securities, Inc.
Pursuant to an agreement between the U.S. and international underwriting
syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters has agreed or will agree that, as a part of the distribution
of the shares offered hereby and subject to certain exceptions, it will offer,
sell or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed or will agree pursuant to the Agreement
Between that, as a part of the distribution of the shares offered as a part of
the international offering, and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
34
<PAGE> 36
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company, VPI, and certain executive officers and directors of the
Company have agreed, except as described below, that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 90 days after the date of the Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of Common Stock without the prior written
consent of the Underwriters, except for the shares of Common Stock offered in
connection with the concurrent U.S. and international offerings. Such consent
may be provided without prior notice to holders of the Common Stock or to the
markets where such securities are traded. The Underwriters have agreed that
Messrs. McNamara, Flowers, Hilzinger and Yost may sell up to 150,000, 32,000,
25,000 and 35,000 shares, respectively, after 30 days following the date of the
Prospectus.
A Selling Stockholder has granted the U.S. Underwriters an option
exercisable for 30 days after the date of the Prospectus to purchase up to an
aggregate of 570,000 additional shares of Common Stock to cover over-allotments,
if any. If the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to 3,800,000
shares of Common Stock offered. A Selling Stockholder has granted the
International Underwriters a similar option to purchase up to an aggregate of
150,000 additional shares of Common Stock.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
international offering, to persons located in the United States.
The Company and the Selling Stockholders have agreed to indemnify the
several underwriters against certain liabilities, including liabilities under
the Securities Act.
Certain members of AmeriSource's management have outstanding margin loans
from DLJ. The margin loans were incurred primarily to satisfy certain tax
liabilities in connection with the exercise of employee stock options. These
members of management have pledged the shares of Common Stock acquired pursuant
to exercise of such options as collateral for the margin loans. Under certain
circumstances, DLJ may foreclose on and sell such pledged Common Stock.
The Company has commenced an offer to purchase all of its outstanding
Senior Debentures from the holders thereof (the "Tender Offer") and a
solicitation of consents from the holders of Senior Debentures for the amendment
of certain covenants in the Indenture (the "Consent Solicitation"). DLJ will act
as Dealer Manager in connection with the Tender Offer and the Consent
Solicitation. The Company has agreed to pay DLJ, upon acceptance of the Senior
Debentures by the Company for payment and purchase pursuant to the Tender Offer,
a fee of 0.50% of the aggregate principal amount of Senior Debentures tendered,
for its services as Dealer Manager in connection with the Tender Offer and the
Consent Solicitation. The Company has also agreed to indemnify the Dealer
Manager and its affiliates against certain liabilities under Federal or state
law or otherwise caused by, relating to or arising out of the Tender Offer or
the Consent Solicitation.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Dechert Price & Rhoads, Philadelphia, Pennsylvania.
Certain legal matters with respect
35
<PAGE> 37
to the shares of Common Stock offered hereby will be passed upon for the
Underwriters by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York. Barton J. Winokur, a partner of Dechert Price
& Rhoads, which performs various legal services for the Company, is a director
of the Company and owns 19,750 shares of the Common Stock of the Company.
EXPERTS
The consolidated financial statements and schedules of AmeriSource Health
Corporation and subsidiaries as of September 30, 1995 and 1994, and for each of
the three years in the period ended September 30, 1995 incorporated by reference
in this Prospectus and Registration Statement (as defined herein) from the
Company's Annual Report on Form 10-K for the year ended September 30, 1995 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated by reference herein and in the
Registration Statement. Such consolidated financial statements and schedules are
incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements, and other
information with the Commission. Such reports, proxy statements, and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's Regional
Offices located at Seven World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
The Company has filed with the Commission the Registration Statement on
Form S-3 under the Securities Act (the "Registration Statement") with respect to
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to, or incorporated by reference into, the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement is qualified in its
entirety by such reference. For further information regarding the Company and
the shares of Common Stock offered hereby, reference is hereby made to the
Registration Statement and the exhibits and schedules which may be obtained from
the Public Reference Section of the Commission as set forth above.
The Registration Statement and the exhibits and schedules thereto filed
with the Commission may be inspected without charge at the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such materials may also be obtained from the
Commission's Regional Offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
36
<PAGE> 38
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 33-27835-01) pursuant to the Exchange Act are incorporated herein by
reference:
(i) the Company's Annual Report on Form 10-K for the year ended
September 30, 1995;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1995 and March 31, 1996; and
(iii) the description of the capital stock of the Company included in
the Company's Registration Statement on Form 8-A, filed on March 24, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering made hereby shall be deemed to be incorporated by
reference in this Prospectus and to be part hereof from the date of filing of
such documents.
Certain information incorporated by reference herein contains
forward-looking statements as such term is defined in Section 27A of the
Securities Act and Section 21E of the Exchange Act. Certain factors as discussed
in "Risk Factors" could cause actual results to differ materially from those in
the forward-looking statements.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
To the extent that any proxy statement is incorporated by reference herein,
such incorporation shall not include any information contained in such proxy
statement that is not, pursuant to the Commission's rules, deemed to be "filed"
with the Commission or subject to the liabilities of Section 18 of the Exchange
Act.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Any such request should be directed to Teresa T.
Ciccotelli, Esq., Vice President, General Counsel and Secretary, AmeriSource
Health Corporation, P.O. Box 959, Valley Forge, Pennsylvania 19482 (telephone
number (610) 296-4480).
37
<PAGE> 39
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statement of Operations for the year ended September 30, 1995
(unaudited)......................................................................... P-3
Consolidated Statement of Operations for the six months ended March 31, 1996
(unaudited)......................................................................... P-4
Consolidated Statement of Operations for the six months ended March 31, 1995
(unaudited)......................................................................... P-5
Consolidated Balance Sheet as of March 31, 1996
(unaudited)......................................................................... P-6
</TABLE>
P-1
<PAGE> 40
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma statements of operations for the fiscal year ended
September 30, 1995 and for the six months ended March 31, 1996 and 1995 set
forth below give effect to the use of the proceeds from the Offering made hereby
(the "1996 Offering") of $52.9 million, assuming the sale of 1,500,000 shares of
Common Stock by the Company at an offering price of $37.50 per share less
estimated issuance cost of $3.4 million, as if such transaction had occurred as
of October 1, 1994. Additionally, the unaudited pro forma financial statements
for the fiscal year ended September 30, 1995 and for the six months ended March
31, 1995 give effect to the consummation of the receivables securitization
financing and the amendment of the Credit Agreement in December 1994 and the
redemption of the 14 1/2% senior subordinated notes in January 1995
(collectively the "1995 Refinancing"), and the net proceeds of $148 million from
the issuance of 7,590,000 shares of Common Stock in a public offering at $21.00
per share in April 1995 and the related exercise of stock options (the "1995
Offering"). See Notes 4 and 5 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1995, incorporated by reference in this Prospectus,
for additional information.
The unaudited pro forma balance sheet as of March 31, 1996 set forth below
gives effect to the 1996 Offering as if such transaction had occurred on March
31, 1996.
The unaudited pro forma financial statements are not necessarily indicative
of what the Company's results of operations and balance sheet would have been
had the 1995 Refinancing, the 1995 Offering, and the 1996 Offering been
consummated at the assumed dates, nor are they necessarily indicative of the
Company's results of operations and balance sheet for any future period. The
unaudited pro forma financial statements should be read in conjunction with the
audited and unaudited consolidated financial statements and related notes
thereto and "Use of Proceeds" included elsewhere or incorporated by reference in
this Prospectus.
P-2
<PAGE> 41
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1995
-------------------------------------------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS ADJUSTMENTS
------------------------ -----------
1995 1995 1996
HISTORICAL REFINANCING OFFERING AS ADJUSTED OFFERING AS ADJUSTED
---------- ----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................ $4,668,948 $ -- $ -- $4,668,948 $ -- $4,668,948
Cost of goods sold.................. 4,402,593 4,402,593 4,402,593
---------- ---------- ----------
Gross profit........................ 266,355 266,355 266,355
Selling and administrative
expenses.......................... 161,064 161,064 161,064
Depreciation........................ 7,456 7,456 7,456
---------- ---------- ----------
Operating income.................... 97,835 97,835 97,835
Interest expense.................... 52,288 (3,745)(1) (7,110 )(2) 41,433 (3,991)(3) 37,442
---------- ------- ------- ---------- ------- ----------
Income before taxes and
extraordinary items............... 45,547 3,745 7,110 56,402 3,991 60,393
Taxes on income..................... 17,329 1,413(4) 2,682 (4) 21,424 1,517(4) 22,941
---------- ------- ------- ---------- ------- ----------
Income before extraordinary
items(5).......................... $ 28,218 $ 2,332 $ 4,428 $ 34,978 $ 2,474 $ 37,452
========== ======= ======= ========== ======= ==========
Income before extraordinary items
per share (fully diluted)(5)...... $ 1.53 $ 1.57 $ 1.58 (6)
========== ========== ==========
Weighted average common shares
outstanding (fully diluted)(7).... 18,396 22,272 23,772
========== ========== ==========
</TABLE>
- ---------------
(1) Adjusted for interest savings consisting of: (i) a $6,876 reduction due to
the redemption of the 14 1/2% senior subordinated notes; (ii) a $599
reduction in amortization of deferred financing fees related to the 14 1/2%
senior subordinated notes and the Credit Agreement, (iii) additional
interest of $3,302 associated with the Credit Agreement and Receivables
Program and (iv) the addition of $428 of amortization of deferred financing
fees. The Receivables Program is assumed to bear a cost of 8.1% per annum
(representative of historical rates on fixed principal certificates) on the
assumed $207,000 in Certificates sold to investors. The Credit Agreement is
assumed to bear a weighted average interest rate of 8.9% per annum, which is
representative of historical interest rates.
(2) Adjusted for interest savings consisting of: (i) a $4,956 reduction due to
the redemption of one-half of the Senior Debentures; (ii) a $145 reduction
in amortization of deferred financing fees related to the Senior Debentures;
and (iii) a $2,009 reduction due to an assumed weighted average net pay down
of $45,709 in borrowings under the Credit Agreement. The Credit Agreement is
assumed to bear a weighted average interest rate of 8.9% per annum, which is
representative of historical interest rates.
(3) Adjusted for interest savings of $3,991 due to an assumed repayment of
$52,859 in borrowings under the Credit Agreement. The Credit Agreement is
assumed to bear a weighted average interest rate of 8.9% per annum, which is
representative of historical interest rates.
(4) Tax provision arising from the pro forma adjustments.
(5) Does not reflect an extraordinary charge of $18,037, net of tax benefits,
relating to the amendment of the Credit Agreement, the redemption of the
14 1/2% senior subordinated notes and the partial redemption of the Senior
Debentures.
(6) As discussed in note (3), the $52,859 proceeds from the 1996 Offering are
assumed to be used to repay borrowings under the Credit Agreement. If the
proceeds were assumed to be used to purchase and retire Senior Debentures at
a price of 112.75% of the principal amount thereof (including fees) plus
accrued interest, income before extraordinary items per share on a fully
diluted basis would be $1.61. On May 20, 1996, the Company commenced a
tender offer and related consent solicitation with respect to all of the
outstanding Senior Debentures, whereby the Company has offered to pay to
tendering holders, subject to the fulfillment of certain conditions, 110.25%
of the principal amount thereof plus accrued interest and a consent fee
equal to two percent of the principal amount thereof. There can be no
assurances that the Company will be able to purchase the Senior Debentures
pursuant to the tender offer or otherwise. See "Use of Proceeds."
(7) The pro forma weighted average common shares outstanding reflects the
additional shares issued in connection with the 1996 Offering and the 1995
Offering.
P-3
<PAGE> 42
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1996
------------------------------------------
PRO FORMA
ADJUSTMENTS
-----------
1996
HISTORICAL OFFERING AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................ $2,644,569 $ -- $ 2,644,569
Cost of goods sold.................................. 2,496,686 2,496,686
---------- ----------
Gross profit........................................ 147,883 147,883
Selling and administrative expenses................. 92,245 92,245
Depreciation........................................ 3,964 3,964
---------- ----------
Operating income.................................... 51,674 51,674
Interest expense.................................... 19,002 (1,802)(1) 17,200
---------- ------- ----------
Income before taxes................................. 32,672 1,802 34,474
Taxes on income..................................... 13,722 730(2) 14,452
---------- ------- ----------
Net income.......................................... $ 18,950 $ 1,072 $ 20,022
========== ======= ==========
Net income per share (fully diluted)................ $ 0.84 $ 0.83(3)
========== ==========
Weighted average common shares outstanding
(fully diluted)(4)................................ 22,504 24,004
========== ==========
</TABLE>
- ---------------
(1) Adjusted for interest savings of $1,802 due to an assumed repayment of
$52,859 in borrowings under the Credit Agreement. The Credit Agreement is
assumed to bear a weighted average interest rate of 7.7% per annum, which is
representative of historical interest rates.
(2) Tax provision arising from the pro forma adjustments.
(3) As discussed in note (1), the $52,859 proceeds are assumed to be used to
repay borrowings under the Credit Agreement. If the proceeds were assumed to
be used to purchase and retire Senior Debentures at a price of 112.75% of
the principal amount thereof (including fees) plus accrued interest, net
income per share on a fully diluted basis would be $0.86. On May 20, 1996,
the Company commenced a tender offer and related consent solicitation with
respect to all of the outstanding Senior Debentures, whereby the Company has
offered to pay to tendering holders, subject to the fulfillment of certain
conditions, 110.25% of the principal amount thereof plus accrued interest
and a consent fee equal to two percent of the principal amount thereof.
There can be no assurances that the Company will be able to purchase the
Senior Debentures pursuant to the tender offer or otherwise. See "Use of
Proceeds."
(4) The pro forma weighted average common shares outstanding reflects the
additional shares issued in connection with the 1996 Offering.
P-4
<PAGE> 43
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1995
---------------------------------------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS ADJUSTMENTS
------------------------ -----------
1995 1995 1996
HISTORICAL REFINANCING OFFERING AS ADJUSTED OFFERING AS ADJUSTED
---------- ----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................... $2,307,131 $ -- $ -- $2,307,131 $ -- $2,307,131
Cost of goods sold................. 2,178,256 2,178,256 2,178,256
---------- ---------- ----------
Gross profit....................... 128,875 128,875 128,875
Selling and administrative
expenses......................... 78,134 78,134 78,134
Depreciation....................... 3,436 3,436 3,436
---------- ---------- ----------
Operating income................... 47,305 47,305 47,305
Interest expense................... 31,989 (3,659)(1) (6,582)(2) 21,748 (1,939)(3) 19,809
---------- ------- ------- ---------- ------- ----------
Income before taxes and
extraordinary items.............. 15,316 3,659 6,582 25,557 1,939 27,496
Taxes on income.................... 7,757 1,337(4) 2,406(4) 11,500 737(4) 12,237
---------- ------- ------- ---------- ------- ----------
Income before extraordinary
items(5)......................... $ 7,559 $ 2,322 $ 4,176 $ 14,057 $ 1,202 $ 15,259
========== ======= ======= ========== ======= ==========
Income before extraordinary items
per share (fully diluted)(5)..... $ 0.51 $ 0.63 $ 0.64 (6)
========== ========== ==========
Weighted average common shares
outstanding
(fully diluted)(7)............... 14,765 22,202 23,702
========== ========== ==========
</TABLE>
- ---------------
(1) Adjusted for interest savings consisting of: (i) a $6,876 reduction due to
the redemption of the 14 1/2% senior subordinated notes; (ii) a $599
reduction in amortization of deferred financing fees related to the 14 1/2%
senior subordinated notes and the Credit Agreement, (iii) additional
interest of $3,388 associated with the Credit Agreement and Receivables
Program and (iv) the addition of $428 of amortization of deferred financing
fees. The Receivables Program is assumed to bear a cost of 8.1% per annum
(representative of historical rates on fixed principal certificates) on the
assumed $207,000 in Certificates sold to investors. The Credit Agreement is
assumed to bear a weighted average interest rate of 9.0% per annum, which is
representative of historical interest rates.
(2) Adjusted for interest savings consisting of: (i) a $4,051 reduction due to
the redemption of one-half of the Senior Debentures; (ii) a $108 reduction
in amortization of deferred financing fees related to the Senior Debentures;
and (iii) a $2,423 reduction due to an assumed weighted average net pay down
of $65,277 in borrowings under the Credit Agreement. The Credit Agreement is
assumed to bear a weighted average interest rate of 9.0% per annum, which is
representative of historical interest rates.
(3) Adjusted for interest savings of $1,939 due to an assumed repayment of
$52,859 in borrowings under the Credit Agreement. The Credit Agreement is
assumed to bear a weighted average interest rate of 9.0% per annum, which is
representative of historical interest rates.
(4) Tax provision arising from the pro forma adjustments.
(5) Does not reflect an extraordinary charge of $18,037, net of tax benefits,
relating to the amendment of the Credit Agreement, the redemption of the
14 1/2% senior subordinated notes and the partial redemption of the Senior
Debentures.
(6) As discussed in note (3), the $52,859 proceeds from the 1996 Offering are
assumed to be used to repay borrowings under the Credit Agreement. If the
proceeds were assumed to be used to purchase and retire the Senior
Debentures at a price of 112.75% of the principal amount thereof (including
fees) plus accrued interest, income before extraordinary items per share on
a fully diluted basis would be $0.66. On May 20, 1996, the Company commenced
a tender offer and related consent solicitation with respect to all of the
outstanding Senior Debentures, whereby the Company has offered to pay to
tendering holders, subject to the fulfillment of certain conditions, 110.25%
of the principal amount thereof plus accrued interest and a consent fee
equal to two percent of the principal amount thereof. There can be no
assurances that the Company will be able to purchase the Senior Debentures
pursuant to the tender offer or otherwise. See "Use of Proceeds."
(7) The pro forma weighted average common shares outstanding reflects the
additional shares issued in connection with the 1996 Offering and the 1995
Offering.
P-5
<PAGE> 44
UNAUDITED PRO FORMA BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------
PRO FORMA
ADJUSTMENTS
-----------
1996 AS
HISTORICAL OFFERING(1) ADJUSTED
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................... $ 63,833 $ $ 63,833
Restricted cash................................... 6,102 6,102
Accounts receivable............................... 340,272 340,272
Merchandise inventories........................... 590,675 590,675
Prepaid expenses and other........................ 3,714 3,714
---------- -------- ----------
Total current assets...................... 1,004,596 1,004,596
Property and equipment, at cost..................... 85,985 85,985
Less accumulated depreciation..................... 35,432 35,432
---------- -------- ----------
50,553 50,553
Other Assets........................................ 27,983 27,983
---------- -------- ----------
$1,083,132 $ $1,083,132
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.................................. $ 609,607 $ $ 609,607
Accrued expenses and other........................ 25,368 25,368
Accrued income taxes.............................. 17,357 17,357
Deferred income taxes............................. 32,809 32,809
---------- -------- ----------
Total current liabilities................. 685,141 685,141
Long-Term Debt
Revolving credit facility......................... 215,000 (52,859) 162,141
Receivables securitization financing.............. 209,860 209,860
Senior debentures................................. 74,293 74,293
Other debt........................................ 1,697 1,697
---------- -------- ----------
500,850 (52,859) 447,991
Other liabilities................................... 7,518 7,518
Stockholders' equity
Common stock...................................... 255 15 270
Capital in excess of par value.................... 171,441 52,844 224,285
Retained earnings (deficit)....................... (275,853) (275,853)
Cost of common stock in treasury.................. (6,220) (6,220)
---------- -------- ----------
(110,377) 52,859 (57,518)
---------- -------- ----------
$1,083,132 $ 0 $1,083,132
========== ======== ==========
</TABLE>
- ---------------
(1) Assumes the Company would have used the net proceeds from the 1996 Offering
of $52,859 to repay borrowings under the Credit Agreement.
P-6
<PAGE> 45
-------------------------------------------------------------
-------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGES IN THE
AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................... 3
Risk Factors................................ 9
Use of Proceeds............................. 11
Price Range of Common Stock and Dividend
Policy.................................... 12
Capitalization.............................. 13
Selected Consolidated Financial Data........ 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 16
Business.................................... 21
Management.................................. 29
Selling Stockholders........................ 32
Shares Eligible for Future Sale............. 33
Underwriting................................ 34
Legal Matters............................... 35
Experts..................................... 36
Available Information....................... 36
Incorporation of Certain Documents by
Reference................................. 37
Index to Unaudited Pro Forma Financial
Statements................................ P-1
</TABLE>
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
4,800,000 SHARES
LOGO
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
---------------------------
LOGO
---------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
WHEAT FIRST BUTCHER SINGER
-------------------------------------------------------------
-------------------------------------------------------------
<PAGE> 46
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an estimate of the expenses that will be
incurred in connection with the sale and distribution of the Common Stock being
registered hereby.
<TABLE>
<S> <C>
SEC registration fee..................................................... $ 70,666
NASD filing fee.......................................................... 21,200
Blue Sky fees and expenses............................................... 15,000
Printing and engraving expenses.......................................... 100,000
Legal fees and expenses.................................................. 250,000
Accounting fees and expenses............................................. 200,000
Transfer Agent and Registrar fees and expenses........................... 5,000
Miscellaneous............................................................ 318,134
-------
Total.......................................................... $980,000
=======
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation, as amended (the "Charter")
provides that directors of the Company shall be entitled to all limitations on
the liability of directors available under the Delaware General Corporation Law
(the "DGCL"). Further, the Charter provides that a director shall not be liable
to the Company or its stockholders 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 Company or its stockholders, (ii) for acts or omissions
by the director not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) acts described under Section 174 of the DGCL
relating to the declaration of dividends and purchase or redemption of shares in
violation of the DGCL or (iv) for any transaction from which a director derived
an improper personal benefit. In addition, Section 145 of the DGCL and Article
IV of the Company's Bylaws under certain circumstances, provide for the
indemnification of the Company's officers and directors against liabilities
which they may incur in such capacities.
In general, any officer or director of the Company shall be indemnified by
the Company against expenses including attorneys' fees, judgments, fines and
settlements actually and reasonably incurred by that person in connection with a
legal proceeding as a result of such relationship, whether or not the
indemnified liability arises from an action by or in the right of the Company,
if the officer or director acted in good faith, and in the manner believed to be
in or not opposed to the Company's best interest, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. Such indemnity is limited to the extent that (i) such person is
not otherwise indemnified and (ii) such indemnification is not prohibited by the
DGCL or any other applicable law.
Any indemnification under the previous paragraph (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon
the determination that indemnification of the director or officer is proper in
the circumstances because that person has met the applicable standard of conduct
set forth above. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum of disinterested directors who are not parties to
such action or (ii) if such quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion. To the extent that a director or officer of the Company shall
be successful in prosecuting an indemnity claim, the reasonable expenses of any
II-1
<PAGE> 47
such person and the fees and expenses of any special legal counsel engaged to
determine the possibility of indemnification shall be borne by the Company.
Expenses incurred by a director or officer of the Company in defending a
civil or criminal action, suit or proceeding shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Company as authorized by the Bylaws.
The indemnification and advancement of expenses provided by, or granted
pursuant to Article IV of the Bylaws is not deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled, both as to action in that person's official capacity and as to action
in another capacity while holding such office.
The Board of Directors has the power to authorize the Company to purchase
and maintain insurance on behalf of the Company and others to the extent that
power to do so has not been prohibited by the DGCL, create any fund to secure
any of its indemnification obligations and give other indemnification to the
extent permitted by law. The obligations of the Company to indemnify a director
or officer under Article IV of the Bylaws is a contract between the Company and
such director or officer, and no modification or repeal of the Bylaws shall
detrimentally affect such officer or director with regard to that person's acts
or omissions prior to such amendment or repeal.
The Company has also purchased insurance for its directors and officers for
certain losses arising from claims or charges made against them in their
capacities as directors and officers of the Company.
Reference is made to Section 8 of the form Underwriting Agreement filed as
Exhibit 1.1 hereto for additional indemnification provisions.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement, dated May , 1996, between AmeriSource Health
Corporation (the "Company") and the Underwriters.
4.1 Certificate of Incorporation of the Company, as amended (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended September
30, 1995).
4.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, Amendment No. 1, Registration No. 33-44244).
4.3 Form of the Company's Class A Common Stock, $0.01 par value per share (incorporated by
reference to Exhibit 4.10 to the Company's Registration Statement on Form S-2,
Amendment No. 2, Registration No. 33-57513).
*5.1 Opinion and Consent of Dechert Price & Rhoads.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Dechert Price & Rhoads (included in opinion filed as Exhibit 5.1 hereto).
*24.1 Power of Attorney of the Board of Directors of the Company.
27.1 Intentionally Omitted.
</TABLE>
- ---------------
* Previously filed.
II-2
<PAGE> 48
ITEM 17. UNDERTAKINGS.
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 a 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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.
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 foregoing provisions, 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, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Philadelphia, Commonwealth of
Pennsylvania, on May 21, 1996.
AMERISOURCE HEALTH CORPORATION
By: /s/ Kurt J. Hilzinger
------------------------------------
Kurt J. Hilzinger
Vice President, Chief Financial
Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ ---------------------------------- ---------------
<C> <S> <C>
John F. McNamara* Chairman of the Board, President May 21, 1996
- ------------------------------------------ and Chief Executive Officer
John F. McNamara (Principal Executive Officer)
/s/ Kurt J. Hilzinger Vice President, Chief Financial May 21, 1996
- ------------------------------------------ Officer and Treasurer (Principal
Kurt J. Hilzinger Financial Officer and Principal
Accounting Officer)
Bruce C. Bruckmann* Director May 21, 1996
- ------------------------------------------
Bruce C. Bruckmann
Michael A. Delaney* Director May 21, 1996
- ------------------------------------------
Michael A. Delaney
Richard C. Gozon* Director May 21, 1996
- ------------------------------------------
Richard C. Gozon
Lawrence C. Karlson* Director May 21, 1996
- ------------------------------------------
Lawrence C. Karlson
George H. Strong* Director May 21, 1996
- ------------------------------------------
George H. Strong
James A. Urry* Director May 21, 1996
- ------------------------------------------
James A. Urry
</TABLE>
II-4
<PAGE> 50
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ ---------------------------------- ---------------
<C> <S> <C>
Barton J. Winokur* Director May 21, 1996
- ------------------------------------------
Barton J. Winokur
*By: /s/ Teresa T. Ciccotelli
- ------------------------------------------
Teresa T. Ciccotelli
Attorney-In-Fact Pursuant to
Power of Attorney
</TABLE>
II-5
<PAGE> 1
AMERISOURCE HEALTH CORPORATION
CLASS A COMMON STOCK
(par value $0.01 per share)
---------------------------
Underwriting Agreement
(U.S. Version)
---------------------------
May , 1996
--
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette
Securities Corporation
Smith Barney Inc.
Bear, Stearns & Co. Inc.
Wheat, First Securities, Inc.
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
AmeriSource Health Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 1,200,000 shares of Class A Common Stock (par value $0.01 per share)
("Stock") of the Company and the stockholders of the Company named in Schedule
II hereto (the "Selling Stockholders") propose, subject to the terms and
conditions stated herein, to sell to the Underwriters an aggregate of 2,600,000
shares and, at the election of the Underwriters, up to 570,000 additional shares
of Stock. The aggregate of 3,800,000 shares to be sold by the Company and the
Selling Stockholders is herein called the "Firm Shares" and the aggregate of
570,000 additional shares to be sold by the Selling Stockholders is herein
called the "Optional Shares". The Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of 1,150,000 shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Donaldson,
Lufkin & Jenrette Securities Corporation, Smith Barney Inc., Bear, Stearns
International Limited and Wheat, First Securities, Inc. are acting as lead
managers. Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement and the International Underwriting
Agreement are hereby expressly made conditional on one another. The Underwriters
hereunder and the International Underwriters are simultaneously entering into an
Agreement between U.S. and International Underwriting Syndicates (the "Agreement
<PAGE> 2
between Syndicates") which provides, among other things, for the transfer of
shares of Stock between the two syndicates. Two forms of prospectus are to be
used in connection with the offering and sale of shares of Stock contemplated by
the foregoing, one relating to the Shares hereunder and the other relating to
the International Shares. The latter form of prospectus will be identical to the
former except for certain substitute pages including the front and back covers,
the "Underwriting" section and the "Certain United States Federal Tax
Considerations for Non-U.S. Holders of Common Stock" section. Except as used in
Sections 2, 3, 4, 9 and 11 herein, and except as the context may otherwise
require, references hereinafter to the Shares shall include all the shares of
Stock which may be sold pursuant to either this Agreement or the International
Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both the U.S. and the international versions thereof. All terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Prospectus (as hereinafter defined).
1. (a) The Company represents and warrants to, and agrees
with, each of the Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-02953) (the
"Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement including any pre-effective
amendments and supplements thereto and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement") filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document with
respect to the Initial Registration Statement or with respect to any
document incorporated by reference therein has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
the Initial Registration Statement, any post-effective amendments
thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in
the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including (x) the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the
time it was declared effective and (y) the documents incorporated by
reference in the prospectus contained in the registration statement at
the time such part of the registration statement became effective, each
as amended at the time such part of the Initial Registration Statement
became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; such
final prospectus, in
-2-
<PAGE> 3
the form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus"; and any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the
date of such Preliminary Prospectus or Prospectus, as the case may be,
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Section 13(a) or 15(d)
of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration
Statement;
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement to such documents, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements
of the Act and the rules and regulations of the Commission thereunder
and do not and will not, as of the applicable
-3-
<PAGE> 4
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus which loss on
interference would have a material adverse effect, or would have a
prospective material adverse effect on the Company and its
subsidiaries, taken as a whole; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock (other
than immaterial changes as result of the exercise of stock options or
conversions of capital stock outstanding as of such date) or long-term
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property in the aggregate and do not materially interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed
to be made of such property and buildings by the Company and its
subsidiaries;
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with
power and corporate authority to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and
each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation;
-4-
<PAGE> 5
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except as
set forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(ix) The unissued Shares to be issued and sold by the Company to
the Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein and in the
International Underwriting Agreement, will be duly and validly issued
and fully paid and non-assessable and will conform to the description
of the Stock contained in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement
and the International Underwriting Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or
any of their properties except, in each case (other than with respect
to such Certificate of Incorporation or By-laws), for such conflicts,
violations, breaches or defaults which would not result in a material
adverse change in the business, prospects, financial condition or
results of operations of the Company and its subsidiaries taken as a
whole; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration under the
Act of the Shares, compliance with applicable requirements of the New
York Stock Exchange and such consents, approvals, authorizations,
registrations or qualifications as may be required under state or
foreign securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters and under the rules of the National Association of
Securities Dealers, Inc.;
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound
which breach or default (other than with respect to such Certificate of
Incorporation or
-5-
<PAGE> 6
By-Laws) would have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(xii) The statements set forth in the Prospectus under the caption
"Shares Eligible for Future Sale," insofar as they purport to
constitute a summary of legal matters or documents referred to therein,
constitute in all material respects a fair summary of such terms and
the statements set forth in the Prospectus under the caption
"Business--Regulatory Matters" and the statements set forth in the
International Prospectus under the caption "Certain United States Tax
Consequences To Non-U.S. Holders of Common Stock," insofar as they
purport to summarize Federal laws of the United States referred to
thereunder, fairly summarize such laws in all material respects;
(xiii) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(xiv) The Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xv) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(xvi) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(b) Each of the Selling Stockholders severally represents and
warrants to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement hereinafter referred to, and for
the sale and delivery of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement, have been obtained; and such Selling Stockholder has full
right, power and authority to enter into this Agreement, the
International Underwriting Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement;
-6-
<PAGE> 7
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement and the
compliance by such Selling Stockholder with all of the provisions of
this Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any statute, indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which
such Selling Stockholder is a party or by which such Selling
Stockholder is bound, or to which any of the property or assets of
such Selling Stockholder is subject, nor will such action result in
any violation of the provisions of the Certificate of Incorporation or
By-laws of such Selling Stockholder if such Selling Stockholder is a
corporation or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such
Selling Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold
by such Selling Stockholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of such Shares and payment
therefor pursuant hereto and thereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters or the International
Underwriters, as the case may be;
(iv) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder or under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially
similar securities (other than pursuant to employee stock option plans
existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement
and the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any
-7-
<PAGE> 8
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares
to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement have been placed in custody under
a Custody Agreement, in the form heretofore furnished to you (the
"Custody Agreement"), duly executed and delivered by such Selling
Stockholder to [Name of Custodian], as custodian (the "Custodian"),
and such Selling Stockholder has duly executed and delivered a Power
of Attorney, in the form heretofore furnished to you (the "Power of
Attorney"), appointing the persons indicated in Schedule II hereto,
and each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this
Agreement and the International Underwriting Agreement on behalf of
such Selling Stockholder, to determine the purchase price to be paid
by the Underwriters and the International Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the
delivery of the Shares to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder
in connection with the transactions contemplated by this Agreement,
the International Underwriting Agreement and the Custody Agreement;
and
(ix) The Shares represented by the certificates held in custody for
such Selling Stockholder under the Custody Agreement are subject to
the interests of the Underwriters hereunder and the International
Underwriters under the International Underwriting Agreement; the
arrangements made by such Selling Stockholder for such custody, and
the appointment by such Selling Stockholder of the Attorneys-in-Fact
by the Power of Attorney, are to that extent irrevocable; the
obligations of the Selling Stockholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of
any individual Selling Stockholder or, in the case of an estate or
trust, by the death or incapacity of any executor or trustee or the
termination of such estate or trust, or in the case of a partnership
or corporation, by the dissolution of such partnership or corporation,
or by the occurrence of any other event; if any individual Selling
Stockholder or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be terminated, or
if any such partnership or corporation should be dissolved, or if any
other such event should occur, before the delivery of the Shares
hereunder, certificates representing the Shares shall be delivered by
or on behalf of the Selling Stockholders in accordance with the terms
and conditions of this Agreement, of the International Underwriting
Agreement and of the Custody Agreements; and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid
as if such death, incapacity, termination, dissolution or other event
had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them,
-8-
<PAGE> 9
shall have received notice of such death, incapacity, termination,
dissolution or other event.
2. Subject to the terms and conditions herein set forth: (a)
the Company and each of the Selling Stockholders agree, severally and not
jointly, to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and each of the
Selling Stockholders, at a purchase price per share of $......................,
the number of Firm Shares (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying the aggregate number of Firm Shares to be sold
by the Company and each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company and all of the Selling Stockholders
hereunder and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, each of the
Selling Stockholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Stockholders, at the purchase price per share
set forth in clause (a) of this Section 2, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 570,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made as set forth in Schedule II hereto. Any
such election to purchase Optional Shares may be exercised only by written
notice from you to the Attorneys-in-Fact, given within a period of 30 calendar
days after the date of this Agreement and setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, as determined by you but in no event earlier than the First
Time of Delivery (as defined in Section 4 hereof) or, unless you and the
Attorneys-in-Fact otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of The Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by
-9-
<PAGE> 10
or on behalf of such Underwriter of the purchase price therefor by wire or by
certified or official bank check or checks, payable to the order of the Company
and each of the Selling Stockholders, as their interests may appear, in Federal
(same day) funds. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of DTC or its designated custodian Goldman, Sachs & Co., 85 Broad
Street, New York, New York 10004 (the "Designated Office"). The time and date of
such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
New York City time, on May .., 1996 or such other time and date as Goldman,
Sachs & Co., the Company and the Selling Stockholders may agree upon in writing,
and, with respect to the Optional Shares, 9:30 a.m., New York City time, on the
date specified by Goldman, Sachs & Co. in the written notice given by Goldman,
Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or
such other time and date as Goldman, Sachs & Co. and the Selling Stockholders
may agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery", such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(l) hereof, will be delivered at the offices
of: Cahill Gordon & Reindel, 80 Pine Street, New York, NY 10005 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
each Time of Delivery. A meeting will be held at the Closing Location at
..............p.m., New York City time, on the New York Business Day next
preceding each Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to the last Time of Delivery
which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you copies thereof; to
file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Shares; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the
-10-
<PAGE> 11
Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in order to
comply with the Act or the Exchange Act, to notify you and upon your
request to file such document and to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder and under the
-11-
<PAGE> 12
International Underwriting Agreement, any securities of the Company
that are substantially similar to the Shares, including but not limited
to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Stock or any such substantially
similar securities (other than pursuant to employee and director stock
option and 401(K) plans existing on, or upon the conversion or exchange
of convertible or exchangeable securities outstanding as of, the date
of this Agreement), without your prior written consent;
(f) Furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail;
(g) During a period of three years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed on a
non-confidential basis with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and
(ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to the
extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to
the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list the Shares on the New York
Stock Exchange (the "Exchange"); and
(j) If the Company elects to rely upon Rule 462(b), to file a
Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement, and at the time of filing either pay to the Commission
the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company and each of the Selling Stockholders, jointly and
severally, covenant and agree with one another and with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's and Selling Stockholders' counsel
and accountants in connection with the registration of the Shares under the Act
and all other expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any
-12-
<PAGE> 13
Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the New York Stock Exchange; (v) the filing fees incident to, and the
fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar;
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section; (ix) the fees and expenses of the Attorneys-in-Fact and the Custodian;
and (x) all expenses and taxes incident to the sale and delivery of the Shares
to be sold by the Selling Stockholders to the Underwriters hereunder. In
connection with Clause (x) of the preceding sentence, Goldman, Sachs & Co.
agrees to pay New York State stock transfer tax, and each Selling Stockholder
agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such
tax payment is not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, stock transfer
taxes on resale of any of the Shares by them, and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction; and if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement;
(b) Cahill Gordon & Reindel, counsel for the Underwriters,
shall have furnished to you their written opinion, dated such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii)
(only with respect to the description of the Stock incorporated by
reference in the Prospectus), (iv), (v) and (viii) of subsection (c)
below as well as such other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;
-13-
<PAGE> 14
(c) Dechert Price & Rhoads, counsel for the Company, shall
have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of Delaware, with corporate power and authority (corporate and
other) to own its properties and conduct its business as described
in the Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being delivered
at such Time of Delivery when issued by the Company and duly
delivered and paid for as contemplated by the Underwriting
Agreement) have been duly and validly authorized and issued and
are fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) This Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by the Company;
(iv) The statements set forth in the Prospectus under
the caption "Shares Eligible for Future Sale," insofar as they
purport to constitute a summary of legal matters or documents
referred to therein, constitute in all material respects a fair
summary of such terms and the statements set forth in the
International Prospectus under the caption "Certain United States
Tax Consequences To Non-U.S. Holders Of Common Stock," insofar as
they purport to summarize Federal laws of the United States
referred to thereunder, fairly summarize such laws in all material
respects;
(v) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act;
(vi) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the
financial statements including the notes thereto and related
schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder; and although they do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained
in such documents, no facts have come to their attention that have
caused them to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or, in
the case of other documents which were filed under the Exchange
Act with the Commission, an untrue statement of a material fact or
omitted to state a material
-14-
<PAGE> 15
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
documents were so filed, not misleading; and
(vii) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial
statements including the notes thereto and related schedules and
the other financial data contained or incorporated by reference
therein, as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement
or the Prospectus, no facts have come to their attention that have
caused them to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by
the Company prior to such Time of Delivery (other than the
financial statements including the notes thereto and related
schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that,
as of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements including the notes
thereto and related schedules and other financial data contained
or incorporated by reference therein, as to which such counsel
need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, as of such
Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the
financial statements including the notes thereto and related
schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading to the Registration Statement required to be filed or
of any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus or required to be
described in the Registration Statement or the Prospectus which
are not filed or incorporated by reference or described as
required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(d) Teresa T. Ciccotelli, Esq., Vice President, General
Counsel and Secretary for the Company, shall have furnished to you her
written opinion, dated such Time of Delivery in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly qualified as
a foreign corporation for the transaction of business and
is in good standing under
-15-
<PAGE> 16
the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to
require such qualification, or is subject to no material
liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters
of fact upon certificates of officers of the Company,
provided that such counsel shall state that they believe
that both you and they are justified in relying upon such
opinions and certificates);
(ii) Each subsidiary of the Company has been
duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of
incorporation; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable,
and (except as set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the
Company or its subsidiaries, provided that such counsel
shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iii) The Company and its subsidiaries have
good and marketable title in fee simple to all real
property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially
affect the value of such property in the aggregate and do
not materially interfere with the use made and proposed to
be made of such property by the Company and its
subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not
materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries (in giving the opinion in this clause, such
counsel may state that no examination of record titles for
the purpose of such opinion has been made, and that they
are relying upon a general review of the titles of the
Company and its subsidiaries, upon opinions of local
counsel and abstracts, reports and policies of title
companies rendered or issued at or subsequent to the time
of acquisition of such property by the Company or its
subsidiaries, upon opinions of counsel to the lessors of
such property and, in respect of matters of fact, upon
certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in
relying upon such opinions, abstracts, reports, policies
and certificates);
(iv) To the best of such counsel's knowledge
and other than as set forth in the Prospectus, there are
no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which
any property of the Company or any of its subsidiaries is
the subject which could reasonably be expected to be
determined
-16-
<PAGE> 17
adversely to the Company or any of its subsidiaries and
would individually or in the aggregate have a material
adverse effect on the current or future consolidated
financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a
whole; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(v) The issue and sale of the Shares being
delivered at such Time of Delivery to be sold by the
Company and the compliance by the Company with all of the
provisions of this Agreement and the International
Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or
any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries
or any of their properties except, in each case (other
than with respect to such Certificate of Incorporation or
By-laws), for such conflicts, violations, breaches or
defaults which would not result in a material adverse
change in the business, prospects, financial conditions or
results of operations of the Company and its subsidiaries
taken as a whole;
(vi) No consent, approval, authorization,
order, registration or qualification of or with any such
court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement
and the International Underwriting Agreement, except the
registration under the Act of the Shares, and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the
Underwriters and the International Underwriters or under
the rules of the National Association of Securities
Dealers, Inc.;
(vii) Neither the Company nor any of its
subsidiaries is in violation of its Certificate of
Incorporation or By-laws or in default in the performance
or observance of any material obligation, agreement,
covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which
it or any of its properties may be bound which breach or
default (other than with respect to such Certificate of
Incorporation or Bylaws) would have a material adverse
effect on the Company and its subsidiaries taken as a
whole;
-17-
<PAGE> 18
(viii) The documents incorporated by reference
in the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery
(other than the financial statements including the notes
thereto and related schedules and other financial data
contained or incorporated by reference therein, as to
which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the
case may be, complied as to form in all material respects
with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the
Commission thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness
of the statements contained in such documents, no facts
have come to their attention that have caused her to
believe that any of such documents, when such documents
became effective or were so filed, as the case may be,
contained, in the case of a registration statement which
became effective under the Act, an untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or, in the case of other documents
which were filed under the Exchange Act with the
Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made when such
documents were so filed, not misleading; and
(ix) The Registration Statement and the
Prospectus and any further amendments and supplements
thereto made by the Company prior to such Time of Delivery
(other than the financial statements including the notes
thereto and related schedules and other financial data
contained or incorporated by reference therein, as to
which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although she
does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in
the Registration Statement or the Prospectus, no facts
have come to her attention that have caused her to believe
that, as of its effective date, the Registration Statement
or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial
statements including the notes thereto and related
schedules and other financial data contained or
incorporated by reference therein, as to which such
counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
to make the statements therein not misleading or that, as
of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements including
the notes thereto and related schedules and other
financial data contained or incorporated by reference
therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading or that, as of
such Time of Delivery, either the Registration Statement
or the Prospectus or any further amendment or supplement
thereto made by the Company prior to such
-18-
<PAGE> 19
Time of Delivery (other than the financial statements
including the notes thereto and related schedules and the
other financial data contained or incorporated by
reference therein, as to which such counsel need express
no opinion) contains an untrue statement of a material
fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances
under which they were made, not misleading; and she does
not know of any amendment to the Registration Statement
required to be filed or of any contracts or other
documents of a character required to be filed as an
exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus or required
to be described in the Registration Statement or the
Prospectus which are not filed or incorporated by
reference or described as required.
(e) The respective counsel for each of the Selling
Stockholders, as indicated in Schedule II hereto, each shall have
furnished to you their written opinion with respect to each of the
Selling Stockholders for whom they are acting as counsel, dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) A Power of Attorney and a Custody Agreement have
been duly executed and delivered by such Selling Stockholder and
constitute valid and binding agreements of such Selling
Stockholder in accordance with their terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject to general principles of equity;
(ii) This Agreement and the International Underwriting
Agreement have been duly executed and delivered by or on behalf of
such Selling Stockholder; and the sale of the Shares to be sold by
such Selling Stockholder hereunder and thereunder and the
compliance by such Selling Stockholder with all of the provisions
of this Agreement and the International Underwriting Agreement,
the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any
terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which such
Selling Stockholder is a party or by which such Selling
Stockholder is bound, or to which any of the property or assets of
such Selling Stockholder is subject, nor will such action result
in any violation of the provisions of the Certificate of
Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation or any statute, order, rule
or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over such Selling Stockholder
or the property of such Selling Stockholder (where the
consequences of such conflict, breach, violation or default would
affect the ability of such Selling Stockholder to sell its Shares
to the Underwriters pursuant to this Agreement or materially
affect the ability of such Selling Stockholder to perform its
obligations under this Agreement);
(iii) No consent, approval, authorization or order of any
court or the State of Delaware (as it relates to the Delaware
General Corporate Law, the State of New York or any federal
governmental body or agency) is required for the consummation of
the transactions contemplated by this Agreement and the
-19-
<PAGE> 20
International Underwriting Agreement in connection with the Shares
1to be sold by such Selling Stockholder hereunder or thereunder,
except such consents, approvals, authorization or orders which
have been duly obtained and are in full force and effect, such as
have been obtained under the Act and such as may be required under
state securities or Blue Sky laws in connection with the purchase
and distribution of such Shares by the Underwriters or the
International Underwriters;
(iv) Good and valid title to such Shares, free and clear
of all liens, encumbrances, equities or claims, has been
transferred to each of the several Underwriters or International
Underwriters, as the case may be, who have purchased such Shares
in good faith and without notice of any such lien, encumbrance,
equity or claim or any other adverse claim within the meaning of
the Uniform Commercial Code.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate;
(f) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Ernst & Young LLP shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto;
(g) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since
the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock
[(other than immaterial changes as a result of the exercise of stock
options or conversions of capital stock outstanding as of such date)]
or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes
-20-
<PAGE> 21
of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's debt
securities;
(i) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension
or material limitation in trading in the Company's securities on the
New York Stock Exchange; (iii) a general moratorium on commercial
banking activities declared by either Federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, if the effect of any such event specified
in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(j) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly listed on
the New York Stock Exchange;
(k) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of the persons listed on
Exhibit A hereto substantially to the effect set forth in Subsection
1(b)(iv) hereof in form and substance satisfactory to you;
(l) The Company and the Selling Stockholders shall have furnished
or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and of the Selling Stockholders,
respectively, satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Selling
Stockholders, respectively, herein at and as of such Time of Delivery,
as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or
prior to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections
(a) and (g) of this Section, and as to such other matters as you may
reasonably request; and
(m) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of Prospectuses on
the New York Business Day next succeeding the date of this Agreement.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, except as provided below in subsection (d), will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with
-21-
<PAGE> 22
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and the Selling Stockholders shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein.
(b) Each of the Selling Stockholders will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the amount of each
indemnity under this subsection (b) shall be limited to an amount equal to the
total net proceeds received by such Selling Stockholder from the offering of the
Shares purchased under this Agreement and provided, further, that such Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein.
(c) Each Underwriter will indemnify and hold harmless the Company
and each Selling Stockholder against any losses, claims, damages or liabilities
to which the Company or such Selling Stockholder may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in
-22-
<PAGE> 23
connection with investigating or defending any such action or claim as such
expenses are incurred.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Stockholders on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be
-23-
<PAGE> 24
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (e),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders
under this Section 8 shall be in addition to any liability which the Company and
the respective Selling Stockholders may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company or any Selling Stockholder within the
meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company and the Selling Stockholders shall
be entitled to a further period of thirty-six hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company and the Selling Stockholders that you have so arranged for
the purchase of such Shares, or the Company and the Selling Stockholders notify
you that they have so arranged for the purchase of such Shares, you or the
Company and the Selling Stockholders shall have the right to postpone such Time
of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
-24-
<PAGE> 25
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Stockholders, except
for the expenses to be borne by the Company and the Selling Stockholders and the
Underwriters as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and the
several Underwriters, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, or any of the Selling Stockholders, or any
officer or director or controlling person of the Company, or any controlling
person of any Selling Stockholder, and shall survive delivery of and payment for
the Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder), will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs
-25-
<PAGE> 26
& Co. on behalf of you; and in all dealings with any Selling Stockholder
hereunder, you and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of such Selling Stockholder
made or given by any or all of the Attorneys-in-Fact for such Selling
Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you in care of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department; if to any Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Stockholder at its address set forth in Schedule II
hereto; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholders by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one counterpart hereof for each of the Company and each of the
Underwriters, each counsel and the Custodian, if any, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and each of the Selling Stockholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters
(U.S. Version), the form of which shall be submitted to the Company and the
Selling Stockholders for examination upon request, but without warranty on your
part as to the authority of the signers thereof.
-26-
<PAGE> 27
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
AmeriSource Health Corporation
By:
---------------------------------------
Name:
Title:
[Names of Selling Stockholders]
By:
---------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of each of
the Selling Stockholders named in Schedule II
to this Agreement.
Accepted as of the date hereof
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
Smith Barney Inc.
Bear, Stearns & Co. Inc.
Wheat, First Securities, Inc.
On behalf of each of the Underwriters
-27-
<PAGE> 28
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ---------
Goldman, Sachs & Co....................
Donaldson, Lufkin & Jenrette
Securities Corporation...............
Smith Barney Inc.......................
Bear, Stearns & Co. Inc................
Wheat, First Securities, Inc...........
Total................
-28-
<PAGE> 29
SCHEDULE II
[Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
---------- ---------
The Company................................
The Selling Stockholder(s):
[Name of Selling Stockholder](a)......
[Name of Selling Stockholder](b)......
[Name of Selling Stockholder](c)......
[Name of Selling Stockholder](d)......
[Name of Selling Stockholder](e)......
Total................................. (7)]
(a) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
-29-
<PAGE> 30
Exhibit A
AmeriSource Health Corporation
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
John F. McNamara 150,000
David M. Flowers 32,000
Kurt J. Hilzinger 25,000
R. David Yost 35,000
Total 242,000
</TABLE>
-30-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-02953) and related
Prospectus of AmeriSource Health Corporation for the registration of 5,520,000
shares of its Common Stock and to the incorporation by reference therein of our
report dated November 3, 1995, with respect to the consolidated financial
statements and schedules of AmeriSource Health Corporation included in its Form
10-K for the year ended September 30, 1995, filed with the Securities and
Exchange Commission.
Philadelphia, Pennsylvania
May 21, 1996
