As filed with the Securities and Exchange Commission on March 19, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
FISHER SCIENTIFIC INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 5049 02-0451017
(State or other (Primary standard (I.R.S. employer
jurisdiction) industrial classification identification number)
code number)
Liberty Lane
Hampton, NH 03842
(603) 926-5911
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Todd M. DuChene, Esq.
Fisher Scientific International Inc.
Liberty Lane
Hampton, NH 03842
(603) 925-5911
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Gregory A. Fernicola, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
(212) 735-3000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and their is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration 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. [ ] _____________
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum
Title Of Each Class Of Amount To Be Proposed Maximum Aggregate Offering Amount Of
Securities To Be Registered Registered Offering Price Per Unit Price(1) Registration Fee
- ------------------------------ ------------ ----------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes $400,000,000 100% $400,000,000 $118,000
due 2008 (the "Notes")
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
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 Section 8(a), may
determine.
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY
PROSPECTUS DATED MARCH 19, 1998
PROSPECTUS
- ----------
Offer For All Outstanding
9% Senior Subordinated Notes due 2008 in Exchange for
9% Senior Subordinated Notes due 2008, Which Have
Been Registered Under the Securities Act of 1933,
As Amended, of
[FISHER SCIENTIFIC INTERNATIONAL INC. LOGO]
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless extended.
---------------
Fisher Scientific International Inc. ("Fisher" and, collectively with its
subsidiaries, the "Company") hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange an
aggregate principal amount of up to $400,000,000 of its 9% Senior Subordinated
Notes due 2008 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its issued and outstanding 9% Senior Subordinated Notes due 2008 (the
"Old Notes" and, together with the New Notes, the "Notes") from the holders (the
"Holders") thereof. The terms of the New Notes are identical in all material
respects to the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except for certain provisions
providing for liquidated damages on the Old Notes under certain circumstances
relating to the timing of the Exchange Offer.
On January 21, 1998, Fisher issued $400,000,000 aggregate principal amount
of Old Notes. The Old Notes were issued pursuant to an offering exempt from
registration under the Securities Act and applicable state securities laws.
Interest on the Notes is payable semiannually in arrears on February 1 and
August 1 of each year, commencing August 1, 1998. The Notes will mature on
February 1, 2008. The Notes will be redeemable at the option of Fisher, in whole
or in part, at any time on or after February 1, 2003, at the redemption prices
set forth herein, together with accrued and unpaid interest, if any, to the date
of redemption. In addition, on or prior to February 1, 2001, Fisher may redeem
in the aggregate up to 40% of the original principal amount of the Notes at a
redemption price equal to 109% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption, with the net cash proceeds
of one or more Equity Offerings (as defined herein); provided, however, that at
least 60% of the aggregate principal amount of Notes originally issued remain
outstanding immediately after giving effect to such redemption. See "Description
of the Notes-Optional Redemption." Upon a Change of Control (as defined herein),
if Fisher does not redeem the Notes, subject to certain conditions, each holder
of Notes will have the right to require Fisher to purchase all or a portion of
such holder's Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of purchase. See
"Description of the Notes-Change of Control."
The Old Notes were issued as part of the financing necessary to effect the
Recapitalization (as defined herein) of the Company. Concurrently with the
consummation of the offering of the Old Notes, Fisher and certain subsidiary
borrowers entered into a new credit facility (the "New Credit Facility") to
obtain funds that will also be used in part to effect the Recapitalization. See
"The Recapitalization."
The Notes are unsecured senior subordinated obligations of Fisher and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of Fisher, including borrowings under the New Credit
Facility, and rank pari passu in right of payment with all other existing and
future senior subordinated indebtedness of Fisher. As of December 31, 1997, on a
pro forma basis after giving effect to the Recapitalization and the financing
therefor, Fisher would have had approximately $469.7 million of Senior
Indebtedness outstanding.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from January 21, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of accrued interest on such Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of Fisher contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to third
parties, Fisher believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any Holder which is an "affiliate" of
Fisher within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holders' business and such Holders have no arrangement with any person
to participate in the distribution of such New Notes. However, the Commission
has not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Each Holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of such New Notes and has
no arrangement or understanding to participate in a distribution of New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. For a
period of 180 days after the Expiration Date (as defined herein), Fisher will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
Fisher will not receive any proceeds from the Exchange Offer. Fisher will
pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event Fisher terminates the Exchange Offer and does not
accept for exchange any Old Notes, Fisher will promptly return the Old Notes to
the Holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or the
ability of Holders of the New Notes to sell their New Notes or the price at
which such Holders may be able to sell their New Notes. Merrill Lynch & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation and Chase Securities Inc.
(the "Initial Purchasers") have advised Fisher that they currently intend to
make a market in the New Notes. The Initial Purchasers are not obligated to do
so, however, and any market-making with respect to the New Notes may be
discontinued at any time without notice. Fisher does not intend to apply for
listing or quotation of the New Notes on any securities exchange or stock
market.
See "Risk Factors" beginning on page 12 for a discussion of certain
factors that should be considered by prospective investors who tender their Old
Notes in the Exchange Offer.
---------------
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.
The date of this Prospectus is , 1998.
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. 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 jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated or projected, forecast, estimated or budgeted in or
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk and other factors set forth under "Risk Factors" as well
as the following: general economic and business conditions; industry trends;
overseas expansion; the loss of major customers or suppliers; the timing of
orders received from customers; cost and availability of raw materials; changes
in business strategy or development plans; availability and quality of
management; and availability, terms and deployment of capital. SPECIAL ATTENTION
SHOULD BE PAID TO SUCH FORWARD-LOOKING STATEMENTS INCLUDING, BUT NOT LIMITED TO,
STATEMENTS RELATING TO (I) THE COMPANY'S ABILITY TO EXECUTE ITS POST-MERGER
BUSINESS STRATEGY, (II) THE COMPANY'S ABILITY TO OBTAIN SUFFICIENT RESOURCES TO
FINANCE ITS WORKING CAPITAL AND CAPITAL EXPENDITURE NEEDS AND PROVIDE FOR ITS
KNOWN OBLIGATIONS, (III) INDUSTRY SALES GROWTH AND THE ABILITY OF THE COMPANY TO
MAKE ACQUISITIONS, AND (IV) THE IMPACT OF ENVIRONMENTAL REGULATION ON THE
COMPANY'S OPERATIONS.
AVAILABLE INFORMATION
Fisher is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by Fisher with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 or at its regional offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained
from the Public References Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains an Internet
"website" that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov. Fisher Common Stock is listed on the NYSE, and reports,
proxy statements and other information concerning the Company may be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005. This Prospectus constitutes a part of a Registration
Statement on Form S-4 filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information contained in
the Registration Statement, and reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the New Notes offered hereby. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to such copy filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. The
Registration Statement and the exhibits thereto may be inspected without charge
at the office of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies thereof may be obtained from the Commission
at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference documents which are not presented
herein or delivered herewith. Copies of any such documents relating to the
Company, other than exhibits to such documents (unless such exhibits
specifically are incorporated by reference in such documents), are available
without charge, upon written or oral request, from Fisher Scientific
International Inc., Liberty Lane, Hampton, New Hampshire 03842, Attention: Todd
M. DuChene, Esq., Vice President, General Counsel and Secretary, telephone (603)
926-5911.
The following documents previously filed by the Company (File No. 1-10920)
with the Commission are incorporated in this Prospectus by reference:
(1) Fisher's Annual Report on Form 10-K for the year ended December 31,
1997;
(2) Fisher's Current Report on Form 8-K dated February 5, 1998; and
i
<PAGE>
(3) Fisher's Proxy Statement/Prospectus on Form S-4 dated December 19,
1997, including Fisher's definitive proxy material mailed to Fisher's
stockholders in connection with the special meeting of stockholders to
be held on January 16, 1998, and as amended on February 2, 1998.
All reports and other documents subsequently filed by Fisher pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act shall be deemed to be
incorporated by reference herein and to be part hereof from the date of filing
of such reports and documents.
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 that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
ii
<PAGE>
(This page intentionally left blank)
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Unless
otherwise indicated, all references in this Prospectus to the "Company" refer to
Fisher Scientific International Inc., a Delaware corporation, and its
subsidiaries. All references to "fiscal 1997" refer to the year ended December
31, 1997. Unless otherwise indicated, industry data contained herein is derived
from publicly available industry trade journals, reports and other publicly
available sources, which the Company has not independently verified, or from
Company estimates which the Company believes to be reasonable but which have not
been independently verified. FOR A DISCUSSION OF CERTAIN IMPORTANT FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 12.
The Company
Fisher Scientific International Inc. is a world leader in serving science,
providing more than 245,000 products and services to research, healthcare,
industrial, educational and government customers in 145 countries. The Company
serves as a one-stop source for the scientific and laboratory needs of its
customers, supplying a broad product offering of leading brands of instruments,
research chemicals, clinical consumables, diagnostics, laboratory workstations
and other laboratory supplies. The Company provides integrated supply services
for the procurement of maintenance, repair and operating ("MRO") products and
other basic supplies, and also develops and markets software for electronic
commerce. Fisher was founded in 1991, although the business conducted by its
principal operating subsidiary, Fisher Scientific Company L.L.C., has been in
continuous operation since 1902 and traces its roots to 1851. Fisher's principal
executive offices are located at Liberty Lane, Hampton, New Hampshire 03842, and
its telephone number is (603) 926-5911.
Pursuant to the Second Amended and Restated Agreement and Plan of Merger
amending an Agreement and Plan of Merger dated August 7, 1997 (as amended, the
"Merger Agreement") dated November 14, 1997, between the Company and FSI Merger
Corp. ("FSI"), a Delaware corporation formed by Thomas H. Lee Company ("THL
Co."), providing for, among other things, the merger (the "Merger" and, together
with the financing of the Merger and the related transactions described below,
the "Recapitalization") of such corporation with and into Fisher, which was
consummated on January 21, 1998, approximately 87% of the fully diluted common
stock of Fisher was converted into the right to receive $48.25 per share in cash
(approximately $955.0 million in the aggregate) pursuant to an election process
that provided stockholders the right to elect for each share of Fisher Common
Stock held, subject to proration, either $48.25 in cash or to retain one share
of stock in the recapitalized company. Pursuant to the Merger Agreement, vesting
of all outstanding options accelerated.
The Industry
The Company's market consists of five principal sectors: (i) scientific
research and development activities conducted by biotechnology, pharmaceutical,
chemical, environmental and other entities; (ii) hospitals and physicians'
offices that perform diagnostic tests on patients, (iii) commercial and national
reference laboratories; (iv) educational activities in research institutions,
medical schools, universities, colleges, elementary and secondary schools; and
(v) users of MRO materials and occupational health and safety products in
production and other activities.
The Company's largest market is the scientific research supply market.
According to a recent study conducted by the Laboratory Products Association,
sales to the scientific research supply market were estimated to be
approximately $5 billion during 1997. The scientific research market is
primarily impacted by the level of applicable scientific and technology related
research and development ("R&D") spending in the U.S. The National Science
Foundation estimates that non-defense related R&D expenditures increased from
$44 billion in 1980 to over $130 billion in 1995, representing a compound annual
growth rate of approximately 7.5%. In addition to this growth,
non-defense-related R&D expenditures have not typically been subject to cyclical
swings, having not experienced a year-over-year decline since 1960 (when the
National Science Foundation began publishing such data).
The Company's second-largest market is the U.S. clinical laboratory
testing market. A recent study by MarketData Enterprises Inc. estimated that
the U.S. clinical laboratory testing market totaled approximately $30
1
<PAGE>
billion in 1997, up from approximately $27 billion in 1993. Based on these
overall spending levels, management estimates that the clinical testing
equipment and supply market, the market the Company competes in, totals
approximately $6 billion. The Company's third-largest market, safety supply,
which is a subset of the $225 billion MRO market, is estimated to be
approximately $7 billion. This market is currently highly fragmented, but there
has been a recent trend towards consolidation of suppliers of safety products.
The markets in which the Company competes are typically characterized by
high transaction volume (units) with relatively small average order prices. As a
result, customers in these markets incur relatively high average procurement
costs per order. The Company believes that as end users consolidate their vendor
base and/or outsource their procurement functions to reduce costs, manufacturer
use of distribution and demand for the Company's distribution and third party
procurement services, including demand for the Company's electronic ordering
technology, will increase. By leveraging the Company's distribution and
technological capabilities as well as its national sales force, manufacturers
and end users can reduce the cost of procurement for an expanding list of
products.
Over the last few years, the trend toward fewer suppliers has resulted in
consolidation of the fragmented scientific distribution market. Consolidation
benefits larger distributors by presenting them with the opportunity to leverage
large distribution infrastructures over higher sales volume and more customers.
The mergers of Fisher with CMS and VWR Scientific Products Corporation with
Baxter Industrial are illustrative of this trend. These same trends exist in
most international markets.
Products and Services
The Company currently has over 245,000 products available for delivery from
its electronic and other order-entry systems and is continuously expanding and
refining its product offerings to provide its customers with a complete array of
laboratory and clinical testing supplies. In addition to supplying leading
brands of instruments, supplies and equipment, the Company offers research
chemicals, clinical consumables, instruments, diagnostics, and laboratory
workstations of its own manufacture.
Fisher Products. The Company's product portfolio is comprised of
proprietary products as well as sourced products. Proprietary offerings consist
of self-manufactured products and products sold through exclusive distribution
agreements. Management estimates that proprietary products accounted for
approximately 40% of total sales in fiscal 1997. Consumable products, such as
laboratory supplies and specialty chemicals, represented approximately 75% of
the Company's total sales in fiscal 1997.
Sales and Customer Service Professionals. In order to reduce the complexity
of today's scientific research and clinical testing product offerings, the
Company provides customer support through a worldwide sales and customer service
network. The Company's direct sales force consists of over 1,000 account
representatives and product/systems sales specialists worldwide. Most of the
members of the Company's direct sales force have scientific or medical
backgrounds, which enable them to provide technical assistance to the end users
of Fisher products. In addition to performing traditional selling functions,
these representatives provide the basis for a market-driven development program
for new products and services by identifying customer needs and utilizing the
Company's accumulated technical expertise to translate those needs into new
services or products, which may be manufactured by either the Company or its
suppliers. In addition, the Company's customer service organization includes
over 1,000 representatives worldwide. These customer service representatives,
supported by a scientific and technical staff, respond to end-user product or
application questions and assist the Company's customers with efficient order
entry and order expediting. In response to customers' efforts to improve
purchasing efficiencies, the Company has developed the computerized order-entry
systems described in "Electronic Commerce" below.
Electronic Commerce. In an effort to meet its customers' desire to improve
purchasing efficiencies, the Company expanded its role as an industry leader in
the development and deployment of electronic commerce solutions through the
formation of Fisher Technology Group ("FTG"). This business unit was established
to commercialize software and related services developed by the Company.
Organizations are utilizing these offerings to implement advanced
supply-chain-management techniques that enable procurement to be automated for
improved service at lower total cost. These Internet, intranet and client/server
solutions are an extension of FTG's
2
<PAGE>
historical inventory management and procurement systems. The applications
contain full graphics and text display, and provide search, retrieval,
order-management and transaction-processing functions. CornerStone allows buyers
and suppliers to create public or private web sites to support their
business-to-business transactions. ProcureNet (www.procurenet.com), a public
mall owned and operated by FTG, utilizes the CornerStone architecture to provide
the general commercial community access to the electronic storefronts of its
supplier tenants. More than 300,000 products are currently available on
ProcureNet. SupplyLink provides the same capability in a client/server
environment.
Fisher Catalog. The Fisher Catalog has been published for over 90 years and
is a standard reference for the scientific community worldwide. In addition, the
Company publishes the CMS/Fisher Healthcare Catalog, the Fisher Chemical
Catalog, the Fisher Science Education catalog, as well as several international
catalogs in nine different languages. In 1995, the Company established an
Internet site (Fishersci.com), which currently features The Fisher Catalog, the
Fisher Chemical Catalog, the Fisher Safety Catalog, the Acros Organics Catalog
of Fine Chemicals and the CMS/Fisher Healthcare Catalog, as well as other
product, safety and general information, all in electronic form for quick and
easy access. More than 100,000 items and over 25,000 images representing 6,000
catalog pages can be browsed. New products are continuously added, making the
Fisher suite of catalogs a dynamic library, one of the most complete and
up-to-date sources of laboratory and safety products available. The Company's
customers now have the ability to place their orders electronically through an
intuitive, integrated and easy-to-use process. The Company also continues to
publish over a dozen international catalogs to support its growing worldwide
presence. More than one million copies of the Company's various catalogs are
produced biannually, with supplements tailored to specific market segments such
as biotechnology, research chemicals, educational materials and occupational
health and safety.
Distribution
The Company's distribution network comprises 32 locations in the U.S.,
including a national distribution center in Somerville, New Jersey, four
regional centers (New Jersey, California, Illinois and Georgia) and twenty-seven
local facilities throughout the United States. The Company also has two
distribution centers in Canada and one each in Germany, France, England,
Belgium, Singapore, Korea, Malaysia, Mexico and Australia. Through its worldwide
distribution networks, the Company distributes an average of 20,000 items every
business day, with products accounting for more than 90% of total sales in
fiscal 1997 shipped to customers within 24 hours of being ordered.
Manufacturing
The Company operates principal manufacturing facilities in Fair Lawn,
Somerville and Swedesboro, New Jersey; Two Rivers, Wisconsin; Indiana and
Pittsburgh, Pennsylvania; Huntersville, North Carolina; Loughborough, United
Kingdom; Geel, Belgium; Rochester, New York; and Mountain Home, Arkansas.
Products manufactured include research, bulk and organic chemical, laboratory
equipment, laboratory fumehoods, wood, plastic and metal laboratory workstations
and furniture, computer local area network "LAN" cabinets, scientific glassware
and plastic labware, and diagnostic and educational materials. More than
one-half of these products are sold directly to end users, other dealers and
distributors with the balance sold through the Company's distribution network.
The Company's manufacturing customers range from small start-up operations
to large national corporations and government agencies. The Company's
manufacturing operations are not dependent on any single customer and are
operated on a "stand alone" basis to complement the Company's distribution
organization by providing the Company's sales representatives with a full range
of value added service and product offerings and to position the Company as a
one-stop source for all of the customer's scientific research and laboratory
needs.
Suppliers
The Company distributes laboratory instruments, supplies and equipment
obtained from over 3,200 vendors. Vendors generally offer these products to
distributors on substantially similar terms. Although certain products are
available from only a limited number of vendors, Fisher does not anticipate that
it will be unable to purchase any of the products it distributes. The Company's
largest supplier represented approximately 11% of total sales in fiscal 1997.
3
<PAGE>
Competition
The Company operates in a highly competitive market. The Company competes
primarily with a wide range of suppliers and manufacturers that sell their own
products directly to end users. The Company also competes with other
distributors, such as VWR Scientific Products Corporation in the scientific
research market and Allegiance Corporation in the clinical market. The principal
means of competition in the markets the Company serves are systems capabilities,
breadth and exclusivity of product offerings, price and service. The Company
believes that it competes effectively in these areas through The Fisher Catalog,
electronic procurement systems, integrated supply capabilities, and
international logistics and distribution capabilities.
Trademarks and Patents
The Company owns or licenses a number of patents and patent applications
that are important to its businesses. The Company has more than 200 registered
and unregistered service marks and trademarks for its products and services.
Some of its more significant marks include CornerStone, Fisher Rims, ProcureNet,
SupplyLink, UniKix, Webkix, Accumet, Acros, Biochemical Sciences, Chemalert,
Chemguard, CMS, Curtin Matheson Scientific, Enviroware, Fisher, Fisherbiotech,
Fisherbrand, Fisher Diagnostics, Fisher Healthcare, Fisher Safety, Fisher
Scientific, Gastrak, Hamilton, Histoprep, Isotemp, Marathon, Microprobe, Optima,
Pacific Hemostasis, and Valutrak. Registered trademarks generally can have
perpetual life, provided they are renewed on a timely basis and continue to be
used properly as trademarks, subject to the rights of third parties to seek
cancellation of the marks.
Customers, Seasonality and Backlog
The Company's sales are not materially dependent upon any single customer
or any few customers. No single customer of the Company represented more than 5%
of 1997 sales. The Company's customers range in size from start-up companies,
hospital purchasing consortiums, and government agencies to nationally and
internationally recognized scientific research, medical and educational
institutions. The Company's sales are generally related to applicable R&D
spending and to clinical testing practices and are therefore not seasonal to any
significant extent. In addition, no material portion of the Company's business
is subject to renegotiation of profits or termination at the election of the
United States Government. Because the Company's products are, in most cases,
sold for immediate shipment, there are no significant backlogs.
The Recapitalization
On November 14, 1997, Fisher and FSI entered into the Merger Agreement
providing for, among other things, the Merger as well as the other elements of
the Recapitalization.
As a result of the Merger, THL Co. (through the Thomas H. Lee Equity Fund
III, L.P. ("THL Fund III") and other affiliates of THL Fund III (collectively
"THL"), DLJ Merchant Banking Partners II, L.P. and affiliates ("DLJMB"), Chase
Equity Associates, L.P. ("Chase Equity") and Merrill Lynch & Co. ("Merrill
Lynch" and, together with THL, DLJMB and Chase Equity, the "Equity Investors")
own 78.4% of the issued and outstanding shares of Fisher Common Stock, with THL
owning 50.2% of the outstanding shares.
In connection with the Recapitalization, Fisher has entered into and, along
with certain material foreign subsidiaries, is the obligor pursuant to, a new
senior bank credit facility consisting of (i) a $294.2 million term loan
facility (the "Term Facility") and (ii) a $175.0 million revolving credit
facility (the "Revolving Credit Facility" and, together with the Term Facility,
the "New Credit Facility"). In addition to the net proceeds from the sale of the
Old Notes, Fisher financed the Recapitalization with (a) $294.2 million of term
loan borrowings under the New Credit Facility, (b) $150.0 million of proceeds
pursuant to a securitization of accounts receivable (the "Receivables
Securitization Facility") and (c) $303.0 million from the sale of common stock
to the Equity Investors (the "Equity Contribution"). The proceeds from such bank
borrowings, the sale of the Old Notes, the Receivables Securitization Facility
and the Equity Contribution were used principally to finance the conversion into
cash of the shares of Fisher Common Stock then outstanding which were not
retained by existing stockholders and eligible employees, to refinance certain
outstanding indebtedness of the Company and to pay related fees and expenses of
the Merger.
4
<PAGE>
The following table sets forth the sources and uses of funds in connection
with the financing of the Recapitalization assuming the Recapitalization was
consummated on December 31, 1997:
Sources:
Amount
-------------
(In millions)
Revolving Credit Facility(1) .......................... $ 0.0
Receivables Securitization Facility ................... 150.0
Term Facility ......................................... 294.2
Proceeds from sale of the Old Notes ................... 400.0
New equity capital(2) ................................. 303.0
--------
Total ............................................. $1,147.2
========
Uses:
Cash merger consideration ............................. $ 955.0
Repayment of existing indebtedness .................... 112.0
Estimated fees and expenses ........................... 72.5
Excess cash ........................................... 7.7
--------
Total ............................................. $1,147.2
========
- ----------
(1) The $175.0 million Revolving Credit Facility is available for working
capital and general corporate purposes.
(2) Does not include common stock retained by existing shareholders ($36.0
million measured at the cash price of $48.25 per share), $36.2 million of
common stock issued to management pursuant to the conversion of options by
certain employees and $11.0 million of common stock retained by certain
eligible employees. As a result of the Recapitalization, shares of FSI
common stock were converted into shares of Fisher Common Stock.
5
<PAGE>
The Exchange Offer
Securities Offered... $400,000,000 principal amount of 9% Senior
Subordinated Notes due 2008 which have been
registered under the Securities Act. The terms of the
New Notes and the Old Notes are identical in all
material respects, except for certain transfer
restrictions and registration rights relating to the
Old Notes and except for certain provisions providing
for liquidated damages on the Old Notes under certain
circumstances relating to the timing of the Exchange
Offer.
The Exchange Offer... The New Notes are being offered in exchange for
a like principal amount of Old Notes. The issuance of
the New Notes is intended to satisfy obligations of
Fisher contained in the Registration Rights
Agreement, dated January 21, 1998, among Fisher and
the Initial Purchasers (the "Registration Rights
Agreement").
Expiration Date;
Withdrawal Rights.... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998, or such later date
and time to which it is extended. The tender of Old
Notes pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. Any Old
Note not accepted for exchange for any reason will be
returned without expense to the tendering Holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer. See
"The Exchange Offer--Terms of the Exchange Offer;
Period for Tendering Old Notes" and "--Withdrawal
Rights."
Procedures for
Tendering Old Notes.. Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with either
certificates for such Old Notes or a Book-Entry
Confirmation (as defined herein) of such Old Notes
into the Book-Entry Transfer Facility (as defined
herein), if such procedure is available, and any
other required documentation to the exchange agent
(the "Exchange Agent") at the address set forth
herein. By executing the Letter of Transmittal, each
Holder will represent to Fisher, among other things,
that (i) the New Notes acquired pursuant to the
Exchange Offer by the Holder and any other person are
being obtained in the ordinary course of business of
the person receiving such New Notes, (ii) neither the
Holder nor such other person is participating in,
intends to participate in or has an arrangement or
understanding with any person to participate in the
distribution of such New Notes and (iii) neither the
Holder nor such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the
Company. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker or dealer
as a result of market-making activities or other
trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a
broker or dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--Procedures
for Tendering Old Notes" and "Plan of Distribution."
Special Procedures for
Beneficial Owners.... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes
6
<PAGE>
to tender should contact such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering
its Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered Holder. The transfer of
registered ownership may take considerable time. See
"The Exchange Offer--Procedures for Tendering Old
Notes."
Guaranteed Delivery
Procedures........... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes or
any other documents required by the Letter of
Transmittal to the Exchange Agent must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Certain Federal Income
Tax Considerations... The exchange pursuant to the Exchange Offer will
not result in the recognition of income, gain or loss
to the Holders or the Company for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Use of Proceeds...... There will be no proceeds to the Company from the
Exchange Offer.
Exchange Agent....... State Street Bank and Trust Company is serving as
Exchange Agent in connection with the Exchange Offer.
See "The Exchange Offer--Exchange Agent."
Consequences of Exchanging Old Notes
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Fisher does not currently anticipate that it
will register Old Notes under the Securities Act. See "Description of the
Notes--Registration Rights." Based on interpretations by the staff of the
Commission, as set forth in no-action letters issued to third parties, Fisher
believes that New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold or otherwise transferred by Holders
thereof (other than any Holder which is an "affiliate" of Fisher within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such Holders'
business and such Holders have no arrangement with any person to participate in
the distribution of such New Notes. However, the Commission has not considered
the Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each Holder,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. Each broker-dealer
that receives New Notes for its own account in exchange of Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
a Prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
See "The Exchange Offer--Consequences of Exchanging Old Notes."
7
<PAGE>
Summary Description of the New Notes
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except for certain provisions under the
Registration Rights Agreement providing for liquidated damages on the Old Notes
under certain circumstances relating to timing of the Exchange Offer, which
rights in each case will terminate upon consummation of the Exchange Offer. The
New Notes will bear interest from the most recent date to which interest has
been paid on the Old Notes or, if no interest has been paid on the Old Notes,
from January 21, 1998. Accordingly, registered Holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from January 21, 1998. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer, which rights will terminate upon consummation of the
Exchange Offer.
Notes Offered........ Up to $400,000,000 principal amount
of Fisher's 9% Senior Subordinated Notes due 2008,
which have been registered under the Securities Act.
Maturity Date......... February 1, 2008.
Interest Payment
Dates ................ February 1 and August 1 of each year, commencing
August 1, 1998.
Optional Redemption... The Notes are redeemable at the option of Fisher,
in whole or in part, at any time on or after February
1, 2003 at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to
the date of redemption. In addition, on or prior to
February 1, 2001, Fisher, at its option, may redeem
in the aggregate up to 40% of the original principal
amount of the Notes at a redemption price equal to
109% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of
redemption, with the net cash proceeds of one or more
Equity Offerings; provided, however, that at least
60% of the aggregate principal amount of Notes
originally issued remain outstanding immediately
after giving effect to such redemption. See
"Description of the Notes--Redemption--Optional
Redemption."
Ranking.............. The Notes are unsecured senior subordinated
obligations of Fisher and will be subordinated in
right of payment to all existing and future Senior
Indebtedness of Fisher, including borrowings under
the New Credit Facility and outstanding under the
7-1/8% Notes due 2005 and rank pari passu in right of
payment with all other existing and future senior
subordinated indebtedness of Fisher. As of December
31, 1997, after giving pro forma effect to the
Recapitalization, Fisher would have had approximately
$469.7 million of Senior Indebtedness outstanding.
See "Description of the Notes--Subordination."
Change of Control.... Upon the occurrence of a Change of Control
Triggering Event (as defined herein), subject to
certain conditions, each holder of Notes will have
the right to require Fisher to purchase such holder's
Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of purchase. In
addition, at any time on or prior to February 1,
2003, upon the occurrence of a Change of Control, the
Company may, at its option, redeem all but not less
than all of the Notes, at a redemption price equal to
the sum of (i) 100% of the outstanding principal
amount thereof plus (ii) the Applicable Premium (as
defined herein) plus (iii) accrued and unpaid
interest and Liquidated Damages (as defined herein),
if any, to the date of redemption. See "Description
of the Notes--Change of Control."
8
<PAGE>
Covenants............ The indenture pursuant to which the Old Notes were,
and the New Notes will be, issued (the "Indenture")
contains certain covenants that, among other things,
limit the ability of Fisher and any Restricted
Subsidiary (as defined herein) to (i) incur
additional indebtedness, (ii) pay dividends or make
other distributions in respect of its capital stock,
(iii) repurchase equity interests or subordinated
indebtedness, (iv) create certain liens, (v) enter
into certain transactions with affiliates, (vi)
consummate certain asset sales and (vii) merge or
consolidate. See "Description of the Notes--Certain
Covenants."
Exchange Offer;
Registration Rights... Holders of New Notes (other than as set forth
below) are not entitled to any registration rights
with respect to the New Notes. Pursuant to the
Registration Rights Agreement (the "Registration
Rights Agreement"), Fisher agreed to use its best
efforts to file an Exchange Offer Registration
Statement (as defined). The Registration Statement of
which this Prospectus is a part constitutes the
Exchange Offer Registration Statement. Under certain
circumstances, certain Holders of Notes (including
Holders of Notes who may not participate in the
Exchange Offer or who may not freely resell New Notes
received in the Exchange Offer) may require Fisher to
file, and cause to become effective, a shelf
registration statement under the Securities Act,
which would cover resales of Notes by such Holders
before making a decision to tender their Old Notes in
the Exchange Offer. See "Description of the
Notes--Exchange Offer; Registration Rights."
Use of Proceeds...... The Company will not receive any proceeds from the
Exchange Offer. The net proceeds from the offering of
the Old Notes, together with certain borrowings under
the New Credit Facility, the Receivables
Securitization Facility and the Equity Contribution,
were used to finance the Recapitalization and to pay
fees and expenses in connection therewith. See "Use
of Proceeds," "Capitalization" and "The
Recapitalization."
Risk Factors
Holders of Old Notes should carefully consider the matters set forth under
"Risk Factors," beginning on page 12, and all other information set forth in
this Prospectus, before making a decision to tender their Old Notes in the
Exchange Offer.
9
<PAGE>
Selected Historical and Pro Forma Financial Data
(Dollars in millions)
The selected financial data for each of the fiscal years in the five year
period ended December 31, 1997 have been derived from the Company's audited
financial statements. Such information is contained in and should be read in
conjunction with the financial statements and accompanying notes included or
incorporated by reference in the Company's Annual Reports on Form 10-K for such
years. The selected unaudited pro forma financial data of the Company have been
derived from, and should be read in conjunction with, the Unaudited Pro Forma
Financial Statements, including the notes thereto, appearing elsewhere in this
Prospectus. See "Unaudited Pro Forma Financial Statements." The selected
unaudited pro forma financial data are presented for illustrative purposes only
and are not necessarily indicative of the operating results or financial
position that would have occurred if the Recapitalization had been consummated
on the dates indicated, nor are they necessarily indicative of future operating
results or financial position.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------
1993 1994 1995(a) 1996 1997
----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales ................................................ $ 978.4 $ 1,126.7 $ 1,435.8 $ 2,144.4 $ 2,175.3
Cost of sales ........................................ 685.7 807.8 1,048.9 1,565.9 1,583.6
-------- ---------- ---------- ---------- ----------
Gross profit ......................................... 292.7 318.9 386.9 578.5 591.7
Selling, general and administrative expense .......... 232.0 255.0 334.4 483.9 518.8
Restructuring and other charges(b) ................... -- -- 34.3 -- 51.8
-------- ---------- ---------- ---------- ----------
Income from operations ............................... 60.7 63.9 18.2 94.6 21.1
Interest expense ..................................... 7.9 9.0 15.0 27.1 23.0
Other (income) expense, net .......................... (5.0) (7.8) (1.1) (0.1) 3.2
-------- ---------- ---------- ---------- ----------
Income (loss) before income taxes .................... 57.8 62.7 4.3 67.6 (5.1)
Provision for income taxes ........................... 25.2 27.0 1.1 30.8 25.4
-------- ---------- ---------- ---------- ----------
Net income (loss) .................................... $ 32.6 $ 35.7 $ 3.2 $ 36.8 $ (30.5)
======== ========== ========== ========== ==========
Other Financial Data:
Ratio of earnings (loss) to fixed charges(c) ......... 6.3x 6.1x 1.2x 3.1x 0.8x
EBITDA(d) ............................................ $ 85.7 $ 91.1 $ 98.2 $ 157.2 $ 157.9
Depreciation and amortization ........................ 20.0 19.4 28.9 44.6 47.0
Capital expenditures ................................. 12.9 17.7 24.6 40.7 59.2
Pro Forma Unaudited Financial Data:
Ratio of earnings to fixed charges(c) ................ 0.2x
EBITDA(d) ............................................ $ 156.9
Cash interest expense(e) ............................. 83.8
Ratio of EBITDA to cash interest expense ............. 1.9x
</TABLE>
As of December 31, 1997
---------------------------
Historical Pro Forma
------------ ------------
Balance Sheet Data:
Working capital ........................... $ 237.5 $ 123.1
Total assets .............................. 1,176.5 1,066.9
Total indebtedness(f) ..................... 287.5 869.7
Stockholders' equity (deficiency) ......... 347.1 (355.6)
(see footnotes on following page)
10
<PAGE>
(a) On October 17, 1995, Fisher acquired CMS and Fisons Scientific Equipment
("FSE") from Fisons. The operations of CMS and FSE have been included in
the Company's consolidated financial statements from the date of
acquisition.
(b) During the fourth quarter of 1997, the Company recorded $51.8 million
($47.0 million, net of tax) of restructuring and other charges. These
charges related to the closure of additional logistics and customer-service
centers, and related asset write-offs in the United States, personnel
reductions in the United States and internationally, and the write-off of
goodwill related to certain international operations. During the third
quarter of 1995, the Company recorded a $34.3 million ($20.3 million, net
of tax) restructuring charge. The charge is primarily related to the
elimination and in some cases relocation of certain administrative
functions, a sales force reorganization, and the global consolidation of
certain domestic, Canadian and international logistics and customer-service
facilities and systems.
(c) For purposes of computing this ratio, earnings (loss) consist of income
(loss) before income taxes plus fixed charges. Fixed charges consist of
interest expense, and one-third of the rent expense from operating leases,
which management believes is a reasonable approximation of an interest
factor.
(d) "EBITDA" is defined as net income, plus provision for income taxes, plus
interest expense, plus depreciation and amortization expense, plus certain
restructuring and nonrecurring expenses, less nonrecurring gains on sales
of assets plus estimated insurance cost reductions in 1997 which will be
realized in 1998. EBITDA is used here because the Company believes it is an
indicator of the Company's ability to service existing and future
indebtedness. However, EBITDA should not be considered as an alternative to
net income as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting principles.
The Company's computation of EBITDA may not be comparable to similarly
titled measures of other companies. EBITDA is calculated as follows (in
millions):
<TABLE>
<CAPTION>
Year Ended December 31, Pro Forma
--------------------------------------------- ----------
1993 1994 1995 1996 1997 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss) $32.6 $35.7 $ 3.2 $ 36.8 $(30.5) $(69.9)
Income Tax Provision (Benefit) 25.2 27.0 1.1 30.8 25.4 (0.9)
Interest Expense 7.9 9.0 15.0 27.1 23.0 87.7
Depreciation and Amortization 20.0 19.4 28.9 44.6 47.0 47.0
Restructuring and other charges (See note (b) above) -- -- 34.3 -- 51.8 51.8
Nonrecurring charges in selling, general
and administrative expense (1) -- -- 14.5 18.2 29.8 29.8
Nonrecurring charges in cost of sales (1) -- -- 1.2 1.2 6.7 6.7
Amounts in other (income) expense:
Gain on sale of property (2) -- -- -- (1.5) -- --
Fees related to evaluation of strategic
alternatives and loss on sale of a
non-strategic business (3) -- -- -- -- 5.0 5.0
Gains on sale of non-core assets (4) -- -- -- -- (2.8) (2.8)
Insurance Cost Savings (5) -- -- -- -- 2.5 2.5
----- ----- ----- ------ ------ ------
EBITDA $85.7 $91.1 $98.2 $157.2 $157.9 $156.9
===== ===== ===== ====== ====== ======
</TABLE>
(1) Selling, general and administration expense and cost of sales in 1995,
1996 and 1997 include nonrecurring and redundant costs associated with
the implementation of the 1995 Restructuring Plan discussed in (b)
above, the integration of CMS into Fisher, and, in 1997, software
write-offs and other information system-related charges associated
with the Company's implementation of new global computer systems,
direct costs resulting from the UPS strike, management retention
payments primarily related to the Recapitalization and costs related
to adjustments to certain inventory reserves due to changes in
estimates. In addition, management believes that the strike had a
material impact on revenues which adversely impacted operating
profits. For a discussion of uncertainties relating to the United
Parcel Service ("UPS") strike, see "Risk Factors--Reliance on Third
Party Package Delivery Services."
(2) Certain gains on the sale of property, plant and equipment primarily
related to the restructuring and integration plans were recorded in
1996.
(3) Certain costs were incurred in 1997 related to the Board's review of
strategic alternatives and a loss on the sale of a non-strategic
business.
(4) Certain gains were recognized in 1997 related to the sale of non-core
assets.
(5) Cost reductions resulting from the renegotiation of insurance policies
in 1997 which will be realized in 1998.
(e) Cash interest expense is defined as interest expense, including interest
expense related to the Receivables Securitization Facility, adjusted to
exclude amortization of financing costs related to the Revolving Credit
Facility, the Term Facility, the Receivables Securitization Facility, the
offering of the Old Notes, the 71/8% Notes due 2005 and, in 1996, the $125
million convertible subordinated notes due 2003.
(f) Consists of long-term debt and short-term debt.
11
<PAGE>
RISK FACTORS
Holders of Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the following
risks before tendering their Old Notes in the Exchange Offer, although the risk
factors set forth below (other than "--Consequences of Failure to Exchange and
Requirements for Transfer of New Notes") are generally applicable to the Old
Notes as well as the New Notes.
Consequences of Failure to Exchange and Requirements for Transfer of New Notes
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Fisher does not currently anticipate that it
will register Old Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, Fisher believes that New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of Fisher within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holders' business and such Holders have no arrangement with any
person to participate in the distributions of such New Notes. However, the
Commission has not considered the Exchange Offer in the context of a no-action
letter and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each Holder, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes and has no arrangement or understanding to participate in a
distribution of New Notes. If any Holder is an affiliate of Fisher, is engaged
in or intends to engage in or has any arrangement or understanding with respect
to the distribution of the New Notes to be acquired pursuant to the Exchange
Offer, such Holder (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. For a period of 180 days after the
Expiration Date, Fisher will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
See "The Exchange Offer--Consequences of Exchanging Old Notes."
Substantial Leverage; Ability to Service Indebtedness
As a result of the Recapitalization, the Company is highly leveraged, with
indebtedness that is very substantial in relation to its shareholders' equity.
After giving pro forma effect to the Recapitalization, as of December 31, 1997,
the Company's aggregate outstanding indebtedness would have been $869.7 million
and the Company's shareholders' equity would have been a deficit of $355.6
million. The New Credit Facility, the Receivables Securitization Facility and
the Indenture (defined below) permit the Company to incur or guarantee certain
additional indebtedness, subject to certain limitations. See "Unaudited Pro
Forma Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources," "The
Recapitalization" and "Description of the Notes."
In addition, the substantial leverage will have a negative effect on the
Company's net income. For the fiscal year ended December 31, 1997, the
Company's net loss on a pro forma basis as adjusted to give effect to the
Recapitalization would have been $69.9 million as compared to the historical
net loss of $30.5 million for such period. For the fiscal year ended December
31, 1997, pro forma interest expense would have been $87.7 million as compared
to $23.0 million for the same period on an historical basis.
12
<PAGE>
The Company's high degree of leverage could have important consequences to
holders of Notes, including but not limited to the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired in the
future; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations and
other purposes, including investments in research and development and capital
spending; (iii) the Company may be substantially more leveraged than certain of
its competitors, which may place the Company at a competitive disadvantage;
(iv) the Company may be hindered in its ability to adjust rapidly to changing
market conditions; and (v) the Company's substantial degree of leverage could
make it more vulnerable in the event of a downturn in general economic
conditions or its business or changing market conditions and regulations.
The Company's ability to repay or to refinance its obligations with
respect to its indebtedness will depend on its future financial and operating
performance, which, in turn, will be subject to prevailing economic and
competitive conditions and to certain financial, business, legislative,
regulatory and other factors, many of which are beyond the Company's control.
These factors could include operating difficulties, increased operating costs,
product pricing pressures, the response of competitors, regulatory
developments, and delays in implementing strategic projects. The Company's
ability to meet its debt service and other obligations may depend in
significant part on the extent to which the Company can implement successfully
its business strategy. There can be no assurance that the Company will be able
to implement its strategy fully or that the anticipated results of its strategy
will be realized.
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, or seek to obtain additional equity capital,
or to refinance or restructure its debt. There can be no assurance that the
Company's cash flow and capital resources will be sufficient for payment of
principal of, and premium, if any, and interest on, its indebtedness in the
future, or that any such alternative measures would be successful or would
permit the Company to meet its scheduled debt service obligations. In addition,
because the Company's obligations under the New Credit Facility and the
Receivables Securitization Facility bear interest at floating rates, an
increase in interest rates could adversely affect, among other things, the
Company's ability to meet its financing obligations. The Company has entered
into certain interest protection arrangements following the Closing with
respect to a portion of its indebtedness under the New Credit Facility that has
placed a cap on the interest rates payable thereon. See "The Recapitalization."
Subordination of Notes; Asset Encumbrances
The Notes are unsecured, senior subordinated obligations of Fisher, and as
such, are subordinated in right of payment to all existing and future Senior
Indebtedness of Fisher, including indebtedness of Fisher under the New Credit
Facility and the 71/8% Notes due 2005. The Notes rank pari passu with all
senior subordinated indebtedness of Fisher, if any, and rank senior to all
subordinated indebtedness of Fisher, if any. The Notes are also effectively
subordinated to all secured indebtedness of the Company to the extent of the
value of the assets securing such indebtedness, and to all existing and future
obligations and liabilities of the Company's subsidiaries (including that
portion of the New Credit Facility for which Fisher's material subsidiaries are
obligors).
The obligations of Fisher and the subsidiary borrowers under the New
Credit Facility are secured by substantially all assets of the Company and its
material domestic subsidiaries, a pledge of the stock of domestic subsidiaries,
and a pledge of 65% of the stock of material foreign subsidiaries which are
direct subsidiaries of Fisher or one of its material domestic subsidiaries.
Obligations of a foreign subsidiary borrower are secured by a pledge of 100% of
the shares of such borrower. The obligations of Fisher and the subsidiary
borrowers are further guaranteed by Fisher and each material domestic
subsidiary of Fisher. As of December 31, 1997, after giving pro forma effect to
the Recapitalization and the financing therefor, the aggregate amount of Senior
Indebtedness of Fisher would have been approximately $469.7 million.
In the event of bankruptcy, liquidation, dissolution, reorganization or
any similar proceeding regarding Fisher, or any default in payment or
acceleration of any debt thereof, the assets of Fisher will be available to pay
obligations on the Notes only after the Senior Indebtedness of Fisher has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on all or any of the Notes. See "Description of the Notes--Subordination."
Restrictive Covenants
The New Credit Facility contains a number of covenants that will
significantly restrict the operations of the Company and its ability to make
certain types of acquisitions. In addition, under the New Credit Facility and
the
13
<PAGE>
Receivables Securitization Facility, the Company is required to comply with
specified financial ratios and tests, including maximum leverage ratios and
minimum EBITDA to cash interest expense ratios, and certain of these ratios and
tests may be more restrictive in future years. There can be no assurance that
the Company will be able to comply with such covenants or restrictions in the
future. The Company's ability to comply with such covenants and other
restrictions may be affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any such covenants
or restrictions could result in a default under the New Credit Facility or a
termination event under the Receivables Securitization Facility that would
permit the lenders thereunder to declare all amounts outstanding thereunder to
be immediately due and payable, together with accrued and unpaid interest, and
to terminate their commitments to make further extensions of credit thereunder,
and the Company could be prohibited from making any payments on the Notes. See
"The Recapitalization." In addition, the Indenture contains a number of
restrictive covenants relating to the Company. See "Description of the Notes."
Fraudulent Conveyance Risks
The incurrence by the Company of indebtedness, including indebtedness in
connection with the New Credit Facility and the Notes, and the subsequent
transfer of a portion of the proceeds thereof to the Company's stockholders to
pay the cash consideration in the Merger, may be subject to review under
relevant federal and state fraudulent conveyance statutes in a bankruptcy,
reorganization or rehabilitation case or similar proceeding or in a lawsuit by
or on behalf of unpaid creditors of the Company. Under these fraudulent
conveyance statues, if a court were to find that, at the time of the
Recapitalization, (i) the Company incurred the indebtedness and paid the cash
consideration in the Merger with the intent of hindering, delaying or
defrauding current or future creditors or (ii) (a) the Company received less
than reasonably equivalent value or fair consideration in connection with the
Recapitalization and (b) the Company (1) was insolvent or was rendered
insolvent by reason of the Recapitalization, including the incurrence of the
indebtedness related thereto, (2) was engaged in a business or transaction for
which its assets constituted unreasonably small capital, (3) intended to incur,
or believed that it would incur obligations beyond its ability to pay as such
obligations matured (as the foregoing terms are defined in or interpreted under
the fraudulent conveyance statutes) or (4) was a defendant in an action for
money damages, or had a judgment for money damages docketed against it (if, in
either case, after final judgment the judgment is unsatisfied), such court
could determine to invalidate such indebtedness, in whole or in part, as a
fraudulent conveyance or subordinate such indebtedness to existing or future
creditors of the Company.
As a condition to consummation of the Merger, the Company received an
opinion from an independent expert as to the solvency of the Company after
giving effect to the Merger and the Recapitalization.
Difficulty In Executing Business Strategy
The business strategy that has been developed by the Company is based on
the Company's current and historical operations and the operations of other
companies in the scientific services industries. The Company's current business
strategy is based, in part, on the Company's ability to capitalize on benefits
expected to result from various acquisitions and investments made by the
Company over the last few fiscal years, including the acquisitions of CMS and
FSE, investments to expand the Company's international operations and continued
investment in FTG. Although partially completed, there can be no assurance that
the Company will be able to successfully complete the integration of CMS into
its operations, or that such integration, when complete, will generate expected
efficiencies and cost savings. In addition, the Company's consolidated
international operations and FTG each incurred net losses in fiscal 1997 and
are currently operating at a loss. If the Company is unable to improve the
sales and profitability of its international business and of FTG, the Company's
financial condition and results of operations may be materially adversely
affected. After the Recapitalization, the Company's management may decide to
alter or discontinue certain parts of the business strategy described herein
and may adopt alternative or additional strategies. In addition, there can be
no assurance that such a strategy, if implemented, will be successful or will
improve operating results. Moreover, there can be no assurance that the
successful implementation of such a strategy will result in improved operating
results. Further, other conditions may exist, such as increased competition, or
an economic downturn, which may offset any improved operating results that are
attributable to such a strategy.
Dependence on Information Systems; Systems Conversion; Year 2000 Issue
The Company's business is dependent in part on its information systems.
These systems play an integral role in: tracking product offerings (including
pricing and availability); processing and shipping customer orders; warehouse
operations; purchasing; inventory management; financial reporting; and other
operational functions. The
14
<PAGE>
Company is currently in the process of implementing a project whereby many of
its present computer systems, including its order entry, purchasing and
financial systems will be replaced. This conversion is expected to occur over
the next two years. There can be no assurance that the Company will not
experience unanticipated delays, complications and expenses in implementing,
integrating and operating such systems. Failure to successfully complete the
conversion of the Company's current computer system on a timely basis or
failures with respect to the Company's systems generally could result in
operational and financial disruptions and could also lead to cost over-runs.
The Company faces "Year 2000" issues. Year 2000 issues exist when dates
are recorded using two digits (rather than four) and are then used for
arithmetic operations, comparisons or sorting. A two-digit date recording may
recognize a date using "00" as 1900 rather 2000, which could cause the
Company's computer systems to perform inaccurate computations. The Company's
Year 2000 issues relate not only to its own systems but also to those of its
customers and suppliers. It is anticipated the Company's program to enhance its
systems capabilities described above, and other Year 2000 activities of the
Company with respect to systems not being replaced will resolve the Year 2000
issue with respect to the Company's internal systems. Although management
believes its program to address Year 2000 issues is adequate, there is no
guarantee that the program is in fact adequate or that the systems replacements
and modifications will be completed on time. Even if the Company's Year 2000
conversion is completed, the failure of the Company's suppliers and customers
to address the Year 2000 issue could result in disruption or significantly
impact the Company.
Dependence on Corporate Research and Development Spending
The Company's customers include corporations active in scientific or
technological research, healthcare, industrial, safety and other markets, both
in the U.S. and internationally. The research and development budgets and
activities of these companies have a significant effect on the demand for
products manufactured and/or distributed by the Company. Such policies are
based on a variety of factors, including the need to develop new products,
competition and availability of resources. Although scientific and
technology-related research and development spending in the U.S. historically
has not been subject to cyclical swings, no assurance can be made that this
trend will continue. In addition, as the Company continues to expand its
international operations, the research and development spending levels in other
global markets will become increasingly important. A decrease in research and
development spending by the Company's customers could have a material adverse
effect on the Company's results of operations.
Healthcare Reform; Cost Containment
The Company's sales to the U.S. clinical laboratory market have
historically been significant. The trend towards managed care, together with
efforts to reform the healthcare delivery system in the U.S., has resulted in
increased pressure on healthcare providers and other participants in the
healthcare industry to reduce costs. To the extent that the Company's customers
in the healthcare industry seek to address the need to contain costs by
limiting the number of clinical tests being performed, the Company's results of
operations could be materially and adversely affected.
Control of the Company
As a result of the Recapitalization, the Equity Investors own 78.4% of the
issued and outstanding Fisher Common Stock, with THL owning 50.2% of such
outstanding stock. Accordingly, the Equity Investors control the Company and
have the power to elect a majority of its directors, appoint new management and
approve any action requiring the approval of the holders of recapitalized
Fisher Common Stock, including adopting amendments to the Company's certificate
of incorporation and approving mergers or sales of substantially all of the
Company's assets. In connection with the Recapitalization, the Equity Investors
and certain members of management entered into an Investor's Agreement dated
January 21, 1998 (the "Investors' Agreement"). The Investors' Agreement
provides that the Board of Directors of the Company will comprise at least 10,
but not more than 11 directors, seven of whom will be appointed by THL, one of
whom will be appointed by DLJMB, one of whom will be Mr. Paul M. Montrone and
one of whom will be Mr. Paul M. Meister. The directors elected pursuant to the
Investors' Agreement will have the authority to make decisions affecting the
capital structure of the Company, including the issuance of additional capital
stock, the implementation of stock repurchase programs and the declaration of
dividends. There can be no assurance that the interests of the Equity Investors
will not conflict with the interests of the other shareholders.
15
<PAGE>
Competition
The Company operates in a market which is highly competitive. The
Company's competitors include other distributors as well as a large number of
suppliers and manufacturers that sell their own products directly to end users.
Some of these competitors are larger and may have greater resources than the
Company. There has been a recent trend toward consolidation in the industry
which could result in the Company's competitors that provide distribution
services becoming larger. In addition, potential competitors in the future
could include suppliers and manufacturers that currently rely on one or more
third party distributors to distribute their products. There can be no
assurance that market competition, both international and domestic, will not
have a material adverse effect on the Company's financial condition and results
of operations.
Reliance on Third Party Package Delivery Services
Virtually all of the Company's products are shipped to customers by
independent package delivery companies. The Company does not own or maintain a
fleet of transportation vehicles dedicated to the delivery of its products. The
principal independent delivery service used by the Company is UPS, which
shipped products accounting for over sixty percent of the Company's U.S.
shipments in fiscal 1997. Other carriers used by the Company include national
and regional trucking firms, overnight courier services and the United States
Postal Service. A major work stoppage or other series of events that would make
such carriers unavailable to the Company could have a significant adverse
effect upon the Company's ability to conduct its business.
Fisher Sales Growth
The Company's ability to implement its business strategy will depend on
numerous factors, many of which are beyond the control of the Company. Much of
the Company's recent sales growth was the result of acquisitions, including the
acquisitions of CMS and FSE in October 1995. Future growth will be largely
dependent on growth in the overall market for instruments, supplies and
equipment, and environmental testing, life sciences, worker safety and emerging
testing techniques and the ability of the Company to make acquisitions. There
can be no assurance that such growth will occur or that suitable acquisition
candidates will be available or that any acquisition will be successful.
Environmental Regulation
Some of the Company's operations involve and have involved the handling,
manufacture or use of many substances that are classified as toxic or hazardous
substances within the meaning of applicable environmental and other laws. Some
risk of environmental and other damage or hazard is inherent in particular
operations and products manufactured, sold or distributed by the Company. There
can be no assurance that damage, hazard or loss will not occur. To a large
extent, such damage is uninsured. The Company continually monitors and reviews
its procedures and policies for compliance with existing law and the cost of
compliance with existing environmental laws is not expected to have a material
adverse effect on the Company's earnings, liquidity or competitive position.
However, future events, including changes in existing laws and regulations may
give rise to additional costs which are currently unintended and unforeseen and
which could have a material adverse effect on the Company's financial
condition.
Dependence on Key Personnel
The Company depends heavily on the services of its senior management,
including Paul M. Montrone, the Company's Chairman, President and Chief
Executive Officer, and Paul M. Meister, the Company's Vice Chairman, Executive
Vice President and Chief Financial Officer. The loss of any member of the
Company's senior management, including Mr. Montrone or Mr. Meister, could have
a material adverse effect on the Company. In addition, certain members of
management have entered into employment agreements with Fisher in connection
with the Merger.
International Operations
The Company conducts international operations through a variety of wholly
owned subsidiaries, majority-owned subsidiaries, joint ventures, equity
interests and agents located in North and South America, Europe, the Far East,
the Middle East and Africa. The Company is also exploring the possibility of
expansion into other international markets as well. There is no guarantee that
the Company will maintain significant operations internationally or that any
such operations will be successful. Any international operations established by
the
16
<PAGE>
Company will be subject to risks similar to those affecting its North American
operations in addition to a number of other risks, including lack of complete
operating control, lack of local business experience, foreign currency
fluctuations, difficulty in enforcing intellectual property rights, language
and other cultural barriers and political and economic instability.
Exchange Rate Fluctuations
The majority of the Company's revenues and expenses are denominated in
U.S. dollars, although the Company owns properties and conducts operations in
non-U.S. facilities including Canada, France, Mexico, Belgium, Germany, the
Netherlands, Singapore, Malaysia, Switzerland and the United Kingdom.
Accordingly, fluctuations in the exchange rate between the U.S. dollar and the
respective currencies of the aforementioned countries could have an adverse
effect on the Company.
Change of Control
Upon the occurrence of a Change of Control Triggering Event (as defined in
the Indenture), the Company will be required to make an offer to purchase all
of the outstanding Notes at a price equal to 101% of the principal amount
thereof at the date of purchase plus accrued and unpaid interest, if any, to
the date of purchase. In addition, at any time on or prior to February 1, 2003,
upon the occurrence of a Change of Control (as defined in the Indenture), the
Company may, at its option, redeem all but not less than all of the Notes, at a
redemption price equal to the sum of (i) 100% of the outstanding principal
amount thereof plus (ii) the Applicable Premium (as defined in the Indenture)
plus (iii) accrued and unpaid interest and Liquidated Damages (as defined in
the Indenture), if any, to the date of redemption. The occurrence of certain of
the events that would constitute a Change of Control would constitute a default
under the New Credit Facility and might constitute a default under other
indebtedness of the Company. In addition, the New Credit Facility prohibits the
purchase of the Notes by the Company in the event of a Change of Control,
unless and until such time as the indebtedness under the New Credit Facility is
repaid in full. The Company's failure to purchase the Notes in such instance
would result in a default under each of the Indenture and the New Credit
Facility. The inability to repay the indebtedness under the New Credit
Facility, if accelerated, could have material adverse consequences to the
Company and to the holders of the Notes. Future indebtedness of the Company may
also contain prohibitions of certain events or transactions that could
constitute a Change of Control or require such indebtedness to be repurchased
upon a Change of Control. See "The Recapitalization" and "Description of the
Notes--Change of Control." In the event of a Change of Control, there can be no
assurance that the Company would have sufficient assets to satisfy all of its
obligations under the New Credit Facility and the Notes.
Absence of Public Market for the Notes
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were issued on January 21, 1998 to a small number of institutional
investors and are eligible for trading in the Private Offering, Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association of
Securities Dealers' screenbased, automated market for trading of securities
eligible for resale under Rule 144A. To the extent that Old Notes are tendered
and accepted in the Exchange Offer, the trading market for the remaining
untendered Old Notes could be adversely affected. There is no existing trading
market for the New Notes, and there can be no assurance regarding the future
development of a market for the New Notes, or the ability of Holders of the New
Notes to sell their New Notes or the price at which such Holders may be able to
sell their New Notes. If such a market were to develop, the New Notes could
trade at prices that may be higher or lower than the initial offering price of
the Old Notes depending on many factors, including prevailing interest rates,
the Company's operating results and the market for similar securities. Although
the Initial Purchasers have informed Fisher that they currently intend to make
a market in the New Notes, they are not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly, there can
be no assurance as to the development or liquidity of any market for the Notes.
Fisher does not intend to apply for listing of the New Notes on any securities
exchange or for quotation through the National Association of Securities
Dealers Automated Quotation System.
17
<PAGE>
THE RECAPITALIZATION
Background. On November 14, 1997, Fisher and FSI entered into the Merger
Agreement providing for, among other things, the Merger as well as the other
elements of the Recapitalization.
As a result of the Merger, THL and the other Equity Investors own 78.4% of
the issued and outstanding shares of Fisher Common Stock, with THL owning 50.2%
of the outstanding shares.
In addition to the net proceeds from the sale of the Old Notes, Fisher
financed the Recapitalization with (a) $294.2 million of term loan borrowings
under the New Credit Facility, (b) $150.0 million in proceeds under the
Receivables Securitization Facility and (c) $303.0 million from the Equity
Contribution. The proceeds from such bank borrowings, the sale of the Old
Notes, the Receivables Securitization Facility and the Equity Contribution were
used principally to finance the conversion into cash of the shares of Fisher
Common Stock currently outstanding which are not retained by existing
stockholders and eligible employees, to refinance certain outstanding
indebtedness of the Company and to pay related fees and expenses of the Merger.
The following table sets forth the sources and uses of funds in connection
with the financing of the Recapitalization assuming the Recapitalization was
consummated on December 31, 1997:
Sources:
Amount
--------------
(In millions)
Revolving Credit Facility(1) ................ $ 0.0
Receivables Securitization Facility ......... 150.0
Term Facility ............................... 294.2
Proceeds from sale of the Old Notes ......... 400.0
New equity capital(2) ....................... 303.0
--------
Total ................................... $ 1,147.2
=========
Uses:
Cash merger consideration ................... $ 955.0
Repayment of existing indebtedness .......... 112.0
Estimated fees and expenses ................. 72.5
Excess cash ................................. 7.7
---------
Total ................................... $ 1,147.2
=========
------------
(1) The $175.0 million Revolving Credit Facility is available for working
capital and general corporate purposes.
(2) Does not include common stock retained by existing shareholders ($36.0
million measured at the Cash Price of $48.25 per share), $36.2 million of
common stock issued to management pursuant to the conversion of options
by certain employees and $11.0 million of common stock retained by
certain eligible employees. As a result of the Recapitalization, shares
of FSI common stock were converted into shares of Fisher Common Stock.
For a description of the New Credit Facility and other indebtedness of the
Company, see "Description of Other Indebtedness" and the notes to the
Consolidated Financial Statements included elsewhere herein. For a description
of the Receivables Securitization Facility, see "Description of Other
Financing."
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the offering of the Old Notes were approximately $380.0 million,
after deducting discounts and commissions and expenses related to the offering.
The net proceeds from the offering of the Old Notes were used to fund a portion
of the financing for the Recapitalization and related transactions, including
payments in respect of Fisher Common Stock and options for Fisher Common Stock,
repayment of certain existing indebtedness of the Company and payment of
transaction-related fees and expenses. For further discussion of the sources
and uses of funds related to the Recapitalization, see "The Recapitalization."
The existing indebtedness of the Company repaid in connection with the
Recapitalization consisted of certain existing bank facilities and other debt
of the Company. As of December 31, 1997, the outstanding balance of such
indebtedness amounted to $112.0 million and bore interest at a weighted average
rate of 6.84% per annum.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 on a historical basis and on a pro forma basis after giving
effect to the Recapitalization. This table should be read in conjunction with
"Use of Proceeds," "Unaudited Pro Forma Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------------
Historical As Adjusted
------------ --------------
(In millions)
<S> <C> <C>
Cash and cash equivalents ........................ $ 18.2 $ 25.9
======= ========
Debt(a):
Revolving Credit Facility(b) .................... $ -- $ --
Term Facility ................................... -- 294.2
Existing Bank Credit Facility ................... 100.6 --
7-1/8% Notes due 2005 ........................... 149.0 149.0
Notes ........................................... -- 400.0
Other ........................................... 37.9 26.5
------- --------
Total debt ................................... 287.5 869.7
------- --------
Shareholders' equity (deficit):
Preferred Stock ................................. -- --
Common Stock(c) ................................. 0.2 0.1 (c)
Capital in excess of par value .................. 278.9 305.3 (c)
Retained earnings (deficit) ..................... 96.7 (603.5)
Other ........................................... (28.7) (57.5)
------- --------
Total shareholders' equity (deficit) ......... 347.1 (355.6)
------- --------
Total capitalization ......................... $ 634.6 $ 514.1
======= ========
</TABLE>
------------
(a) Excludes $150.0 million of funds received from the sale of accounts
receivable through the Receivables Securitization Facility which was
entered into concurrently with the Recapitalization and which was
reflected as a reduction in receivables.
(b) The $175.0 million Revolving Credit Facility is available for working
capital and general corporate purposes.
(c) Includes common stock retained by existing shareholders ($36.0 million
measured at the cash price of $48.25 per share), $36.2 million of common
stock issued to management pursuant to the conversion of options by
certain employees and $11.0 million of common stock retained by eligible
employees and certain warrants received by the Equity Investors.
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following Unaudited Pro Forma Financial Statements have been derived
from the Company's historical financial statements. The Unaudited Pro Forma
Statement of Operations gives effect to the Recapitalization as if it occurred
on January 1, 1997. The Unaudited Pro Forma Balance Sheet gives effect to the
Recapitalization as if it occurred on December 31, 1997. The Recapitalization
was recorded in the Company's historical financial statements effective January
21, 1998.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The Unaudited Pro Forma Financial Statements should be read in conjunction with
the Financial Statements of the Company and the related notes, and other
financial information included elsewhere or incorporated by reference in this
Prospectus. This unaudited pro forma financial information is provided for
informational purposes only and does not purport to be indicative of the
results which would have been obtained had the Recapitalization been completed
on the dates indicated or which may be expected to occur in the future.
20
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC. UNAUDITED PRO FORMA BALANCE SHEET
(in millions)
December 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments(a) Pro Forma
------------ ---------------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents .......................................... $ 18.2 $ 7.7 (a) $ 25.9
Receivables, net .............................................. 297.1 (150.0)(b) 147.1
Inventories ................................................... 223.8 0.0 223.8
Other current assets .......................................... 53.3 0.0 53.3
--------- --------- ---------
Total current assets ......................................... 592.4 (142.3) 450.1
Property, plant and equipment, net ............................. 223.6 0.0 223.6
Goodwill ....................................................... 251.4 0.0 251.4
Other assets ................................................... 109.1 32.7 (c) 141.8
--------- --------- ---------
Total assets ................................................. $ 1,176.5 $ (109.6) $ 1,066.9
========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Short-term debt ............................................... $ 19.7 $ 0.0 $ 19.7
Accounts payable .............................................. 199.8 0.0 199.8
Accrued and other current liabilities ......................... 135.4 (27.9)(d) 107.5
--------- --------- ---------
Total current liabilities .................................... 354.9 (27.9) 327.0
Long term debt ................................................. 267.8 582.2 (e) 850.0
Other liabilities .............................................. 206.7 38.8 (f) 245.5
--------- --------- ---------
Total liabilities ............................................ 829.4 593.1 1,422.5
Stockholders' Equity (Deficit)
Cumulative redeemable preferred stock ......................... 0.0 0.0 0.0
Common stock .................................................. 0.2 (0.1)(g) 0.1
Capital in excess of par value ................................ 278.9 26.4 (g) 305.3
Retained earnings (deficit) ................................... 96.7 (700.2)(g) (603.5)
Other ......................................................... (28.7) (28.8)(g) (57.5)
--------- --------- ---------
Total stockholders' equity (deficit) ......................... 347.1 (702.7)(g) (355.6)
--------- --------- ---------
Total liabilities and stockholders' equity (deficit) ......... $ 1,176.5 $ (109.6) $ 1,066.9
========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma balance sheet.
21
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
The pro forma financial data has been derived by the application of pro
forma adjustments to the Company's historical financial statements for the
period noted. The Merger has been accounted for as a recapitalization which
will have no impact on the historical basis of assets and liabilities.
(a) The net effect of the Merger and the Recapitalization, as if it occurred on
December 31, 1997, reflects the following (in millions):
Sources
Revolving Credit Facility(1) ................ $ --
Receivables Securitization Facility ......... 150.0
Term Facility ............................... 294.2
Proceeds from sale of the Old Notes ......... 400.0
New equity capital
FSI common stock(2) ....................... 303.0
--------
Total ................................... $1,147.2
=========
Uses
Cash merger consideration ................... $ 955.0
Repayment of existing indebtedness .......... 112.0
Estimated fees and expenses ................. 72.5
Excess cash ................................. 7.7
---------
Total ................................... $1,147.2
=========
- ------------
(1) The $175.0 million Revolving Credit Facility is available for working
capital and general corporate purposes.
(2) 746,114 shares were retained by non-employees and 228,857 shares were
retained by eligible employees pursuant to the stock election process
described in the Merger Agreement.
(b) Concurrent with the financing of the Merger, the Company sold $150.0
million of its accounts receivable under the Receivables Securitization
Facility and recorded a corresponding accrual for the loss on the sale of
$1.4 million.
(c) The adjustment reflects the following (in millions):
Capitalized financing costs ......... $34.0
Write-off of unamortized financing
costs on debt refinanced .......... (1.3)
--------
$32.7
========
The $34.0 million reflects the capitalized portion of fees and expenses paid
to effect the Merger. Total estimated fees and expenses are $72.5 million,
the remaining $38.5 million of which will be charged off against
stockholders' equity. Such estimated fees and expenses consist of (i) fees
and expenses related to the Recapitalization, including bank commitment
fees and underwriting discounts and commissions, (ii) professional,
advisory and investment banking fees and expenses and (iii) miscellaneous
fees and expenses such as printing and filing fees. The $1.3 million
write-off relates to unamortized financing costs on the portion of
long-term debt refinanced.
22
<PAGE>
(d) The adjustment reflects the following (in millions):
Income tax benefits related to:
Employee stock options exercised ........... $ (22.3)
Grant of options to certain
executive officers (see Note (f)) ......... (4.0)
Transaction fees and expenses .............. (1.9)
Loss on sale of receivables ................ (0.6)
Write-off of unamortized financing
fees on debt refinanced ................... (0.5)
Accrual for loss on sale of accounts
receivable ................................ 1.4
-------
$ (27.9)
=======
(e) The pro forma adjustment to long-term debt reflects the following (in
millions):
Cash inflow/
(outflow)
-------------
Term Facility ........................................... $294.2
Sale of Old Notes ....................................... 400.0
Repayment of existing long-term debt outstanding......... (112.0)
--------
Pro forma adjustment to long-term debt ................ $582.2
========
The $175.0 million Revolving Credit Facility, including a letter of credit
limit of $150.0 million, is available for working capital and general
corporate purposes. The Revolving Credit Facility amount excludes
approximately $35.0 million of letters of credit which would have been
issued to replace existing letters of credit.
(f) The adjustment reflects the following (in millions):
Liability for new shares to be held in trust .............. $ 28.8
Accrual for options granted to certain executives ......... 10.0
-------
$ 38.8
=======
Of the common stock issued to management pursuant to the conversion of
certain options, $28.8 million was deposited in a Rabbi Trust. These shares
are included in the Company's pro forma shares outstanding number and,
accordingly, in the pro forma earnings per share calculations. The trust is
reflected as a liability within other long-term liabilities and as a
contra-equity item.
The $10.0 million accrual for options granted to certain executives relates
to options granted to certain executive officers which provide for a put
right.
(g) The pro forma adjustment reflects the following (in millions):
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Other Total
---------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Repurchase of Common Stock and conversions
of options to cash .................................. $ (0.2) $ (278.9) $ (675.9) $ -- $ (955.0)
Equity contribution by FSI ........................... 0.1 302.9 -- -- 303.0
Conversion of management stock options ............... -- 36.2 (36.2) -- --
Grant of options to certain executives ............... -- -- (10.0) -- (10.0)
Accrual for loss on sale of accounts receivable ...... -- -- (1.4) -- (1.4)
Write-off of unamortized financing fees .............. -- -- (1.3) -- (1.3)
Fees and expenses related to the Recapitalization..... -- (33.8) (4.7) -- (38.5)
Tax benefit on above charges ......................... -- -- 29.3 -- 29.3
Deposit of shares held in trust ...................... -- -- -- (28.8) (28.8)
------ -------- -------- ------- --------
Total .............................................. $ (0.1) $ 26.4 $ (700.2) $ (28.8) $ (702.7)
====== ======== ======== ======= ========
</TABLE>
23
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments Pro Forma
------------- ------------------ -------------
<S> <C> <C> <C>
Sales ............................................... $ 2,175.3 $ -- $ 2,175.3
Cost of sales ....................................... 1,583.6 -- 1,583.6
Selling, general and administrative expense ......... 518.8 1.0 (a) 519.8
Restructuring and other charges ..................... 51.8 -- 51.8
--------- ---------- ---------
Income from operations .............................. 21.1 (1.0) 20.1
Interest expense .................................... 23.0 64.7 (b) 87.7
Other expense, net .................................. 3.2 -- 3.2
--------- ---------- ---------
Loss before income taxes ............................ (5.1) (65.7) (70.8)
Income tax provision/(benefit) ...................... 25.4 (26.3)(c) (0.9)
---------- ---------- ----------
Net Loss ............................................ $ (30.5) $ (39.4) $ (69.9)
========== ========== ==========
Loss per Common Share:
Basic and Diluted ................................ $ (1.50) $ -- $ (8.74)
=========== ========== ===========
Weighted average common shares and common share
equivalents outstanding:
Basic and Diluted ................................ 20.3 (12.3)(d) 8.0
=========== ========== ===========
</TABLE>
See the accompanying notes to unaudited pro forma statement of operations.
24
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
The pro forma financial data has been derived by the application of pro
forma adjustments to the Company's historical financial statements for the year
ended December 31, 1997. The Merger has been accounted for as a
recapitalization which has no impact on the historical basis of assets and
liabilities.
(a) The pro forma adjustment to selling, general and administrative expense
reflects the annual management fee the Company will pay to THL.
(b) The pro forma adjustment to interest expense reflects the following (in
millions):
<TABLE>
<CAPTION>
Rate
-----------
<S> <C> <C>
Interest expense related to Receivables Securitization Facility ........ 6.125% $ 9.3
Interest expense on Term Facility--Tranche A ........................... 8.450% 10.7
Interest expense on Term Facility--Tranche B ........................... 8.125% 8.2
Interest expense on Term Facility--Tranche C ........................... 8.375% 5.9
Interest expense on the Notes .......................................... 9.000% 36.0
Amortization of capitalized financing fees ............................. 3.6
Interest expense on long-term debt refinanced .......................... (9.0)
------
Total adjustment ..................................................... $ 64.7
======
</TABLE>
(c) The adjustment reflects the tax effect of the pro forma adjustments at a
40% effective tax rate.
(d) Reflects the reduction in weighted average common shares and common share
equivalents outstanding as a result of the reduction in shares in
connection with the Merger.
Pursuant to the Merger Agreement, upon the consummation of the Merger,
certain shares of Fisher Common Stock outstanding were retained. The
19,381,793 shares which were not converted were canceled and the holders
thereof received cash. Simultaneously, all of the shares of FSI were
converted into 6,278,915 shares of Fisher and existing stockholders and
certain eligible employees hold 974,971 shares of Fisher Common Stock
which were retained in connection with the Merger. In addition, certain
eligible employees exchanged 2,144,570 outstanding options for 750,901
shares of Fisher Common Stock pursuant to the conversion of certain
options. Thus, immediately following the transaction, there was an
aggregate of 8,004,787 shares of Fisher Common Stock outstanding and the
Equity Investors had warrants to acquire 516,663 shares of Fisher Common
Stock at $48.25 per share.
(e) Net loss for the year ended December 31, 1997 does not include total
charges of $43.9 million, net of a tax benefit of $29.3 million consisting
of (i) a charge of $33.5 million, net of a tax benefit of $22.3 million
for compensation expense to be recorded in connection with employee stock
options, (ii) a charge of $6.0 million net of a tax benefit of $4.0
million for compensation expense to be recorded in connection with the
grant of options to certain executives reflecting the put right associated
with these options, (iii) a charge of $2.8 million, net of a tax benefit
of $1.9 million for fees and expenses related to the Merger which will be
expensed, (iv) a charge of $0.8 million, net of a tax benefit of $0.6
million for the loss on the sale of accounts receivable and (v) a charge
of $0.8 million, net of a tax benefit of $0.5 million for the write-off to
be recorded for unamortized financing costs related to long term debt
refinanced. These charges will be reflected in the Company's Statement of
Operations in the first accounting period after the Merger.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was formed in September 1991. The Company's operations are
conducted by wholly owned and majority-owned subsidiaries, joint ventures,
equity interests and agents, located in North and South America, Europe, the
Far East, the Middle East and Africa. The Company's activities relate
principally to one business segment--scientific and clinical products. This
includes operations engaged in the supply, marketing, service and manufacture
of scientific, clinical, educational and occupational health and safety
products, and MRO materials.
Pursuant to the Recapitalization which was consummated on January 21,
1998, approximately 87% of the fully diluted common stock of Fisher was
converted into the right to receive $48.25 per share in cash (approximately
$955.0 million in the aggregate) pursuant to an election process that provided
stockholders the ability to elect for each share of Fisher Common Stock held,
subject to proration, either $48.25 in cash or to retain one share of stock in
the recapitalized company. Pursuant to the Merger Agreement, vesting of all
outstanding options accelerated. See Note 2 to Financial Statements.
On October 17, 1995, Fisher acquired the principal businesses of the
laboratory supplies division of Fisons in a transaction accounted for as a
purchase. The Company purchased the outstanding stock of CMS, headquartered in
Houston, Texas, and substantially all of the net assets of FSE, a division of
Fisons with headquarters in Loughborough, United Kingdom. CMS is a supplier of
diagnostic test kits, equipment and laboratory supplies to integrated health
care organizations, managed care organizations, national and independent
reference laboratories, and physicians' office laboratories where human
specimens are tested for subsequent diagnosis, as well as a supplier to the
scientific research community. FSE is a leading supplier of laboratory products
in the United Kingdom and also serves markets throughout Europe, Africa, the
Middle East and the Far East. The Company intends to use these businesses to
expand its operations in the clinical laboratory market, enhance its position
in the North American scientific research laboratory market and complement its
international growth strategy. During 1997, 1996 and 1995, Fisher made certain
smaller acquisitions of laboratory products distributors and other businesses.
All acquisitions have been accounted for as purchases; operations of the
companies and businesses acquired have been included in Fisher's consolidated
financial statements from their respective dates of acquisition. See Note 4 to
Financial Statements.
Results of Operations
Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996
Sales
Sales for the year ended December 31, 1997 increased 1.4% to $2,175.3
million from $2,144.4 million for the comparable period in 1996. Sales growth
in Fisher's historical North American operations and the inclusion of sales of
operations acquired in the fourth quarter of 1996 (UniKix Technologies and a
laboratory products distributor in Mexico) were partially offset by a decrease
in sales to the U.S. clinical laboratory market and the impact of the strike by
employees of UPS who are members of the International Brotherhood of Teamsters
(the "UPS strike"), which occurred in August of 1997.
As a national distributor, the Company utilizes the services of UPS for a
significant portion of its domestic shipments. Fisher is one of UPS's largest
customers in terms of annual revenue to the shipper. The UPS strike
significantly reduced sales for the third and fourth quarters of 1997 and
increased operating costs. The Company anticipates a gradual recovery in sales
levels during 1998.
Gross Profit
The Company's gross profit for the year ended December 31, 1997 increased
2.3% to $591.7 million from $578.5 million for the comparable period in 1996,
primarily as a result of volume. Gross profit as a percent of sales increased
to 27.2% for the year ended December 31, 1997 from 27.0% for the comparable
period in 1996. Gross profit in 1997 was negatively affected by $6.7 million of
costs related to adjustments to certain inventory reserves due to changes in
estimates, direct costs resulting from the UPS strike and the integration of
CMS into the Company. Gross profit in 1996 includes $1.2 million of costs
associated with the revaluation of CMS and FSE acquired inventory.
26
<PAGE>
Selling, General and Administrative Expense
Selling, general and administrative expense for the year ended December
31, 1997 increased 7.2% to $518.8 million from $483.9 million for the
comparable period in 1996. Selling, general and administrative expense in both
periods includes nonrecurring and redundant costs associated with the
implementation of the 1995 Restructuring Plan (defined below), the integration
of CMS into the Company, and, in 1997, software write-offs and other
information system-related charges associated with the Company's implementation
of new global computer systems, direct costs resulting from the UPS strike, and
management retention payments related primarily to the Recapitalization.
Nonrecurring integration and restructuring-related costs include costs
resulting from the temporary duplication of operations, relocation of
inventories and employees, hiring and training new employees, and other
one-time and redundant costs, which will be eliminated as the integration and
restructuring plans are completed. These costs are recognized as incurred. For
the year ended December 31, 1997, approximately $29.8 million of such
nonrecurring costs were included in selling, general and administrative expense
compared with $18.2 million for the corresponding periods in 1996.
Excluding nonrecurring costs, selling, general and administrative expense
as a percentage of sales was 22.5% for 1997 compared with 21.7% for 1996. This
increase is primarily due to lower than expected sales volume without a
corresponding decrease in expense. The Company has taken and is continuing to
take actions to improve efficiencies and reduce this expense as a percent of
sales.
Operations outside the United States continue to have significantly higher
selling, general and administrative expense as a percentage of sales as
compared with that of the Company's domestic operations. These higher costs are
being incurred as part of a plan to develop an integrated worldwide supply
capability, the benefit of which has not been fully realized.
Restructuring and Other Charges
Following the execution of the Merger Agreement, during the fourth quarter
of 1997 in conjunction with the annual business planning process, the Company
evaluated its business strategy for both its domestic and international
operations and, as a result, adopted the 1997 restructuring plan (the "1997
Restructuring Plan") and recorded restructuring and other charges of $51.8
million. The charges include costs associated with the closure of additional
logistics and customer-service centers and related asset write-offs in the
United States and internationally, the write-off of goodwill related to certain
international operations and the write-off of systems-related assets.
Implementation of the 1997 Restructuring Plan is expected to be completed and
the related accruals substantially expended by the end of 1999.
Income from Operations
Income from operations for the year ended December 31, 1997 decreased to
$21.1 million from $94.6 million for the comparable period in 1996 primarily
due to the 1997 restructuring and other nonrecurring charges and the increased
selling, general and administrative expense discussed above. Income from
operations as a percent of sales decreased to 1.0% for the year ended December
31, 1997, compared with 4.4% for the same period in 1996.
Interest Expense
Interest expense for the year ended December 31, 1997 decreased to $23.0
million from $27.1 million for the comparable period in 1996. The decrease
principally reflects a reduction in interest expense as a result of the June
1996 conversion and redemption of the Fisher's $125 million step-up convertible
notes. See "Liquidity and Capital Resources" below.
Other (Income) Expense, net
Other (income) expense, net for the year ended December 31, 1997 decreased
to $3.2 million of expense from $0.1 million of income for the comparable
period in 1996. The increase in expense for the year was primarily due to
foreign exchange losses, $5.0 million of fees and expenses related to the Board
of Directors' review of strategic alternatives and a loss on the sale of a
non-strategic business, offset by $2.8 million of gains on sales of non-core
assets.
Income Tax Provision
The income tax provision was $25.4 million for the year ended December 31,
1997 compared with $30.8 million for the comparable period in 1996. The
effective income tax rate for 1997 increased significantly compared
27
<PAGE>
with 45.5% for the corresponding period in 1996. The increased rate is a result
of foreign losses for which no tax benefits are currently being provided,
write-off of previously recognized foreign tax benefits and nondeductible fees
and expenses incurred in connection with the Board's review of strategic
alternatives.
Net Income (Loss)
Net income (loss) for the year ended December 31, 1997 decreased to $30.5
million of loss from $36.8 million of income for the comparable period in 1996.
These changes are due to the factors discussed above.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Sales
Sales for the year ended December 31, 1996 increased 49% to $2,144.4
million from $1,435.8 million for the comparable period in 1995. The sales
increase primarily reflects sales of CMS and FSE, acquired in October 1995, as
well as growth in North American distribution.
Gross Profit
The Company's gross profit for the year ended December 31, 1996 increased
50% to $578.5 million from $386.9 million for the comparable period in 1995.
The increase in gross profit is attributable primarily to the aforementioned
sales growth.
Gross profit as a percent of sales was 27.0% for the year ended December
31, 1996 and remained consistent with that of the same period in 1995. Lower
gross margins associated with recently acquired businesses were offset by
improvements in gross margins of Fisher's historical North American operations.
Both 1996 and 1995 include $1.2 million of costs associated with the
revaluation of CMS and FSE acquired inventory.
Selling, General and Administrative Expense
Selling, general and administrative expense for the year ended December
31, 1996 increased 45% to $483.9 million from $334.4 million for the comparable
period in 1995. The increase reflects the inclusion of selling, general and
administrative expenses of recently acquired businesses, growth in base North
American distribution operations, nonrecurring costs to integrate CMS into the
Company and nonrecurring costs associated with the implementation of the 1995
Restructuring Plan (see "Restructuring Charge" below) that began in the third
quarter of 1995.
Operations outside of the United States continue to have significantly
higher selling, general and administrative expense as a percentage of sales as
compared with that of the Company's domestic operations. These higher costs are
being incurred as part of a plan to develop an integrated worldwide supply
capability, the benefit of which has not been fully realized.
Restructuring Charge
In the third quarter of 1995, the Company recorded a pretax restructuring
charge of $34.3 million. The 1995 restructuring plan (the "1995 Restructuring
Plan"), which anticipated the integration of the former Fisons businesses,
including CMS, with the Company, included the elimination and in some cases
relocation of certain administrative functions, reorganization of the research
sales force, and the consolidation and relocation of certain logistics and
customer service systems and locations throughout the world.
Certain costs resulting from the temporary duplication of operations,
relocation of inventories, relocation of employees, hiring and training new
employees, other start-up costs and redundant costs, which will be eliminated
as the 1995 Restructuring Plan is implemented, were not included in the
restructuring charge and are recognized as incurred. Approximately $18.2
million and $14.5 million of such charges have been recorded in 1996 and 1995,
respectively, and are included in selling, general and administrative expense.
Income from Operations
Income from operations for the year ended December 31, 1996 increased to
$94.6 million, compared with $18.2 million for the corresponding period in
1995. The increase reflects the effect of the restructuring charge of $34.3
million recorded in 1995 as well as the factors discussed above. The Company's
operations outside of North America were not profitable, primarily as a result
of costs associated with the continued development of the Company's worldwide
supply capability and up-front infrastructure costs as discussed above in
"Selling, General and Administrative Expense."
28
<PAGE>
Interest Expense
Interest expense of $27.1 million in 1996 increased by $12.1 million from
the 1995 level. The increase principally reflects interest related to
borrowings used to finance the acquisition of CMS and FSE in the fourth quarter
of 1995, partially offset by the June 1996 conversion and redemption of the
Company's $125 million step-up convertible notes.
Net Income
Net income for the year ended December 31, 1996 increased to $36.8 million
from $3.2 million for the comparable period in 1995 as a result of the factors
discussed above.
Liquidity and Capital Resources
For the year ended December 31, 1997, the Company's operations generated
$46.1 million of cash compared with $49.0 million in 1996. This decrease in
cash provided by operating activities primarily reflects a decrease in net
income adjusted for noncash items, partially offset by an increase in cash
flows from changes in working capital. The net increase in cash provided by
receivables, inventories and payables is due to the Company's overall effort to
reduce working capital which had increased during the integration of CMS into
Fisher in 1996. Other assets and liabilities reduced operating cash flows by
$22.5 million compared with $5.3 million in 1996 primarily due to the increased
effect of foreign currency translation in 1997 and increased payments to
software service vendors related to the implementation of new global computer
systems in 1997.
The Company's operating working capital (defined as receivables plus
inventories less accounts payable and accrued liabilities) decreased to $185.7
million at December 31, 1997 from $194.2 million at December 31, 1996. This
decrease is primarily due to net decreases in receivables, inventories and
payables discussed above. Excluding the effect, if any, of future acquisitions
and anticipated temporary inventory duplications as the Company completes the
consolidation and relocation of certain of its logistical facilities in North
America, the Company's working capital requirements are not anticipated to
increase in 1998.
During the year ended December 31, 1997, the Company used $50.7 million of
cash for investing activities compared with $42.0 million for the same period
in 1996. The increase in cash used for investing activities is primarily
attributable to capital expenditures partially offset by proceeds from the sale
of property, plant and equipment. During the years ended December 31, 1997 and
1996, the Company made capital expenditures of $59.2 million and $40.7 million,
respectively. The increase is due to the Company's investments in logistical
facilities in North America and the Far East and global computer systems. The
Company implemented a project to upgrade and, in some cases, to remediate
global computer systems, which it plans to complete in 1999. This project is
expected to result in approximately $35 million of additional spending in 1998
and 1999, which the Company plans to fund with cash from operations and
borrowings. The change in proceeds from the sale of property, plant and
equipment is due to the receipt of proceeds from the sale of non-core fixed
assets. The increase in other investing activities relates to the funding of a
trust associated with the Company's pension plans. See Note 16 to the Financial
Statements. Capital expenditures in 1998 are expected to show a similar
increase over 1997 as the Company continues its consolidation and relocation of
logistical facilities in North America and its global computer systems project.
The Company's investing activities were primarily funded by the Company's cash
on hand and cash provided by operating activities.
Cash used in financing activities was $1.9 million in 1997 compared with
$46.0 million in 1996. This change is due to $7.4 million in net long-term debt
payments in 1997 compared with $52.4 million in 1996. See "Debt" below. In 1997
and 1996 financing activities included approximately $96 million and $25
million, respectively, of long-term debt proceeds from and $105 million and $74
million, respectively, of long-term debt repayments of Fisher's bank credit
facilities.
The Company intends to continue to pursue acquisitions of complementary
businesses that will enhance growth and profitability. The Company currently
has no commitment, understanding or arrangement relating to any material
acquisitions.
The Company expects that 1998 cash flows from operations, together with
cash on hand and funds available under the new debt financing arrangement
(discussed below) entered into as part of the Recapitalization, will be
sufficient to meet ongoing operating and capital expenditure requirements.
29
<PAGE>
After the Recapitalization
Historically, the Company has utilized internally generated funds and
borrowings under credit facilities to meet ongoing working capital and capital
expenditure requirements. In connection with the Recapitalization, the Company
incurred new indebtedness aggregating approximately $694.2 million.
Substantially all of the proceeds of such indebtedness were used to refinance
existing debt, to pay merger consideration, and to pay fees and expenses
relating to the Recapitalization. See "The Recapitalization."
As a result of the Recapitalization, the Company has significantly
increased cash requirements for debt service relating to the Notes and credit
facilities. The Company relies on internally generated funds and, to the extent
necessary, on borrowings under the Revolving Credit Facility to meet its
liquidity needs. On a pro forma basis, at December 31, 1997, the Company would
have had borrowings of approximately $869.7 million and up to $175.0 million
available under the Revolving Credit Facility.
Management believes that based on the current level of operations and
anticipated internal growth, cash flow from operations, together with other
available sources of funds, including borrowings under the Revolving Credit
Facility, will be adequate to make required payments of principal and interest
on the Company's indebtedness and to fund anticipated capital expenditures and
working capital requirements. However, actual capital requirements may change.
The ability of the Company to meet its debt service obligations and reduce its
total debt will be dependent on the future performance of the Company, which in
turn, will be subject to general economic conditions and to financial,
business, and other factors, including factors beyond the Company's control. A
portion of the Company's debt bears interest at floating rates; therefore, its
financial condition is and will continue to be affected by changes in
prevailing interest rates.
Debt
At December 31, 1997, the Company had $100.6 million outstanding under its
pre-existing bank credit facilities (the "Old Bank Credit Facilities"), $60.0
million of which was denominated in U.S. dollars and the remainder in British
Pounds. Borrowings under the Old Bank Credit Facilities were repaid on the date
of the Recapitalization. On December 31, 1997, $173.5 million was available
under the Old Bank Credit Facilities as a revolving line of credit and for
letters of credit. The Company was required to pay a commitment fee based on
certain of the Company's coverage ratios. At December 31, 1997, the rate was
0.2% per annum on the unused portion of the Old Bank Credit Facilities. All
borrowings under the Old Bank Credit Facilities bore interest, at the Company's
option, at either the Bank's Base Rate or at LIBOR plus a margin, based on
certain of the Company's coverage ratios. At December 31, 1997, the rate was
approximately 6.87%. The estimated fair value of these borrowings at December
31, 1997 approximated the net carrying value. The Company also had outstanding
$150.0 million aggregate principal amount of 7-1/8% Notes due December 15, 2005,
which were sold on December 18, 1995 at a price to the public equal to 99.184%
of principal bringing the effective interest rate to 7.5%. The estimated fair
market value of the 7-1/8% Notes at December 31, 1997, based on quotes from bond
traders making a market in the 7-1/8% Notes, was approximately $138.8 million.
In connection with the Recapitalization, effective January 21, 1998,
Fisher entered into new debt financing arrangements, consisting of $469.2
million under the New Credit Facility, $150 million under the Receivables
Securitization Facility and $400 million of Old Notes. The full proceeds of the
Old Notes, together with a portion of the proceeds of the New Credit Facility
were used to finance the conversion into cash of the shares of Fisher Common
Stock then outstanding which were not retained by existing stockholders and
employees, to refinance $107.8 million of indebtedness of the Company
outstanding on the date of the Recapitalization and to pay related fees and
expenses of the Recapitalization. In addition, the New Credit Facility has and
will be used to provide for the Company's working capital requirements.
The New Credit Facility consists of (i) the $294.2 million Term Facility
consisting of (a) a $125.0 million tranche A term loan ("Tranche A"), (b) a
$100.0 million tranche B term loan ("Tranche B") and (c) a $69.2 million
tranche C term loan ("Tranche C"); and (ii) the $175.0 million Revolving Credit
Facility. Borrowings under the Term Facility bear interest at a rate equal to,
at the Company's option, the following: with respect to Tranche A, LIBOR plus
2.25% or Prime Rate plus 1.25%; with respect to Tranche B, LIBOR plus 2.50% or
Prime Rate plus 1.50%; and with respect to Tranche C, LIBOR plus 2.75% or Prime
Rate plus 1.75%. Borrowings made under the Revolving Credit Facility bear
interest at a rate equal to, at the Company's option, LIBOR plus 2.25%, or the
Prime Rate plus 1.25%; provided that (i) pound sterling borrowings under
Tranche A bear interest at LIBOR for sterling
30
<PAGE>
deposits plus 2.25%, (ii) Canadian dollar borrowings under Tranche A bear
interest at the borrower's option at the Canadian Prime Rate plus 1.25% or a
B/A rate determined in accordance with the provisions of the New Credit
Facility and (iii) negotiated foreign currency loans issued under the Revolving
Credit Facility will bear interest at the rates to be negotiated. The Company
will also pay to the lenders a commitment fee equal to .50% per annum of the
undrawn portion of each lender's commitment from time to time. The LIBOR and
Prime Rate margins and the commitment fees are subject to reductions, based on
various tests of Fisher's financial performance. The tranches of the Term
Facility have the following maturity periods from the date of inception:
Tranche A--6 years, Tranche B--7 years and Tranche C--7.75 years. The Revolving
Credit Facility expires six years from the date of inception.
The obligations of Fisher and the subsidiary borrowers under the New
Credit Facility are secured by substantially all assets of the Company and its
material domestic subsidiaries, a pledge of the stock of all domestic
subsidiaries, and a pledge of 65% of the stock of material foreign subsidiaries
which are direct subsidiaries of Fisher or one of its material domestic
subsidiaries. Obligations of each foreign subsidiary borrower are secured by a
pledge of 100% of the shares of such borrower. The obligations of Fisher and
the subsidiary borrowers are further guaranteed by Fisher and each material
domestic subsidiary of Fisher.
The New Credit Facility contains covenants of the Company and the
subsidiary borrowers, including, without limitation, restrictions on (i)
indebtedness, (ii) the sale of assets, (iii) mergers, acquisitions and other
business combinations, (iv) restrictions on the payment of cash dividends to
shareholders, and (v) various financial covenants. The financial covenants
include requirements to maintain certain levels of interest coverage, debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
minimum EBITDA and to limit capital expenditures. In addition to the mandatory
repayment schedule discussed below, loans under the Term Facility are required
to be prepaid with 50% of excess cash flow (as defined in the New Credit
Facility and subject to certain limits as specified therein) and certain equity
issuances of the Company, and 100% of net-cash proceeds of certain asset sales,
certain insurance and condemnation proceeds and certain debt issuances of the
Company. The mandatory repayment schedule of the Term Facility, over the next
five years and thereafter is as follows: $0.0 million in 1998, $6.0 million in
1999, $17.0 million in 2000, $22.0 million in 2001, $37.0 million in 2002, and
$212.2 million in the aggregate in years subsequent to 2002.
The Receivables Securitization Facility relates to the sale, on a
revolving basis, of certain of the Company's accounts receivable to a
bankruptcy remote subsidiary of the Company which entered into an agreement to
transfer, on a revolving basis, an undivided percentage ownership interest in a
designated pool of accounts receivable up to a maximum amount based on a
defined calculated percentage of the outstanding accounts receivable balance.
The facility has a maturity of five years and the effective interest rate is
approximately LIBOR plus 50 basis points.
The Notes will mature on February 1, 2008 with interest payable
semiannually in arrears on February 1 and August 1 of each year commencing
August 1, 1998. The Notes are unsecured senior subordinated obligations of the
Company, subordinated in right of payment to all existing and future senior
indebtedness and rank pari passu in right of payment with all other existing
and future senior subordinated indebtedness of the Company.
The Notes are redeemable at the option of Fisher at any time after
February 1, 2003 at an initial redemption price of 104.5%, declining ratably to
par on or after February 1, 2006. In addition, on or prior to February 1, 2001,
Fisher may redeem up to 40% of the original principal amount of the Notes at a
redemption price of 109% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption with the net cash proceeds
of one or more public equity offerings, provided that at least 60% of the
aggregate principal amount of the Notes originally issued remain outstanding
immediately after the occurrence of such redemption. Upon a Change of Control
Triggering Event (as defined in the Indenture under which the Notes are
issued), Fisher will be required to make an offer to purchase all outstanding
Notes at 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase.
The Indenture under which the Notes are issued contains (A) covenants that
restrict, among other things, the ability of the Company and its subsidiaries
to (i) incur additional indebtedness, (ii) pay dividends or make certain other
restricted payments and (iii) merge or consolidate with any other person and
(B) other various covenants which are customary for transactions of this type.
Restructuring Plans
Following execution of the Merger Agreement during the fourth quarter of
1997 in conjunction with the annual business planning process, the Company
evaluated its business strategy for both its domestic and international
31
<PAGE>
operations, and, as a result, adopted the 1997 Restructuring Plan and recorded
restructuring and other charges of $51.8 million. The charges include costs
associated with the closure of additional logistics and customer-service
centers and related asset write-offs in the United States and internationally,
the write-off of goodwill related to certain international operations and the
write-off of systems-related assets. The restructuring and other charges
consist of $38.3 million related to noncash asset impairments, $9.1 million of
accruals for employee separation arrangements and $4.4 million of exit costs.
As previously noted, in 1995 the Company recorded a pretax restructuring
charge of $34.3 million, of which approximately $18.0 million consisted of
noncash charges and approximately $16.0 million consisted of accrued cash
charges related to separation arrangements and exit costs related to
consolidation efforts. Implementation of the 1995 Restructuring Plan is expected
to be completed in conjunction with the 1997 Restructuring Plan. The Company
expects cash expenditures in 1998 related to these plans to approximate $11.0
million, which will be paid from available funds. Cash expenditures in 1997 and
1996 were approximately $2.0 million and $7.0 million, respectively. Certain
costs resulting from the temporary duplication of certain operations, relocation
of inventory, relocation of employees, hiring and training new employees, other
start-up costs and redundant costs, which are expected to be eliminated as the
1997 Restructuring Plan is implemented, are not included in the restructuring
charge and were recognized in income from operations as incurred. Upon
completion of the 1995 Restructuring Plan and the 1997 Restructuring Plan and
the integration of CMS into the Company, the Company expects an improvement in
annual pretax profitability of approximately $25 million. See "Forward-Looking
Statements".
During the third quarter of 1991, the Company recorded a pretax $20.0
million restructuring charge relating primarily to improving operations of its
North American distribution system through consolidation and expansion of
certain facilities. This plan is substantially complete and the related
accruals remaining of $2.6 million will be substantially expended by the end of
1998.
Environmental Matters
Some of the Company's operations involve and have involved the handling,
manufacture or use of substances that are classified as toxic or hazardous
substances within the meaning of applicable environmental laws. Consequently,
some risk of environmental and other damage is inherent in particular
operations and products of the Company, as it is with other companies engaged
in similar businesses, and there can be no assurance that material damage will
not occur or be discovered to have occurred or be determined to be material in
the future. The Company is currently involved in various stages of
investigation and remediation relative to environmental protection matters.
The Company's Fair Lawn and Somerville, New Jersey facilities are the
subject of administrative consent orders, issued pursuant to New Jersey's
Environmental Clean-Up and Responsibility Act ("ECRA") (now called the
Industrial Site Recovery Act ("ISRA")), in connection with prior transfers of a
controlling interest in the Company, which require that certain remediation and
other activities be undertaken at these sites. The Fair Lawn facility is also
part of a site listed on the "Superfund" National Priority List under the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"). Fisher has also been notified that it is among the
potentially responsible parties under CERCLA or similar state laws for the
costs of investigating and/or remediating contamination caused by hazardous
materials at certain other sites. The Company's non-Superfund liabilities for
environmental matters are principally related to compliance with ECRA/ISRA
administrative consent orders and other environmental regulatory requirements
such as the Clean Air Act, the Clean Water Act and other generally applicable
requirements.
The potential costs related to environmental matters and the possible
impact on future operations are difficult to predict given the uncertainties
regarding the extent of the required cleanup, the complexity and interpretation
of applicable laws and regulations, the varying costs of alternative cleanup
methods and the extent of the Company's responsibility. However, such costs
could be material. Accruals for environmental liabilities are recorded, based
on current interpretations of environmental laws and regulations, when it is
probable that a liability has been incurred and the amount of such liability
can be reasonably estimated. Estimates are established based upon reports
prepared by environmental specialists, management's knowledge to date and its
experience with the foregoing environmental matters, and include potential
costs for investigation, remediation, operation and maintenance of cleanup
sites and related capital expenditures. Accrued liabilities for environmental
matters were $35.1 million and $37.6 million at December 31, 1997 and 1996,
respectively. Although these amounts do not include third-party recoveries,
certain sites may be subject to indemnification. The Company has accounted for
environmental liabilities in accordance
32
<PAGE>
with Accounting Standards Statement of Position 96-1, "Environmental
Remediation Liabilities," which addresses accounting and reporting for
environmental remediation liabilities. Management believes this accrual is
adequate for the environmental liabilities expected to be incurred and, as a
result, believes that the ultimate liability incurred with respect to
environmental matters will not have a material adverse effect on the Company's
financial statements or results of operations. However, future events, such as
changes in existing laws and regulations, changes in agency direction or
enforcement policies, or changes in the conduct of the Company's operations,
may give rise to additional compliance costs which could have a material
adverse effect on the Company's financial statements.
Financial Instruments
The Company's financial instruments consist primarily of cash in banks,
investments in marketable securities, accounts receivable and debt. In
addition, the Company has forward currency contracts that hedge certain firm
commitments. See Notes 3 and 6 of Notes to Financial Statements for additional
information.
Dividends
The Company paid a quarterly cash dividend of $.02 per share for the first
three quarterly periods of fiscal 1997 and each of the quarterly periods of
1996. On January 21, 1998, in connection with the Recapitalization, the Company
and certain of its subsidiaries entered into a New Credit Facility which
restricts the Company's ability to pay future dividends. Accordingly, Fisher
does not anticipate paying cash dividends on Fisher Common Stock at any time in
the future.
Financial Condition
At December 31, 1997, current assets decreased $60.4 million from December
31, 1996, with reductions in cash and cash equivalents of $6.5 million,
accounts receivable of $19.5 million, inventories of $32.2 million and other
current assets of $2.2 million. The decrease in cash and cash equivalents is
primarily due to repayments on the Company's Old Bank Credit Facilities. The
decrease in accounts receivable and inventories is primarily due to the
Company's overall efforts to reduce working capital which had increased during
the integration of CMS into Fisher in 1996.
Current liabilities decreased by $38.1 million primarily due to a decrease
of $34.7 million in accounts payable related to the Company's overall effort to
reduce working capital discussed above. Long-term assets decreased by $25.8
million, primarily due to asset write-offs related to the 1997 Restructuring
Plan which were partially offset by capital expenditures. Long-term debt
decreased by $13.7 million, primarily due to repayments of the Old Bank Credit
Facilities. Stockholders' equity decreased by $39.1 million primarily due to
the Company's net loss and the change in the currency translation adjustment.
Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128
establishes new standards for computing and presenting earnings per share. The
Company adopted SFAS No. 128 in the fourth quarter of 1997 and has restated all
prior periods to comply with this new pronouncement. The effect of the change
on earnings per share was not significant.
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130) and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS No. 131), which
are required to be adopted by Fisher in its fiscal 1998 financial statements.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components in the financial statements and requires companies to
disclose comprehensive income as part of the basic financial statements. SFAS
No. 131 establishes standards for reporting information on operating segments
in financial statements. Fisher is currently reviewing the impact SFAS No. 131
may have on additional disclosure, if any, in its financial statements.
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 96-1, "Environmental Remediation Liabilities", which addresses
accounting and reporting for environmental remediation liabilities. The
implementation of SOP 96-1 during 1997 did not have a material effect on the
Company's financial statements.
33
<PAGE>
THE EXCHANGE OFFER
Terms of the Exchange Offer; Period for Tendering Old Notes
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), Fisher will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York
City time, on , 1998; provided, however, that if Fisher, in its sole
discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $400 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all Holders of Old
Notes known to Fisher. Fisher's obligation to accept Old Notes for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
under "--Certain Conditions to the Exchange Offer" below.
Fisher expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any Old Notes, by giving oral or written
notice of such extension to the Holders thereof as described below. During any
such extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by Fisher. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
Fisher expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer."
Fisher will give oral or written notice of any extension, amendment,
non-acceptance or termination to the Holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
Procedures for Tendering Old Notes
The tender to Fisher of Old Notes by a Holder thereof as set forth below
and acceptance thereof by Fisher will constitute a binding agreement between
the tendering Holder and Fisher upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal.
Except as set forth below, a Holder who wishes to tender Old Notes for exchange
pursuant to the Exchange Offer must transmit a properly completed and duly
executed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to State Street Bank and Trust Company (the "Exchange
Agent") at the address set forth below under "Exchange Agent" on or prior to
the Expiration Date. In addition, either (i) certificates for such Old Notes
must be received by the Exchange Agent along with the Letter of Transmittal, or
(ii) a timely confirmation of book-entry transfer (a "Book-Entry Confirmation")
of such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
Holder must comply with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO FISHER.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership
of the Old Notes
34
<PAGE>
in such owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchanges Medallion Program (collectively, "Eligible Institutions").
If Old Notes are registered in the name of a person other than a signer of the
Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by Fisher in its sole discretion,
duly executed by the registered Holder with the signature thereon guaranteed by
an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by Fisher in its sole discretion, which determination shall be final and
binding. Fisher reserves the absolute right to reject any and all tenders of
any particular Old Notes not properly tendered or to not accept any particular
Old Note which acceptance might, in the judgment of Fisher or its counsel, be
unlawful. Fisher also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any Holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by Fisher
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as Fisher shall determine. Neither
Fisher, the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
Fisher, proper evidence satisfactory to Fisher of their authority to so act
must be submitted.
By tendering, each Holder will represent to Fisher that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, and that neither the Holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Notes. In the case of a Holder that
is not a broker-dealer, each such Holder, by tendering, will also represent to
Fisher that such Holder is not engaged in and does not intend to engage in a
distribution of the New Notes. If any Holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of Fisher, or is
engaged in or intends to engage in or has an arrangement or understanding with
any person to participate in a distribution of such New Notes to be acquired
pursuant to the Exchange Offer, such Holder or any such other person (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. See "Plan of Distribution." The
Letter of Transmittal states that by so acknowledging and by delivering such a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, Fisher will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
35
<PAGE>
the Old Notes. See "--Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, Fisher shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if Fisher has given oral
or written notice thereof to the Exchange Agent, with written confirmation of
any oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from January 21, 1998. Accordingly, registered Holders of New Notes
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from January 21, 1998. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of accrued interest on such Old Notes otherwise payable on
any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
Holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering Holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the
address set forth below under "--Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
Guaranteed Delivery Procedures
If a registered Holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by Fisher (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
Holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the Expiration Date the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the
Expiration Date.
36
<PAGE>
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address or, in the case of Eligible
Institutions, at the facsimile number, set forth below under "--Exchange Agent"
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having tendered the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) contain a statement that such holder is withdrawing his
election to have such Old Notes exchanged, (iv) be signed by the holder in the
same manner as the original signature on the Letter of Transmittal by which
such Old Notes were tendered (including any required signature guarantees) or
be accompanied by documents of transfer to have the Trustee with respect to the
Old Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender and (v) specify the name in which such Old Notes are
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer described above, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by Fisher, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered for exchange but which are
not exchanged for any reason will be returned to the Holder thereof without
cost to such Holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with the Book-Entry Transfer Facility
for the Old Notes) as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following the procedures described under "-- Procedures for
Tendering Old Notes" above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
Certain Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, Fisher shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of Fisher to accept for exchange or exchange some or all of the Old
Notes pursuant to the Exchange Offer; or any statute, rule, regulation,
order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of Fisher
might directly or indirectly result in any of the consequences referred to
in clauses (i) or (ii) above or, in the sole judgment of Fisher, might
result in the holders of New Notes having obligations with respect to
resales and transfers of New Notes which are greater than those described
in the interpretation of the Commission referred to on the cover page of
this Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by a governmental agency or authority which may adversely affect the
ability of Fisher to complete the transactions contemplated by the Exchange
Offer, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by any
governmental agency or authority which
37
<PAGE>
adversely affects the extension of credit or (iv) a commencement of a war,
armed hostilities or other similar international calamity directly or
indirectly involving the United States, or, in the case of any of the
foregoing existing at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of Fisher and its subsidiaries taken as a whole that, in the sole
judgment of Fisher, is or may be adverse to the Company, or Fisher shall
have become aware of facts that, in the sole judgment of Fisher, have or
may have adverse significance with respect to the value of the Old Notes or
the New Notes; which in the sole judgment of Fisher in any case, and
regardless of the circumstances (including any action by Fisher) giving
rise to any such condition, makes it inadvisable to proceed with the
Exchange Offer and/or with such acceptance for exchange or with such
exchange.
The foregoing conditions are for the sole benefit of Fisher and may be
asserted by Fisher regardless of the circumstances giving rise to any such
condition or may be waived by Fisher in whole or in part at any time and from
time to time in its sole discretion. The failure by Fisher at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, Fisher will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
Exchange Agent
State Street Bank and Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal and requests for Notices of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
State Street Bank and Trust Company, Exchange Agent
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway, 15th Floor Two International Place
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
</TABLE>
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5314
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5314
38
<PAGE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
Fees and Expenses
Fisher will not make any payment to brokers, dealers, or others soliciting
acceptances of the Exchange Offer. The estimated cash expenses to be incurred
in connection with the Exchange Offer will be paid by Fisher and are estimated
in the aggregate to be approximately $1,000,000.
Transfer Taxes
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct Fisher to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
Consequences of Exchanging Old Notes
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Fisher does not currently
anticipate that it will register Old Notes under the Securities Act. See
"Description of the Notes--Registration Rights." Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, Fisher believes that New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of Fisher within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holders' business and such Holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the Commission has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each Holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If any Holder is an affiliate of
Fisher, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such Holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Each broker-dealer that receives
New Notes for its own account in exchange for Old Notes must acknowledge that
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with.
39
<PAGE>
BUSINESS
Introduction
Fisher Scientific International Inc. is a world leader in serving science,
providing more than 245,000 products and services to research, healthcare,
industrial, educational and government customers in 145 countries. The Company
serves as a one-stop source for the scientific and laboratory needs of its
customers, supplying a broad product offering of leading brands of instruments,
research chemicals, clinical consumables, diagnostics, laboratory workstations
and other laboratory supplies. The Company provides integrated supply services
for the procurement of MRO products and other basic supplies, and also develops
and markets software for electronic commerce. Fisher was founded in 1991,
although the business conducted by its principal operating subsidiary, Fisher
Scientific Company L.L.C., has been in continuous operation since 1902 and
traces its roots to 1851. Fisher's principal executive offices are located at
Liberty Lane, Hampton, New Hampshire 03842, and its telephone number is (603)
926-5911.
Pursuant to the Merger Agreement, approximately 87% of the fully diluted
common stock of Fisher was converted into the right to receive $48.25 per share
in cash (approximately $955.0 million in the aggregate) pursuant to an election
process that provided stockholders the right to elect for each share of Fisher
Common Stock held, subject to proration, either $48.25 in cash or to retain one
share of stock in the recapitalized company. Pursuant to the Merger Agreement,
vesting of all outstanding options accelerated.
The Industry
The Company's market consists of five principal sectors: (i) scientific
research and development activities conducted by biotechnology, pharmaceutical,
chemical, environmental and other entities; (ii) hospitals and physicians'
offices that perform diagnostic tests on patients, (iii) commercial and
national reference laboratories; (iv) educational activities in research
institutions, medical schools, universities, colleges, elementary and secondary
schools; and (v) users of MRO materials and occupational health and safety
products in production and other activities.
The Company's largest market is the scientific research supply market.
According to a recent study conducted by the Laboratory Products Association,
sales to the scientific research supply market were estimated to be
approximately $5 billion during 1997. The scientific research market is
primarily impacted by the level of applicable scientific and technology related
R&D spending in the U.S. The National Science Foundation estimates that non-
defense related R&D expenditures increased from $44 billion in 1980 to over
$130 billion in 1995, representing a compound annual growth rate of
approximately 7.5%. In addition to this growth, non-defense-related R&D
expenditures have not typically been subject to cyclical swings, having not
experienced a year-over-year decline since 1960 (when the National Science
Foundation began publishing such data).
The Company's second-largest market is the U.S. clinical laboratory
testing market. A recent study by MarketData Enterprises Inc. estimated that
the U.S. clinical laboratory testing market totaled approximately $30 billion
in 1997, up from approximately $27 billion in 1993. Based on these overall
spending levels, management estimates that the clinical testing equipment and
supply market, the market the Company competes in, totals approximately $6
billion. The Company's third-largest market, safety supply, which is a subset
of the $225 billion MRO market, is estimated to be approximately $7 billion.
This market is currently highly fragmented, but there has been a recent trend
towards consolidation of suppliers of safety products.
The markets in which the Company competes are typically characterized by
high transaction volume (units) with relatively small average order prices. As
a result, customers in these markets incur relatively high average procurement
costs per order. The Company believes that as end users consolidate their
vendor base and/or outsource their procurement functions to reduce costs,
manufacturer use of distribution and demand for the Company's distribution and
third party procurement services, including demand for the Company's electronic
ordering technology, will increase. By leveraging the Company's distribution
and technological capabilities as well as its national sales force,
manufacturers and end users can reduce the cost of procurement for an expanding
list of products.
Over the last few years, the trend toward fewer suppliers has resulted in
consolidation of the fragmented scientific distribution market. Consolidation
benefits larger distributors by presenting them with the opportunity to
leverage large distribution infrastructures over higher sales volume and more
customers. The mergers of Fisher
40
<PAGE>
with CMS and VWR Scientific Products Corporation with Baxter Industrial are
illustrative of this trend. These same trends exist in most international
markets.
Products and Services
The Company currently has over 245,000 products available for delivery
from its electronic and other order-entry systems and is continuously expanding
and refining its product offerings to provide its customers with a complete
array of laboratory and clinical testing supplies. In addition to supplying
leading brands of instruments, supplies and equipment, the Company offers
research chemicals, clinical consumables, instruments, diagnostics, and
laboratory workstations of its own manufacture.
Fisher Products. The Company's product portfolio is comprised of
proprietary products as well as sourced products. Proprietary offerings consist
of self-manufactured products and products sold through exclusive distribution
agreements. Management estimates that proprietary products accounted for
approximately 40% of total sales in fiscal 1997. Consumable products, such as
laboratory supplies and specialty chemicals, represented approximately 75% of
the Company's total sales in fiscal 1997.
Sales and Customer Service Professionals. In order to reduce the
complexity of today's scientific research and clinical testing product
offerings, the Company provides customer support through a worldwide sales and
customer service network. The Company's direct sales force consists of over
1,000 account representatives and product/systems sales specialists worldwide.
Most of the members of the Company's direct sales force have scientific or
medical backgrounds, which enable them to provide technical assistance to the
end users of the Company's products. In addition to performing traditional
selling functions, these representatives provide the basis for a market-driven
development program for new products and services by identifying customer needs
and utilizing the Company's accumulated technical expertise to translate those
needs into new services or products, which may be manufactured by either the
Company or its suppliers. In addition, the Company's customer service
organization includes over 1,000 representatives worldwide. These customer
service representatives, supported by a scientific and technical staff, respond
to end-user product or application questions and assist the Company's customers
with efficient order entry and order expediting. In response to customers'
efforts to improve purchasing efficiencies, the Company has developed the
computerized order-entry systems described in "Electronic Commerce" below.
Electronic Commerce. In an effort to meet its customers' desire to improve
purchasing efficiencies, the Company expanded its role as an industry leader in
the development and deployment of electronic commerce solutions through the
formation of FTG. This business unit was established to commercialize software
and related services developed by the Company. Organizations are utilizing
these offerings to implement advanced supply-chain-management techniques that
enable procurement to be automated for improved service at lower total cost.
These Internet, intranet and client/server solutions are an extension of FTG's
historical inventory management and procurement systems. The applications
contain full graphics and text display, and provide search, retrieval, order-
management and transaction-processing functions. CornerStone allows buyers and
suppliers to create public or private web sites to support their
business-to-business transactions. ProcureNet (www.procurenet.com), a public
mall owned and operated by FTG, utilizes the CornerStone architecture to
provide the general commercial community access to the electronic storefronts
of its supplier tenants. More than 300,000 products are currently available on
ProcureNet. SupplyLink provides the same capability in a client/server
environment.
Fisher Catalog. The Fisher Catalog has been published for over 90 years
and is a standard reference for the scientific community worldwide. In
addition, the Company publishes the CMS/Fisher Healthcare Catalog, the Fisher
Chemical Catalog, the Fisher Science Education catalog, as well as several
international catalogs in nine different languages. In 1995, the Company
established an Internet site (Fishersci.com), which currently features The
Fisher Catalog, the Fisher Chemical Catalog, the Fisher Safety Catalog, the
Acros Organics Catalog of Fine Chemicals and the CMS/Fisher Healthcare Catalog,
as well as other product, safety and general information, all in electronic
form for quick and easy access. More than 100,000 items and over 25,000 images
representing 6,000 catalog pages can be browsed. New products are continuously
added, making the Fisher suite of catalogs a dynamic library, one of the most
complete and up-to-date sources of laboratory and safety products available.
The Company's customers now have the ability to place their orders
electronically through an intuitive, integrated and easy-to-use process. The
Company also continues to publish over a dozen international catalogs to
support its growing worldwide presence. More than one million copies of the
Company's various catalogs are produced biannually, with supplements tailored
to specific market segments such as biotechnology, research chemicals,
educational materials and occupational health and safety.
41
<PAGE>
Distribution
The Company's distribution network comprises 32 locations in the U.S.,
including a national distribution center in Somerville, New Jersey, four
regional centers (New Jersey, California, Illinois and Georgia) and
twenty-seven local facilities throughout the United States. The Company also
has two distribution centers in Canada and one each in Germany, France,
England, Belgium, Singapore, Korea, Malaysia, Mexico and Australia. Through its
worldwide distribution networks, the Company distributes an average of 20,000
items every business day, with products accounting for more than 90% of total
sales in fiscal 1997 shipped to customers within 24 hours of being ordered.
Manufacturing
The Company operates principal manufacturing facilities in Fair Lawn,
Somerville and Swedesboro, New Jersey; Two Rivers, Wisconsin; Indiana and
Pittsburgh, Pennsylvania; Huntersville, North Carolina; Loughborough, United
Kingdom; Geel, Belgium; Rochester, New York; and Mountain Home, Arkansas.
Products manufactured include research, bulk and organic chemical, laboratory
equipment, laboratory fumehoods, wood, plastic and metal laboratory
workstations and furniture, computer local area network "LAN" cabinets,
scientific glassware and plastic labware, and diagnostic and educational
materials. More than one-half of these products are sold directly to end users,
other dealers and distributors with the balance sold through the Company's
distribution network.
The Company's manufacturing customers range from small start-up operations
to large national corporations and government agencies. The Company's
manufacturing operations are not dependent on any single customer and are
operated on a "stand alone" basis to complement the Company's distribution
organization by providing the Company's sales representatives with a full range
of value added service and product offerings and to position the Company as a
one-stop source for all of the customer's scientific research and laboratory
needs.
Suppliers
The Company distributes laboratory instruments, supplies and equipment
obtained from over 3,200 vendors. Vendors generally offer these products to
distributors on substantially similar terms. Although certain products are
available from only a limited number of vendors, Fisher does not anticipate
that it will be unable to purchase any of the products it distributes. The
Company's largest supplier represented approximately 11% of total sales in
fiscal 1997.
Competition
The Company operates in a highly competitive market. The Company competes
primarily with a wide range of suppliers and manufacturers that sell their own
products directly to end users. The Company also competes with other
distributors, such as VWR Scientific Products Corporation in the scientific
research market and Allegiance Corporation in the clinical market. The
principal means of competition in the markets the Company serves are systems
capabilities, breadth and exclusivity of product offerings, price and service.
The Company believes that it competes effectively in these areas through The
Fisher Catalog, electronic procurement systems, integrated supply capabilities,
and international logistics and distribution capabilities.
Trademarks and Patents
The Company owns or licenses a number of patents and patent applications
that are important to its businesses. The Company has more than 200 registered
and unregistered service marks and trademarks for its products and services.
Some of its more significant marks include CornerStone, Fisher Rims,
ProcureNet, SupplyLink, UniKix, Webkix, Accumet, Acros, Biochemical Sciences,
Chemalert, Chemguard, CMS, Curtin Matheson Scientific, Enviroware, Fisher,
Fisherbiotech, Fisherbrand, Fisher Diagnostics, Fisher Healthcare, Fisher
Safety, Fisher Scientific, Gastrak, Hamilton, Histoprep, Isotemp, Marathon,
Microprobe, Optima, Pacific Hemostasis, and Valutrak. Registered trademarks
generally can have perpetual life, provided they are renewed on a timely basis
and continue to be used properly as trademarks, subject to the rights of third
parties to seek cancellation of the marks.
Customers, Seasonality and Backlog
The Company's sales are not materially dependent upon any single customer
or any few customers. No single customer of the Company represented more than
5% of 1997 sales. The Company's customers range in size from start-up
companies, hospital purchasing consortiums, and government agencies to
nationally and internationally
42
<PAGE>
recognized scientific research, medical and educational institutions. The
Company's sales are generally related to applicable R&D spending and to
clinical testing practices and are therefore not seasonal to any significant
extent. In addition, no material portion of the Company's business is subject
to renegotiation of profits or termination at the election of the United States
Government. Because the Company's products are, in most cases, sold for
immediate shipment, there are no significant backlogs.
Environmental Matters
Some of the Company's operations involve the handling, manufacture or use
of substances that are classified as toxic or hazardous substances within the
meaning of applicable environmental laws. Consequently, some risk of
environmental and other damage is inherent in particular operations and
products of the Company, as it is with other companies engaged in similar
businesses, and there can be no assurance that material damage will not occur
or be discovered to have occurred or be determined to be material in the
future. The Company is currently involved in various stages of investigation
and remediation relative to environmental protection matters.
The Company's Fair Lawn and Somerville, New Jersey facilities are the
subject of administrative consent orders, issued pursuant to New Jersey's
Environmental Clean-Up and Responsibility Act ("ECRA") (now called the
Industrial Site Recovery Act ("ISRA")), in connection with prior transfers of a
controlling interest in the Company, which require that certain remediation and
other activities be undertaken at these sites. The Fair Lawn facility is also
part of a site listed on the "Superfund" National Priority List under the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"). Fisher has also been notified that it is among the
potentially responsible parties under CERCLA or similar state laws for the
costs of investigating and/or remediating contamination caused by hazardous
materials at certain other sites. The Company's non-Superfund liabilities for
environmental matters are principally related to compliance with ECRA/ISRA
administrative consent orders and other environmental regulatory requirements
such as the Clean Air Act, the Clean Water Act and other generally applicable
requirements.
The potential costs related to environmental matters and the possible
impact on future operations are difficult to predict given the uncertainties
regarding the extent of the required cleanup, the complexity and interpretation
of applicable laws and regulations, the varying costs of alternative cleanup
methods and the extent of the Company's responsibility. However, such costs
could be material. Accruals for environmental liabilities are recorded, based
on current interpretations of environmental laws and regulations, when it is
probable that a liability has been incurred and the amount of such liability
can be reasonably estimated. Estimates are established based upon reports
prepared by environmental specialists, management's knowledge to date and its
experience with the foregoing environmental matters, and include potential
costs for investigation, remediation, operation and maintenance of cleanup
sites and related capital expenditures. Accrued liabilities for environmental
matters were $35.1 million and $37.6 million at December 31, 1997 and 1996,
respectively. Although these amounts do not include third-party recoveries,
certain sites may be subject to indemnification. The Company has accounted for
environmental liabilities in accordance with Accounting Standards Statement of
Position 96-1, "Environmental Remediation Liabilities," which addresses
accounting and reporting for environmental remediation liabilities. Management
believes this accrual is adequate for the environmental liabilities expected to
be incurred and, as a result, believes that the ultimate liability related to
these environmental matters will not have a material adverse effect on the
Company's financial statements. However, future events, such as changes in
existing laws and regulations, changes in agency direction or enforcement
policies or changes in the conduct of the Company's operations, may give rise
to additional compliance costs which could have a material adverse effect on
the Company's financial statements.
The Company spent approximately $2.3 million and $2.2 million during the
years ended December 31, 1997 and 1996, respectively, on remediation and
related environmental monitoring and compliance. Amounts expensed for
environmental matters, including compliance costs under the existing
administrative consent orders, for installation and operation of groundwater
treatment systems and other planned expenses, are expected to average between
$2 million and $3 million per year.
Employees
As of December 31, 1997, the Company had approximately 6,800 full-time
employees. The Company considers relations with its employees to be
satisfactory. The Company has several labor contracts, none of which is
considered material to its business as a whole. From time to time, union
actions have been threatened or taken. However, management does not believe
such actions have had, or will have a material adverse effect on the financial
statements of the Company or on the Company's ability to serve its customers.
43
<PAGE>
Foreign and Domestic Operations and Export Sales
For information regarding foreign and domestic operations and export
sales, see Note 20 of Notes to Financial Statements, which is incorporated
herein by reference.
Properties
The Company's principal executive offices are located in Hampton, New
Hampshire. The Company believes that its property and equipment are generally
well maintained, in good operating condition and adequate for its present
needs. The inability to renew any short-term real property lease by Fisher or
any of its subsidiaries would not have a material adverse effect on the
Company's financial statements.
The following table identifies the Company's principal facilities, which
are owned in fee unless otherwise indicated:
U.S. Logistics Facilities
Santa Clara, California (a) Florence, Kentucky
Denver, Colorado (a) Agawam, Massachusetts
Delmar (Newark), Delaware Houston, Texas
Suwanee, Georgia (a) Tustin, California
Itasca, Illinois (a) Somerville, New Jersey
Wood Dale, Illinois (a) Hanover Park, Illinois
Dallas, (Plano) Texas Springfield, New Jersey
St. Louis, Missouri Raleigh, North Carolina
Non-U.S. Facilities
Geel, Belgium Offices, Logistics and Manufacturing Center
Edmonton, Alberta, Canada Offices and Logistics Center
Whitby, Ontario, Canada Logistics Center
Nepean, Ontario, Canada Offices
Markham, Ontario, Canada (a) Offices and Data Center
Maurepas, France Offices and Logistics Center
Kamen, Germany (a) Logistics Center
Kuala Lumpur, Malaysia (b) Offices and Logistics Center
Monterrey, Mexico Offices and Logistics Center
Singapore (a) Offices and Logistics Center
Loughborough, United Kingdom Offices, Logistics and Manufacturing Center
Cayey, Puerto Rico Offices and Logistics Center
Zoetermeer, Netherlands Manufacturing and Logistics Center
Schwerte, Germany Manufacturing and Logistics Center
Other Properties
Hampton, New Hampshire (a) Corporate Offices
Fair Lawn, New Jersey Manufacturing
Rochester, New York Manufacturing
Pittsburgh, Pennsylvania (a) Offices, Data Center and Manufacturing
Two Rivers, Wisconsin Offices and Manufacturing Center
Indiana, Pennsylvania Manufacturing
Swedesboro, New Jersey (a) Manufacturing
Huntersville, North Carolina (a) Manufacturing
Somerville, New Jersey Manufacturing
Mountain Home, Arkansas Manufacturing
- ----------
(a) Leased
(b) One property owned, three leased
44
<PAGE>
Legal Proceedings
There are various lawsuits and claims pending against Fisher and certain
of its subsidiaries. In the opinion of the Company's management, the Company's
ultimate liability with respect to these matters, if any, will not have a
material adverse effect on the Company's results of operations and financial
condition. The Company is currently subject to two shareholder suits, each of
which purports to be a class action, Steiner v. Fisher Scientific International
Inc. et. al., Court of Chancery of the State of Delaware, New Castle County,
Civil Action 15730 and Jacob v. Fisher Scientific International Inc. et. al.,
Court of Chancery of the State of Delaware, New Castle County, Civil Action
15743NC. In each case the complaints allege that the then Board of Directors of
the Company breached its fiduciary duties to shareholders by implementing a
"poison pill" and failing to facilitate the unsolicited proposal (the "Trinity
Proposal") made by Trinity I Fund, L.P. ("Trinity"), an investment fund
affiliated with members of the Bass family of Texas, that contemplated a
recapitalization of Fisher in which stockholders who surrendered their shares
would receive $47 to $48 in cash per share or, in the alternative, a cash
merger transaction in which the Company's stockholders would receive the same
consideration, or to seek other interested bidders and by conduct designed to
prevent a change of control of the Company. The plaintiff in each action
requests, among other things, an order certifying a class action, enjoining the
use of defensive tactics in a manner inconsistent with maximizing shareholder
value, requiring that the then Board of Directors of the Company create an
active auction for the Company. In addition to damages the suits seek attorneys
fees and expenses. Because the then Board of Directors of the Company, contrary
to the allegations contained in the shareholders suits listed above, did in
fact conduct an auction for the Company and did seek to find potential buyers
for the Company, which resulted in a change of control transaction having a
value to shareholders greater than that of a proposal by a stockholder of the
Company that contemplated a recapitalization of the Company or, in the
alternative, a cash merger transaction, the shareholder suits are believed by
the Company to be without merit and unlikely to have a material adverse effect
on the Company's financial condition or results of operations.
The Company is subject to the jurisdiction of various regulatory agencies
including, among others, the United States Food and Drug Administration and the
Agency for International Development. Various governmental agencies conduct
investigations from time to time to examine matters relating to the Company's
operations. Some of the Company's operations involve and have involved the
handling, manufacture or use of substances that are classified as toxic or
hazardous substances within the meaning of applicable environmental laws.
Consequently, some risk of environmental and other damage is inherent in
particular operations and products of the Company as it is with other companies
engaged in similar businesses, and there can be no assurance that material
damage will not occur or be discovered to have occurred or be determined to be
material in the future. The Company is currently involved in various stages of
investigation and remediation relative to environmental protection matters. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters." The Company's management believes that such
investigations and expenditures in connection therewith, individually and in
the aggregate, will not have any material adverse effect upon the Company's
results of operations and financial condition.
45
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table provides information concerning the directors and
executive officers of the Company. The Investors' Agreement provides that the
Board of Directors of the Company will comprise at least 10, but not more than
11 directors, seven of whom will be appointed by THL, one of whom will be
appointed by DLJMB, one of whom will be Mr. Paul M. Montrone and one of whom
will be Mr. Paul M. Meister. All directors will hold office until the next
annual meeting of stockholders of the Company and until their successors have
been duly elected and qualified. All officers will serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
<S> <C>
Paul M. Montrone.......56 President and Chief Executive Officer; Chairman of the
Board of Directors of Fisher Scientific International Inc.
Paul M. Meister........45 Executive Vice President and Chief Financial Officer; Vice
Chairman of the Board of Directors of Fisher Scientific
International Inc.
Joseph P. Bolduc.......54 Vice President and Chief Information Officer of Fisher
Scientific International Inc.
Denis M. Maiorani......49 President, Fisher Scientific Worldwide Inc.
Kevin P. Clark.........35 Vice President and Treasurer of Fisher Scientific
International Inc.
Todd M. DuChene........34 Vice President, General Counsel and Secretary of Fisher
Scientific International Inc.
Mitchell J. Blutt......41 Director of Fisher Scientific International Inc.
Robert A. Day..........54 Director of Fisher Scientific International Inc.
Michael D. Dingman.....66 Director of Fisher Scientific International Inc.
Anthony J. DiNovi......35 Director of Fisher Scientific International Inc.
David V. Harkins.......56 Director of Fisher Scientific International Inc.
Scott M. Sperling......39 Director of Fisher Scientific International Inc.
Kent R. Weldon.........30 Director of Fisher Scientific International Inc.
</TABLE>
Paul M. Montrone has been Chairman of the Board of Directors since March
1998 and President and Chief Executive Officer of Fisher Scientific
International Inc. since prior to 1993. Mr. Montrone served as Vice Chairman of
the Board of Directors of Abex Inc. from prior to 1993 to 1995. Since August
1994, he has been Chairman of the Board of General Chemical Group Inc. Mr.
Montrone is a member of the Board of Directors of Waste Management, Inc. Mr.
Montrone was a member of the Board of Directors prior to the effective time of
the Merger (the "Prior Board") and was appointed after the effective time of
the Merger to fill a vacancy on the Board.
Paul M. Meister has been Vice Chairman of the Board and Executive Vice
President and Chief Financial Officer of Fisher Scientific International Inc.
since March 1998, and Senior Vice President and Chief Financial Officer of
Fisher from prior to 1993 to March 1998. He was Senior Vice President of Abex
Inc. from prior to 1992 to 1995. Mr. Meister is a member of the Board of
Directors of M&F Worldwide Corp., The General Chemical Group Inc., Minerals
Technologies, Inc. and Wheelabrator Technologies Inc. Mr. Meister was appointed
after the effective time of the Merger to fill a vacancy on the Board.
Joseph P. Bolduc has been Vice President and Chief Information Officer of
Fisher Scientific International Inc. since October 1996 and President of Fisher
Technology Group from October 1996 to December 1997. Mr. Bolduc also served as
Regional Consulting Manager of Oracle Corporation (computer software) from 1995
to October 1996 and Corporate Vice President of Spiegel, Inc. (catalog
merchandiser/retailer) from prior to 1992 to 1995.
Denis N. Maiorani has been the President of Fisher Scientific Worldwide
Inc., since July 1996. Mr. Maiorani also served as President of Fisher
Scientific Europe Limited from January 1996 to July 1996 and as a consultant to
Fisher from 1995 to January 1996. Mr. Maiorani served as President of
Robertson-Ceco Corporation (building-components manufacturer) from 1992 to
1995.
Kevin P. Clark has been Vice President and Treasurer of Fisher Scientific
International Inc. since September 1997, and served as Assistant Treasurer of
Fisher from 1995 to 1997. Mr. Clark served as Treasurer of Federal-Mogul
46
<PAGE>
Corporation (automotive components) from 1994 to 1995, and held various
financial executive positions at Chrysler Corporation from prior to 1992 to
1993, the most current being Manager of Corporate Finance of Chrysler Financial
Corp.
Todd M. DuChene has been Vice President, General Counsel and Secretary of
Fisher Scientific International Inc. since November 1996. Mr. DuChene served as
Senior Vice President, Secretary and General Counsel of OfficeMax, Inc.
(retailer) from March 1995 to November 1996 and Vice President, General Counsel
and Assistant Secretary of OfficeMax, Inc. from January 1994 to March 1995. He
was an Associate with Baker & Hostetler from prior to 1992 to January 1994.
Mitchell J. Blutt, M.D. is a director of Fisher Scientific International
Inc. Dr. Blutt has been an Executive Partner of Chase Capital Partners since
prior to 1993, and has been an Adjunct Professor of Medicine at the New York
Hospital/Cornell Medical Center since prior to 1993. Dr. Blutt also serves as a
director of Hanger Orthopedic Group and Landec Corp. Dr. Blutt was appointed
after the effective time of the Merger to fill a vacancy on the Board.
Robert A. Day is a director of Fisher Scientific International Inc. Mr.
Day has been Chairman of the Board and Chief Executive Officer of Trust Company
of the West (investments) since prior to 1993 and Chairman and President of W.
M. Keck Foundation since 1996. Mr. Day is also a director of Freeport-McMoran
Inc. Mr. Day was a member of the Prior Board and was appointed after the
effective time of the Merger to fill a vacancy on the Board.
Michael D. Dingman is a director of Fisher Scientific International Inc.
Mr. Dingman was Chairman of the Board of Fisher from prior to 1992 until the
effective time of the Merger. He has been President of Shipston Group Ltd.
(international investments) since 1994. Mr. Dingman was Chairman of the Board
and Chief Executive Officer of Abex Inc. (aerospace products and services) from
prior to 1993 until June 1995. From prior to 1993 until August 1994, he was
Chairman of the Board and Chief Executive Officer of General Chemical. Mr.
Dingman is also a director of Ford Motor Company and Teekay Shipping Ltd. Mr.
Dingman was a member of the Prior Board and was appointed after the effective
time of the Merger to fill a vacancy on the Board.
Anthony J. DiNovi is a director of Fisher Scientific International Inc.
Mr. DiNovi has been employed by Thomas H. Lee Company, a private equity
investment firm, since 1988 and currently serves as a Managing Director. Mr.
DiNovi is also Vice President and Trustee of THL Equity Trust III, the general
partner of the THL Equity Advisors III Limited Partnership, which is the
general partner of the Thomas H. Lee Equity Fund III, L.P. and Vice President
of Thomas H. Lee Advisors I and T.H. Lee Mezzanine II, affiliates of ML-Lee
Acquisition Fund, L.P., ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition
Fund II (Retirement Accounts), L.P., respectively. Mr. DiNovi also serves as a
director of Safelite Glass Corp., First Alert, Inc., The Learning Company,
Inc., and several private corporations.
David V. Harkins is a director of Fisher Scientific International Inc. Mr.
Harkins has been employed by Thomas H. Lee Company since 1986 and currently
serves as a Senior Managing Director. Mr. Harkins is also the President and
Trustee of THL Equity Trust III, the General Partner of THL Equity Advisers III
Limited Partnership, which is the General Partner of Thomas H. Lee Equity Fund
III, L.P. and Chairman of National Dentex Corporation since 1983. Mr. Harkins
is a director of Stanley Furniture Company, Inc., HomeSide, Inc., First Alert,
Inc., Syratech Corporation and several private corporations.
Scott M. Sperling is a director of Fisher Scientific International Inc.
Since July 1994, Mr. Sperling has served as a Managing Director of Thomas H.
Lee Company. Mr. Sperling is also Vice President and Trustee of THL Equity
Trust III, the general partner of Equity Advisors III Limited Partnership,
which is the general partner of Thomas H. Lee Equity Fund III L.P. Mr. Sperling
also serves as a director of Beacon Properties, Inc., The Learning Company,
Livent, Inc., The General Chemical Group Inc., Object Design Inc., Safelite
Glass Corp. and several private corporations.
Kent R. Weldon is a director of Fisher Scientific International Inc. Mr.
Weldon worked at Thomas H. Lee Company from 1991-1993 and rejoined in 1995.
From 1989 to 1991, Mr. Weldon worked in the Mergers & Acquisitions Department
of Morgan Stanley & Co., Incorporated. From 1993 to 1995, Mr. Weldon attended
the Harvard Graduate School of Business Administration. Mr. Weldon is a Vice
President of THL Equity Trust III, the General Partner of THL Equity Advisers
III Limited Partnership, which is the General Partner of Thomas H. Lee Equity
Fund III, L.P. Mr. Weldon also serves as a director of Syratech Corporation.
47
<PAGE>
Compensation of Directors
The non-employee directors of Fisher, other than Messrs. DiNovi, Harkins,
Sperling and Weldon (the "THL Directors") and Dr. Blutt, are entitled to
receive cash compensation and compensation pursuant to the plans described
below.
Cash Compensation. Non-employee directors (other than the THL Directors
and Dr. Blutt) receive compensation of $40,000 per year, with no additional
fees for attendance at Board or committee meetings. All directors are
reimbursed for expenses incurred in attending Board and committee meetings.
Pursuant to the Deferred Compensation Plan for Non-Employee Directors of Fisher
Scientific International Inc., a non-employee director (other than the THL
Directors and Dr. Blutt) may elect, generally prior to the commencement of any
calendar year, to have all or any portion of the director's compensation for
such calendar year credited to a deferred compensation account. Amounts
credited to the director's account will accrue interest based upon the average
quoted rate for ten-year U.S. Treasury Notes. Deferred amounts will be paid in
a lump sum or in installments commencing on the first business day of the
calendar year following the year in which the director ceases to serve on the
Board or of a later calendar year specified by the director.
Retirement Plan for Non-Employee Directors. Pursuant to the Retirement
Plan for Non-Employee Directors of Fisher Scientific International Inc., a
non-employee director (other than the THL Directors and Dr. Blutt), who retires
from the Board with at least five years of service as a non-employee director
is eligible for an annual retirement benefit for the remainder of the
director's lifetime. The annual retirement benefit is equal to 50% of the
director's fee in effect at the date of the director's retirement for a
director who retires with five years of eligible service and is increased by
10% of the director's fee in effect at the date of the director's retirement
for each additional year of service, up to 100% of such fee for 10 or more
years of service as a non-employee director, or for directors who retire at age
70.
Restricted Unit Plan for Non-Employee Directors. Pursuant to the
Restricted Unit Plan for Non-Employee Directors of Fisher Scientific
International Inc., each non-employee director of the Prior Board, upon
becoming a director of Fisher, received a one-time grant of 5,000 units
("Units") evidencing a right to receive shares of Fisher Common Stock, subject
to certain restrictions. Fisher maintained a memorandum account for each
director who received a grant and credits to such account the amount of any
cash or stock dividends and shares of stock of any subsidiary ("Dividend
Equivalents") distributed on a share of Fisher Common Stock (or other
securities in the memorandum account) from the date of grant until the payment
date (described below). No shares of Fisher Common Stock were issued at the
time the Units were granted, and Fisher was not required to set aside a fund
for any such grant or for amounts credited to the memorandum account. Neither
the Units nor the memorandum account may be sold, assigned, pledged or
otherwise disposed of. Twenty-five percent of the Units and the related
Dividend Equivalents vested for each year of service as a non-employee director
of Fisher. Vested Units and the related Dividend Equivalents are not payable
until the director ceases to be a member of the Board. At that time the
director was entitled to receive one share of Fisher Common Stock for each
vested Unit, provided that a director may elect, prior to the date on which
Units vest, to have payment deferred to a later date.
48
<PAGE>
Compensation of Executive Officers
I. Summary Compensation Table
The following table summarizes the compensation paid to the President and
Chief Executive Officer and each of Fisher's four other most highly compensated
executive officers (the "Named Executives") for services in all capacities to
Fisher and its subsidiaries during or with respect to 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual -------------
Compensation (1)
-------------------------- Awards
----------
Securities
Underlying All Other
Salary Bonus Options Compensa-
Name and Principal Position ($) ($) (#) tion ($)(2)
- ------------------------------- --------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Paul M. Montrone .............. 1997 540,000 0 0 53,880
President and Chief 1996 540,000 475,000 0 82,258
Executive Officer 1995 502,500 450,000 399,000 82,567
Paul M. Meister ............... 1997 360,000 0 0 26,430
Executive Vice President and 1996 360,000 315,000 0 32,964
Chief Financial Officer 1995 315,000 290,000 299,000 32,083
Denis N. Maiorani ............. 1997 300,000 0 22,500 8,018
President, Fisher Worldwide 1996 275,000 185,000 22,580 5,453
John R. Sasso(3) .............. 1997 250,000 0 0 11,841
Senior Vice President-Chief 1996 145,000 140,000 150,000 710
Administrative Officer
Todd M. DuChene(4) ............ 1997 260,000 0 7,500 2,878
Vice President-General Counsel 1996 31,233 100,000(5) 40,000 63
</TABLE>
- ----------------
(1) Includes amounts deferred by each Named Executive under Fisher's Savings
and Profit Sharing Plan and Executive Retirement and Savings Program.
(2) Amounts listed in this column reflect Fisher's contributions matching the
Named Executive's contributions to Fisher's Savings and Profit Sharing
Plan and Executive Retirement and Savings Program and the value of
supplemental life insurance programs for 1997. Amounts attributable to
such supplemental life insurance programs are as follows: Mr. Montrone
($24,480) and Mr. Meister ($8,881). All other amounts listed in this
column reflect amounts attributable to Fisher's Savings and Profit Sharing
Plan and Executive Retirement and Savings Program.
(3) Mr. Sasso joined the Company in June 1996. Mr. Sasso is no longer employed
by the Company.
(4) Mr. DuChene joined the Company in November 1996.
(5) Includes amounts paid to Mr. DuChene at the time he joined the Company.
49
<PAGE>
II. Option Grants in Last Fiscal Year
The following table sets forth the stock options granted during 1997 to
the Named Executives:
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration Grant Date
Name Granted Fiscal Year ($/sh) Date Present Value($)(1)
- --------------------------- --------------- ----------------- ------------ ------------ --------------------
<S> <C> <C> <C> <C> <C>
Denis N. Maiorani ......... 10,000(2) 2.08% 36.75 5/2/2007 205,486
Denis N. Maiorani ......... 12,500(2) 2.59% 43.3125 7/22/2007 34,138
Todd M. DuChene ........... 7,500(2) 1.56% 35.75 5/2/2007 154,115
</TABLE>
- ----------------
(1) The estimated grant date present value reflected in this column is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the
value of the options reflected above include (i) an exercise price as
indicated in the table above, equal to the fair market value of the
underlying stock on the date of grant; (ii) options are exercised at the
end of a ten year period; (iii) interest rates representing the interest
rate on U.S. Treasury securities with maturity dates of ten years as of
the date of grant; (iv) volatility of approximately 25.9% calculated using
daily stock prices for the six month period prior to the date of grant;
and (v) dividends at the rate of $0.08 per share representing the
annualized dividends paid with respect to a share of Fisher Common Stock
at the date of grant. The ultimate value of the options will depend on the
future market price of the Fisher Common Stock, which cannot be forecast
with reasonable accuracy. The actual value, if any, an optionee will
realize upon exercise of an option will depend on the excess of the market
value of the Fisher Common Stock on the date the option is exercised over
the exercise price.
(2) Options granted pursuant to the Equity Ownership Plan (the "EOP"). Under
the EOP, options were granted pursuant to participant's commitment to
purchase and hold shares of Fisher Common Stock. Mr. Maiorani purchased
4,500 shares of Fisher Common Stock and Mr. DuChene purchased 1,500 shares
of Fisher Common Stock, and they were granted the option listed above in
exchange for such purchases. The purchased shares must be held for at
least the vesting period relating to the options. Options become
exercisable in three annual installments of 30%, 30% and 40% subject to
acceleration. The options generally must be exercised, if at all, not
later than 90 days following the termination of the grantee's employment
with Fisher and its affiliates. However, in the event the grantee's
employment terminates due to death, disability or normal retirement, the
options must be exercised, if at all, not later than one year following
the termination of grantee's employment with Fisher and its affiliates.
50
<PAGE>
III. Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table sets forth information for each Named Executive with
regard to the aggregate stock options held on December 31, 1997, and the value
of in-the-money stock options held as of December 31, 1997.
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised Unexercised
Shares Options at in-the-Money
Acquired December 31, 1997 Options at
on Value (#) December 31, 1997($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable(1)
- --------------------------- ---------- ---------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Paul M. Montrone .......... 0 0 418,566/191,267 $8,953,925/2,680,898
Paul M. Meister ........... 0 0 266,433/144,933 $4,819,495/2,025,786
Denis N. Maiorani ......... 0 0 36,774/58,306 $ 518,407/616,255
John R. Sasso ............. 0 0 45,000/105,000 $ 510,471/1,191,099
Todd M. DuChene ........... 0 0 12,000/35,500 $ 101,626/320,330
</TABLE>
- ----------------
(1) Excess of the value of the underlying securities at December 31, 1997 of
$47.8438 over the exercise price.
Pursuant to the Merger Agreement, at the effective time of the Merger, the
holders of each outstanding option immediately prior to the effective time of
the Merger became entitled to receive, with respect to each option, either the
cash price of $48.25 per share less the exercise price applicable to each
option or shares of Fisher Common Stock in the recapitalized company equal to
the "spread value" of such options divided by $48.25. Messrs. Montrone,
Meister, Maiorani, Sasso and DuChene elected to receive 241,277, 147,308,
12,158, 8,523 and 7,200 shares of Fisher Common Stock, respectively.
Employment Agreements with Named Executives
Fisher has entered into an Amended and Restated Employment Agreement dated
January 21, 1998 with Mr. Montrone (the "Montrone Employment Agreement") and an
Amended and Restated Employment Agreement dated January 21, 1998 with Mr.
Meister (the "Meister Employment Agreement"). The Montrone Employment Agreement
and the Meister Employment Agreement each provides for a five-year evergreen
term and provides for an annual base salary of $540,000 and $360,000 for
Messrs. Montrone and Meister, respectively, and bonus compensation for Messrs.
Montrone and Meister, of at least $475,000 and $315,000, respectively. The
Company has entered into severance arrangements with each of Messrs. Maiorani
and DuChene. Such arrangements provide that in the event that the executive's
employment is terminated in certain circumstances, the executive is entitled to
receive payment equal to the sum of two times his base salary and annual bonus
amount.
Retirement Program
Fisher maintains two retirement benefit programs: a tax qualified defined
benefit plan available generally to all employees (the "Pension Plan") and the
Executive Retirement and Savings Program, a non-qualified supplemental benefit
plan pursuant to which retirement benefits are provided to certain executive
officers and other eligible key management employees who are designated by the
Compensation Committee, which determines the service recognized under the
program in calculating a participant's vested interest and retirement income
(the "Supplemental Plan" and, together with the Pension Plan, the "Retirement
Program").
51
<PAGE>
The following table shows the total estimated annual benefits payable
under the Retirement Program in the form of a straight life annuity to
hypothetical participants upon retirement at normal retirement age, with
respect to the compensation and years-of-service categories in the table.
<TABLE>
<CAPTION>
Pension Plan Table
Annualized -----------------------------------------------------------------------
Average 15 Years 20 Years 25 Years 30 Years 35 Years
Earnings of Service of Service of Service of Service of Service
- ------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $52,500
200,000 45,000 60,000 75,000 90,000 105,000
400,000 90,000 120,000 150,000 180,000 210,000
600,000 135,000 180,000 225,000 270,000 315,000
800,000 180,000 240,000 300,000 360,000 420,000
1,000,000 225,000 300,000 375,000 450,000 525,000
1,200,000 270,000 360,000 450,000 540,000 630,000
</TABLE>
The years of service recognized under the Retirement Program generally
include all service with Fisher and its predecessors. The credited years of
service as of December 31, 1997 under the Retirement Program for each of the
Named Executives, are as follows: Mr. Montrone, 27 years; Mr. Meister, 17
years; Mr. Maiorani, 2 years; Mr. Sasso, 1 year; and Mr. DuChene, 1 year.
Compensation recognized under the Retirement Program generally includes a
participant's base salary and annual bonus compensation (including any amounts
deferred). Retirement benefits are calculated based upon the average of a
participant's recognized compensation for the five years out of the ten
consecutive years of credited service that produce the highest average and are
not subject to offset or reduction for social security benefits. Under this
formula, the average recognized compensation under the Retirement Program for
each of the Named Executives as of December 31, 1997 was: Mr. Montrone
$1,015,000, Mr. Meister $675,000, Mr. Maiorani $485,000, Mr. Sasso $390,000 and
Mr. DuChene $260,000.
Compensation Committee
The Board of Directors has a Compensation Committee consisting of Messrs.
Day, Dingman and Sperling.
52
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 16, 1998 certain information
concerning each person believed to be a beneficial owner of more than 5% of
Fisher Common Stock and beneficial ownership of Fisher Common Stock by each
nominee, director, Named Executive and all directors and executive officers as
a group. Chase Equity Associates, L.P. is the beneficial owner of all 807,058
issued and outstanding shares of Class B Common Stock.
<TABLE>
<CAPTION>
Shares of Percent of
Name of Beneficial Owner Common Stock Class(1)
- ---------------------------------------------------------- ------------------------------ -----------
<S> <C> <C>
Thomas H. Lee Equity Fund III, L.P. et al. ............ 4,349,869(2)(3)(4) 57.8
DLJ Merchant Banking Partners II, L.P. et al. ......... 1,310,201(3)(5)(6) 18.0
Chase Equity Associates, L.P. ......................... 873,467(2)(7) 1.2
Paul M. Montrone ...................................... 368,777(3)(7) 5.1
Paul M. Meister ....................................... 236,608(3)(9) 3.3
David V. Harkins ...................................... 21,642(2)(3)(10) *
Denis N. Maiorani ..................................... 12,158(3)(11) *
Anthony J. DiNovi ..................................... 10,821(2)(3)(12) *
Scott M. Sperling ..................................... 10,821(2)(3)(13) *
John R. Sasso ......................................... 8,523(3)(11) *
Todd M. DuChene ....................................... 7,200(3)(11) *
Kent R. Weldon ........................................ 1,623(2)(3)(14) *
Mitchell J. Blutt ..................................... 0(7) *
Michael D. Dingman .................................... 0 *
Robert A. Day ......................................... 0 *
All directors and executive officers as a group
(15 individuals) ..................................... 690,670(3)(15) 9.6
</TABLE>
- ----------------
* Less than 1%
(1) Calculated after giving effect to the exercise of warrants to purchase
Fisher Common Stock described below.
(2) The address of Thomas H. Lee Equity Fund III, L.P. is c/o Thomas H. Lee
Company, 75 State Street, Boston, Massachusetts. The information is based
on a Schedule 13D dated January 21, 1998 filed with the Commission by
Thomas H. Lee Equity Fund III, L.P. ("Equity Fund III"), THL-CCI Limited
Partnership ("THL-CCI"), THL Foreign Fund III, L.P. ("Foreign Fund III"),
THL FSI Equity Investors, L.P. ("THL-FSI"), the THL Directors and certain
persons affiliated with THL Co. or the THL Directors (collectively, the
"Additional THL Persons" and, together with Equity Fund III, THL-CCI,
Foreign Fund III, THL-FSI and the THL Directors, the "THL Entities"),
Thomas H. Lee Equity Advisors III Limited Partnership ("Advisors III"),
THL Equity Trust III ("Trust III") and THL Investment Management Corp.
("THL Investment"). Each of the THL Entities, Advisors III, Trust III and
THL Investment expressly disclaims beneficial ownership of shares of
Fisher Common Stock held by the others.
(3) By virtue of the Investors' Agreement, each of the THL Entities, Merrill
Lynch KECALP L.P. 1997 ("ML KECALP"), KECALP Inc. ("KECALP") and ML IBK
Positions, Inc. ("ML IBK" and, together with ML KECALP and KECALP, the "ML
Entities") and the Management Investors may constitute a "group" under the
Exchange Act, as amended. Each of the parties to the Investors' Agreement
expressly disclaims beneficial ownership of shares of Fisher Common Stock
held by the others.
(4) Includes 2,409,525 shares and 198,268 shares issuable upon the exercise of
warrants to purchase shares owned by Equity Fund III; 1,210,587 shares and
99,614 shares issuable upon the exercise of warrants to purchase shares
owned by THL FSI, 149,094 shares and 12,209 shares issuable upon the
exercise of warrants owned by Foreign Fund III; 148,392 and 12,209 shares
issuable upon the exercise of warrants to purchase shares owned by
THL-CCI; 19,996 shares and warrants to purchase 1,646 shares attributable
to Mr. Harkins; 9,998 shares and warrants to purchase 823 shares
attributable to Mr. Sperling; 9,998 shares and warrants to purchase 823
shares attributable to Mr. DiNovi; 1,500 shares and warrants to purchase
123 shares attributable to Mr. Weldon; and 60,062 shares and warrants to
purchase 4,943 shares attributable to the Additional THL Persons.
53
<PAGE>
(5) The address of DLJ Merchant Banking Partners II, L.P. is 277 Park Avenue,
New York, New York 10172. The information is based on a Schedule 13D dated
January 21, 1998 filed with the Commission by DLJ Merchant Banking
Partners II, L.P. ("DLJ Partners II"), DLJ Merchant Banking Partners II-A,
L.P. ("DLJ Partners II-A"), DLJ Offshore Partners II, C.V. ("DLJ Offshore
II"), DLJ Diversified Partners, L.P. ("DLJ Diversified"), DLJ Diversified
Partners-A, L.P. ("DLJ Diversified-A"), DLJ Millennium Partners, L.P.
("DLJ Millennium"), DLJ Millennium Partners-A, L.P. ("DLJ Millennium-A"),
DLJMB Funding II, Inc. ("DLJ Funding II"), UK Investment Plan 1997
Partners ("UK Partners"), DLJ EAB Partners, L.P. ("DLJ EAB"), DLJ ESC II,
L.P. ("DLJ ESC II"), and DLJ First ESC, L.P. ("DLJ ESC" and, together with
DLJ Partners II, DLJ Partners II-A, DLJ Offshore II, DLJ Diversified, DLJ
Diversified-A, DLJ Millennium, DLJ Millennium-A, DLJ Funding II, UK
Partners, DLJ EAB and DLJ ESC II, the "DLJ Entities") and each of DLJ
Merchant Banking II, LLC, DLJ Merchant Banking II, Inc., DLJ Diversified
Associates, L.P., DLJ Diversified Partners, Inc., DLJ LBO Plans Management
Corporation, DLJ Capital Investors, Inc., UK Investment Plan 1997, Inc.,
Donaldson, Lufkin & Jenrette, Inc., The Equitable Companies Incorporated,
AXA-UAP, Finaxa, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, AXA Courtage Assurance Mutuelle, Alpha Assurances Vie Mutuelle,
and Claude Bebear, Patrice Garnier and Henri de Clermont-Tonnerre, trustees
pursuant to a Voting Trust dated as of May 12, 1992, as amended
(collectively, the "Additional DLJ Persons"). Each of the DLJ Entities and
the Additional DLJ Persons expressly disclaims beneficial ownership of
shares held by another.
(6) Includes 762,579 shares and 62,749 shares issuable upon the exercise of
warrants to purchase shares owned by DLJ Partners II, 135,393 shares and
11,140 shares issuable upon the exercise of warrants to purchase shares
owned by DLJ Funding II, 143,803 shares and 11,833 shares issuable upon
the exercise of warrants to purchase shares owned by DLJ ESC II and
192,443 shares and 11,395 shares issuable upon the exercise of warrants to
purchase shares owned by the remaining DLJ Entities.
(7) The address of Chase Equity Associates, L.P. ("CEA") is 270 Park Avenue,
New York, New York 10172. CEA is the owner of 807,058 shares of non-voting
common stock and warrants to purchase 66,409 shares of non-voting stock,
which stock is convertible on a one-to-one basis into shares of Fisher
Common Stock, as provided by Fisher's Amended and Restated Certificate of
Incorporation, as amended. Mitchell J. Blutt, M.D. serves as a director of
Fisher and is a general partner of Chase Capital Partners, which is the
sole general partner of CEA. Mr. Blutt expressly disclaims beneficial
ownership of shares held by CEA.
(8) Includes 55,000 shares owned directly by Mr. Montrone, 72,500 shares which
have been deferred into the Fisher Scientific International Inc. Executive
Retirement and Savings Program Trust (the "Savings Trust") and 241,277
shares held by a rabbi trust established under agreement dated January 21,
1998 (the "Rabbi Trust").
(9) Includes 35,000 shares owned directly by Mr. Meister, 54,300 shares which
have been deferred into the Savings Trust and 147,308 shares deferred into
the Rabbi Trust.
(10) Includes 17,996 shares and warrants to purchase 1,481 shares owned by Mr.
Harkins directly and 2,000 shares and warrants to purchase 165 shares
owned by the 1995 Harkins Gift Trust as to which shares Mr. Harkins
expressly disclaims any beneficial interest.
(11) All of the referenced shares have been deferred into the Rabbi Trust.
(12) Includes 9,998 shares and warrants to purchase 823 shares owned by Mr.
DiNovi directly.
(13) Includes 5,999 shares and warrants to purchase 494 shares owned by Mr.
Sperling directly, and 3,999 shares and warrants to purchase 329 shares
owned by the Sperling Family Limited Partnership as to which shares Mr.
Sperling expressly disclaims beneficial interest.
(14) Includes 1,500 shares and warrants to purchase 123 shares owned by Mr.
Weldon directly.
(15) Includes 127,050 shares held directly, 132,799 shares held indirectly,
warrants to purchase 3,541 shares and 427,406 shares deferred into the
Rabbi Trust.
54
<PAGE>
CERTAIN TRANSACTIONS AND OTHER MATTERS
In connection with the Merger, Fisher entered into Management Agreements
(the "Management Agreements") with each of THL Co. and Equity Fund III.
Pursuant to the Management Agreements, each of THL Co. and Equity Fund III will
provide Fisher with financial and strategic corporate planning and other
management services as may be mutually agreed. The Management Agreements
provided for the payment at the effective time of the Merger to each of THL Co.
and Equity Fund III of the sum of $6,000,000 and $14,000,000, respectively, and
provides for the payment annually during the term of the Management Agreements
of $300,000 and $700,00, respectively. The Management Agreements have a seven
year term, renewing annually thereafter until terminated by either party on not
less than ninety days' notice.
The Investors' Agreement, in addition to providing for the size of the
Board and the nomination and election of directors to serve thereon, also
contains restrictions on transfer of shares held by the parties to the
Investors' Agreement. The Investors' Agreement also provides to the THL
Entities and the Management Investors certain preemptive rights and limits the
ability of the DLJ Entities, CEA, the ML Entities and the Management Investors
to purchase Fisher Common Stock other than in accordance with the preemptive
rights provisions of the Investors' Agreement.
The Investors' Agreement also provides certain registration rights to the
THL Entities which permit the THL Entities to require the Company to register
for sale under the Securities Act Fisher Common Stock held by the THL Entities.
The THL Entities may not require more than six such registrations. Following
the sale by the THL Entities of more than 20% of the Fisher Common Stock
instantly held by them, the Management Directors may require Fisher to register
for sale under the Securities Act Fisher Common Stock held by them. The
Investors' Agreement provides to all parties "piggyback" registration rights.
Under the terms of the Investors' Agreement, Fisher may not grant registration
rights to third parties that conflict with or reduce the registration rights
provided to the parties to the Investors' Agreement.
Fisher, The Chase Manhattan Bank and certain of its affiliates, Merrill
Lynch Capital Corporation and DLJ Capital Funding, Inc. are parties to the New
Credit Facility providing for the $294.2 million Term Facility and the $175.0
million Revolving Credit Facility. The proceeds of the Term Facility and a
portion of the proceeds of the Revolving Credit Facility were used to fund the
Recapitalization. The Chase Manhattan Bank will act as administrative agent for
the syndicate of lenders providing the facility and Merrill Lynch Capital
Corporation and DLJ Capital Funding, Inc. will act as syndicate agent and
documentation agent, respectively. See "Description of Other Indebtedness--The
New Credit Facility."
Fisher and the Initial Purchasers are parties to a purchase agreement
dated January 13, 1998 (the "Purchase Agreement") pursuant to which each of the
Initial Purchasers acted as initial purchasers of the Old Notes, the proceeds
of which were used to fund the Recapitalization. The Purchase Agreement
provides that the Company will indemnify the Initial Purchasers against certain
liabilities, including certain liabilities under the Securities Act, and will
contribute to payments that the Initial Purchasers may be required to make in
respect thereof. In connection with the purchase and sale of the Old Notes,
Fisher and the Initial Purchasers also entered into the Registration Rights
Agreement.
Fisher has entered into the Montrone Employment Agreement and the Meister
Employment Agreement. The Montrone Employment Agreement and the Meister
Employment Agreement each provides for a five-year evergreen term and provides
for an annual base salary of $540,000 and $360,000 for Messrs. Montrone and
Meister, respectively, and bonus compensation for Messrs. Montrone and Meister,
of at least $475,000 and $315,000, respectively. Fisher has also agreed to
provide to certain of its officers and key employees, in the event of
termination without cause, severance benefits of two years. See
"Management--Compensation of Executive Officers" and "--Employment Agreements
with Named Executives."
55
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
The New Credit Facility. The New Credit Facility consists of (i) the Term
Facility consisting of (a) a $125 million tranche A term loan ("Tranche A"),
(b) a $100 million tranche B term loan ("Tranche B") and (c) a $69.2 million
tranche C term loan ("Tranche C"); and (ii) the $175.0 million Revolving Credit
Facility. A portion of Tranche A has been borrowed in U.S. dollars by Fisher;
another portion of Tranche A has been borrowed in pounds sterling by a
subsidiary of Fisher incorporated and domiciled in the United Kingdom and the
remaining portion of Tranche A has been borrowed in Canadian dollars by a
subsidiary of Fisher incorporated and domiciled in Canada. The Chase Manhattan
Bank is the administrative agent for the syndicate of lenders providing the New
Credit Facility, Merrill Lynch Capital Corporation is the syndication agent for
the New Credit Facility and DLJ Capital Funding, Inc. is the documentation
agent. The Revolving Credit Facility includes a sub-limit for the issuance of
letters of credit. The New Credit Facility permits foreign subsidiaries of
Fisher to borrow negotiated loans denominated in their local currencies from
individual lenders thereunder, which bear interest at negotiated rates. Such
negotiated loans will reduce the availability of the Revolving Credit Facility.
Borrowings made under the Revolving Credit Facility bear interest at a
rate equal to, at Fisher's option, LIBOR plus 225 basis points, or the Prime
Rate plus 125 basis points. The "Prime Rate" is a fluctuating interest rate
equal to the higher of (i) the rate of interest announced publicly by a
reference bank as its prime rate and (ii) a rate equal to 1/2 of 1% per annum
above the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers.
Dollar borrowings under Tranche A of the Term Facility bear interest at a
rate equal to, at Fisher's option, LIBOR plus 225 basis points or the Prime
Rate plus 125 basis points; pound sterling borrowings under Tranche A bear
interest at LIBOR for sterling deposits plus 225 basis points; Canadian dollar
borrowings under Tranche A bear interest at the borrower's option at the
Canadian prime rate plus 125 basis points or at a B/A rate determined in
accordance with the provisions of the New Credit Facility. Tranche B of the
Term Facility bears interest at a rate equal to, at Fisher's option, LIBOR plus
250 basis points or the Prime Rate plus 150 basis points; and Tranche C of the
Term Facility bears interest at a rate equal to, at Fisher's option, LIBOR plus
275 basis points or the Prime Rate plus 175 basis points.
The LIBOR and Prime Rate margins are subject to reductions, based on
various tests of the Company's financial performance. Prime Rate interest is
payable quarterly in arrears. LIBOR interest is payable in arrears at the
earlier of (i) the end of the applicable interest period and (ii) quarterly.
LIBOR borrowings are available in 1-, 2-, 3- or 6-month interest periods.
The Revolving Credit Facility expires on January 21, 2004. The Tranche A,
B and C facilities will amortize semi-annually and mature 6, 7 and 7.75 years,
respectively, after January 21, 1998, the closing date of the New Credit
Facility.
The obligations of Fisher and the subsidiary borrowers under the New
Credit Facility are secured by substantially all assets of the Company and its
material domestic subsidiaries, a pledge of the stock of all domestic
subsidiaries, and a pledge of 65% of the stock of material foreign subsidiaries
which are direct subsidiaries of Fisher or one of its material domestic
subsidiaries. Obligations of each foreign subsidiary borrower are secured by a
pledge of 100% of the shares of such borrower. The obligations of Fisher and
the subsidiary borrowers are further guaranteed by Fisher and each material
domestic subsidiary of Fisher. As of December 31, 1997, after giving pro forma
effect to the Recapitalization and the financing therefor, the aggregate amount
of Senior Indebtedness of Fisher would have been approximately $469.7 million.
The New Credit Facility agreement contains customary covenants of the
Company, including, without limitation, restrictions on (i) indebtedness, (ii)
the sale of assets, (iii) mergers, acquisitions and other business
combinations, (iv) voluntary prepayment of certain debt of the Company, (v)
transactions with affiliates, (vi) capital expenditures and (vii) loans and
investments, as well as prohibitions on the payment of cash dividends to, or
the repurchase of redemption of stock from, shareholders, and various financial
covenants. Pursuant to the terms of the New Credit Facility, and subject to
applicable grace periods, in certain circumstances, Fisher will be in default
upon the non-payment of principal or interest when due under such agreement or,
upon the non-fulfillment of the covenants described above, certain changes in
control of the ownership of Fisher or various other defaults described therein.
If such a default occurs, the lenders under the New Credit Facility will be
entitled to take all actions permitted to be taken by a secured creditor under
the Uniform Commercial Code and to accelerate the amounts due under
56
<PAGE>
the New Credit Facility and may require all such amounts to be immediately paid
in full. Loans under the Term Facility are required to be prepaid with 50% of
excess cash flow (to be defined in the New Credit Facility and subject to
certain limits to be specified therein) and certain equity issuances of Fisher,
and 100% of net-cash proceeds of certain asset sales, certain insurance and
condemnation proceeds and certain debt issuances of Fisher.
7-1/8% Notes due 2005. Interest on the 7-1/8% Notes is payable semiannually
on June 15 and December 15. The 7-1/8% Notes mature on December 15, 2005. The
7-1/8% Notes are not entitled to any sinking fund and are redeemable, in whole
or in part, at the option of the Fisher at any time, at a redemption price
equal to the greater of (i) 100% of the principal amount of such notes and (ii)
the sum of the present values as of the date of redemption of all remaining
scheduled payments of principal and interest on such notes due on or after the
date of redemption, discounted on a semiannual basis at the relevant Treasury
rate plus 25 basis points. The 7-1/8% Notes constitute Senior Indebtedness under
the Indenture. Upon consummation of the Recapitalization, the 7-1/8% Notes were
equally and ratably secured with certain other Senior Indebtedness with respect
to certain collateral.
DESCRIPTION OF OTHER FINANCING
Receivables Securitization Facility. In connection with the
Recapitalization, Fisher entered into a five year Receivables Securitization
Facility pursuant to which a subsidiary of Fisher sold approximately $220
million of accounts receivable to a newly formed wholly-owned bankruptcy remote
special purpose subsidiary which in turn transfered $150 million of the
receivables to Park Avenue Receivables Corp ("PARCO"), a special purpose
corporation formed by The Chase Manhattan Bank solely for the purpose of
issuing commercial paper rated A-1/P-1 or higher. The Chase Manhattan Bank acts
as funding agent and with other commercial banks acceptable to PARCO provides
liquidity funding to PARCO for the purchase of the receivables from the
Company's receivables subsidiary. The proceeds from the Receivables
Securitization Facility were used to finance a portion of the conversion into
cash of shares of Fisher Common Stock and related fees and expenses associated
with the Recapitalization. The Receivables Securitization Facility carries an
effective interest rate of LIBOR plus 50 basis points. Excluding participation
in the liquidity facility, none of the parties participating in the debt or
equity financing, with the exception of Chase, are participating in the
Receivables Securitization Facility.
57
<PAGE>
DESCRIPTION OF THE NOTES
The New Notes offered hereby will be issued under an indenture (the
"Indenture"), dated as of January 21, 1998, by and among the Company and State
Street Bank and Trust Company, as Trustee (the "Trustee"). The Indenture will
be subject to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The following summary of the material provisions of the Indenture, which
has been filed as an exhibit to Fisher's Current Report on Form 8-K, dated
February 5, 1998, which report is incorporated by reference to the Registration
Statement of which this Prospectus forms a part, does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Indenture. The Indenture does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Trust Indenture Act, and to
all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
Trust Indenture Act, as in effect on the date of the Indenture. The definitions
of certain capitalized terms used in the following summary are set forth below
under "Certain Definitions." For purposes of this section, references to the
"Company" include only Fisher Scientific International Inc. and not its
subsidiaries.
The New Notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Indebtedness of the Company to
the extent set forth in the Indenture.
The Trustee will authenticate and deliver from time to time New Notes for
original issue only in exchange for a like principal amount of Old Notes.
The New Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the New Notes. The New
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar, which initially will be the Trustee's corporate trust office.
The Company may change any Paying Agent and Registrar without notice to holders
of the New Notes (the "Holders"). The Company will pay principal (and premium,
if any) on the New Notes at the Trustee's corporate office in New York, New
York. At the Company's option, interest may be paid at the Trustee's corporate
trust office or by check mailed to the registered address of Holders.
No service charge will be made for any transfer, exchange or redemption of
New Notes, except in certain circumstances for any tax or other governmental
charge that may be imposed in connection therewith.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Notes.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the New Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
Principal, Maturity and Interest
The New Notes will be limited in aggregate principal amount to
$400,000,000 and will mature on February 1, 2008. Interest on the New Notes
will accrue at the rate of 9% per annum and will be payable semiannually in
cash on each February 1 and August 1 commencing on August 1, 1998, to the
Persons who are registered Holders at the close of business on the January 15
and July 15 immediately preceding the applicable interest payment date.
Interest on the New Notes will accrue from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from January 21, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after the
consummation of the Exchange Offer. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The New Notes will not be entitled to the benefit of any mandatory sinking
fund.
Redemption
Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after
February 1, 2003, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on February 1 of
the year set forth below, plus, in each case, accrued interest to the date of
redemption:
58
<PAGE>
Redemption
Year Price
------ -----------
2003 ......................... 104.50%
2004 ......................... 103.00%
2005 ......................... 101.50%
2006 and thereafter .......... 100.00%
Optional Redemption upon Equity Offerings. At any time, or from time to
time, on or prior to February 1, 2001, the Company may, at its option, use the
net cash proceeds of one or more Equity Offerings (as defined below) to redeem
up to 40% of the aggregate principal amount of Notes originally issued at a
redemption price equal to 109% of the principal amount thereof plus accrued
interest to the date of redemption; provided that at least 60% of the original
principal amount of Notes remains outstanding immediately after any such
redemption (excluding any Notes owned by the Company). In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Company must
mail a notice of redemption no later than 60 days after the related Equity
Offering and must consummate such redemption within 90 days of the closing of
the Equity Offering. "Equity Offering" means a sale of Qualified Capital Stock
of the Company.
Optional Redemption upon Change of Control. At any time on or prior to
February 1, 2003, upon the occurrence of a Change of Control, the Company may,
at its option, redeem all but not less than all of the Notes, at a redemption
price equal to the sum of (i) 100% of the outstanding principal amount thereof
plus (ii) the Applicable Premium plus (iii) accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption. Notice of redemption of
the Notes pursuant to this paragraph shall be mailed to holders of the Notes
not more than 60 days and not less than 30 days following the occurrence of a
Change of Control.
Selection and Notice
In case of a partial redemption, selection of the Notes or portions
thereof for redemption shall be made by the Trustee by lot, pro rata or in such
manner as it shall deem appropriate and fair and in such manner as complies
with any applicable legal requirements; provided, however, that if a partial
redemption is made with the proceeds of an Equity Offering, selection of the
Notes or portion thereof for redemption shall be made by the Trustee only on a
pro rata basis, unless such method is otherwise prohibited. Notes may be
redeemed in part in multiples of $1,000 principal amount only. Notice of
redemption will be sent, by first class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption to each Holder
whose Notes are to be redeemed at the last address for such Holder then shown
on the registry books. If any Note is to be redeemed in part only, the notice
of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after any redemption
date, interest will cease to accrue on the Notes or part thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the redemption price pursuant to the Indenture.
Ranking of Notes
The indebtedness evidenced by the Notes is unsecured Senior Subordinated
Indebtedness of the Company, is subordinated in right of payment, as set forth
in the Indenture, to all existing and future Senior Indebtedness of the
Company, ranks pari passu in right of payment with all existing and future
Senior Subordinated Indebtedness of the Company and is senior in right of
payment to all existing and future Subordinated Obligations of the Company. The
Notes are also effectively subordinated to any Secured Indebtedness of the
Company to the extent of the value of the assets securing such Indebtedness,
and to all existing and future obligations and liabilities of the Company's
Subsidiaries. See "Risk Factors--Subordination of Notes; Asset Encumbrances."
However, payment from the money or the proceeds of U.S. government obligations
held in any defeasance trust described under "--Legal Defeasance and Covenant
Defeasance" below is not subordinated to any Senior Indebtedness or subject to
the restrictions described above if the deposit to such trust which is used to
fund such payment was permitted at the time of such deposit.
As of December 31, 1997, on a pro forma basis, after giving effect to the
Recapitalization and the financing therefor, Fisher would have had
approximately $469.7 million of Senior Indebtedness outstanding (excluding
unused commitments), all of which would have been Secured Indebtedness.
Although the Indenture contains limitations on the amount of additional
Indebtedness which the Company and its Restricted Subsidiaries may incur,
59
<PAGE>
under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness or
Secured Indebtedness. See "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness" below.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior in right of payment to the Notes in accordance with the provisions of
the Indenture. The Notes will in all respects rank pari passu in right of
payment with all other Senior Subordinated Indebtedness of the Company. The
Company has agreed in the Indenture that it will not incur, directly or
indirectly, any Indebtedness which is expressly subordinate in right of payment
to Senior Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness. Without limiting the foregoing, unsecured
Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness
merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, or
any other amount in respect of, the Notes or make any deposit pursuant to the
provisions described under "--Legal Defeasance and Covenant Defeasance" below
and may not otherwise purchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if any amount due in respect of any Senior
Indebtedness (including, without limitation, any amount due as a result of
acceleration of the maturity thereof by reason of default or otherwise) has not
been paid in full in cash or Cash Equivalents unless the default has been cured
or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash or Cash Equivalents. However, the
Company may pay the Notes without regard to the foregoing if the Company and
the Trustee receive written notice approving such payment from the
Representative of the holders of the Designated Senior Indebtedness with
respect to which the events set forth in the immediately preceding sentence
have occurred and are continuing.
In addition, during the continuance of any default (other than a payment
default described in the first sentence of the immediately preceding paragraph)
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration) or the expiration
of any applicable grace periods, the Company may not pay the Notes for a period
(a "Payment Blockage Period") commencing upon the receipt by the Trustee (with
a copy to the Company) of written notice (a "Blockage Notice") of such default
from the Representative of the holders of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such
Blockage Notice and all other defaults with respect to such Designated Senior
Indebtedness shall have been cured or shall have ceased to exist or (iii)
because such Designated Senior Indebtedness has been repaid in full in cash or
Cash Equivalents).
Notwithstanding the provisions described in the immediately preceding
paragraph, unless any payment default described in the first sentence of the
second immediately preceding paragraph has occurred and is then continuing, the
Company may resume payments on the Notes after the end of such Payment Blockage
Period, including any missed payments. Not more than one Blockage Notice may be
given in any consecutive 360-day period, irrespective of the number of defaults
with respect to Designated Senior Indebtedness during such period. However, if
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness other than the Bank Indebtedness, a
Representative of holders of Bank Indebtedness may give another Blockage Notice
within such period. In no event, however, may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in
the aggregate during any 360 consecutive day period.
Upon any payment or distribution of the assets or securities of the
Company to creditors upon a total or partial liquidation or dissolution or
reorganization or winding up of or similar proceeding relating to the Company
or its property or in a bankruptcy, insolvency, receivership or similar
proceeding relating to the Company or its property, or in an assignment for the
benefit of creditors or any marshalling of the assets and liabilities of the
Company, whether voluntary or involuntary, the holders of Senior Indebtedness
will be entitled to receive payment in full in cash or Cash Equivalents of the
Senior Indebtedness before the holders of the Notes are entitled to receive any
payment or distribution of any character and, until the Senior Indebtedness is
paid in full in cash or Cash Equivalents, any payment or distribution to which
holders of the Notes would be entitled but for the subordination provisions of
the Indenture will be made to holders of the Senior Indebtedness as their
interests may appear. If a payment or distribution is made to holders of the
Notes that due to the subordination provisions should not have been made to
them, such holders of the Notes are required to hold it in trust for the
holders of Senior Indebtedness and pay it over to them as their interests may
appear.
60
<PAGE>
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "--Events of Default" below.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until the earlier of five business days after
such holders or the Representative of the holders of Designated Senior
Indebtedness receive notice of such acceleration or the date of acceleration of
such Designated Senior Debt and, thereafter, may pay the Notes only if the
subordination provisions of the Indenture otherwise permit payment at that
time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the holders of the Notes, and
creditors of the Company who are not holders of Senior Indebtedness or of
Senior Subordinated Indebtedness (including the Notes) may recover less,
ratably, than holders of Senior Indebtedness and may recover more than the
holders of Senior Subordinated Indebtedness.
Change of Control
The Indenture provides that upon the occurrence of a Change of Control
Triggering Event, each Holder will have the right to require that the Company
purchase for cash all or a portion of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer"), at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued interest to the date
of purchase.
The Indenture provides that, prior to the mailing of the notice referred
to below, but in any event within 30 days following the date the Company
obtains actual knowledge of any Change of Control Triggering Event, the Company
covenants to (i) repay in full and terminate all commitments under the Bank
Indebtedness or offer to repay in full and terminate all commitments under all
Bank Indebtedness and to repay the Bank Indebtedness owed to each holder of
Bank Indebtedness which has accepted such offer or (ii) obtain the requisite
consents under the New Credit Facility to permit the repurchase of the Notes as
provided below. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase Notes
pursuant to the provisions described below. The Company's failure to comply
with this covenant shall constitute an Event of Default described in clause
(iv) and not in clause (ii) under "--Events of Default" below.
Within 30 days following the date upon which the Company obtains actual
knowledge that a Change of Control Triggering Event has occurred, the Company
must send, by first class mail, a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer.
Such notice shall state, among other things, the purchase date, which must be
no earlier than 30 days nor later than 45 days from the date such notice is
mailed, other than as may be required by law (the "Change of Control Payment
Date"). Holders electing to have a Note purchased pursuant to a Change of
Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
The definition of Change of Control includes a phrase relating to the
sale, lease, exchange or other transfer of "all or substantially all" of the
Company's assets as such phrase is defined in the Revised Model Business
Corporation Act. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise definition of the phrase
under applicable law. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of the
Company, and therefore it may be unclear as to whether a Change of Control has
occurred and whether the Holders have the right to require the Company to
repurchase such Notes.
61
<PAGE>
Neither the Board of Directors of the Company nor the Trustee may waive
the covenant relating to a Holder's right to redemption upon a Change of
Control Triggering Event. Restrictions in the Indenture described herein on the
ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness, to grant Liens on their properties, to make Restricted Payments
and to make Asset Sales may also make more difficult or discourage a takeover
of the Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial resources to
effect such redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of the Company or any of its Subsidiaries by
the management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
Certain Covenants
The Indenture contains, among others, the following covenants:
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock) on or in respect of shares
of Capital Stock of the Company to holders of such Capital Stock, (b) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the
Company or any warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock, other than the exchange of such Capital Stock for
Qualified Capital Stock, or (c) make any Investment (other than Permitted
Investments) in any other Person (each of the foregoing actions set forth in
clauses (a), (b) and (c) (other than the exceptions thereto) being referred to
as a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing, (ii) the Company is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant or (iii) the aggregate amount of Restricted Payments made subsequent
to the Issue Date shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to January 1,
1998 and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company (including Capital Stock issued upon the conversion of convertible
Indebtedness or in exchange for outstanding Indebtedness but excluding net cash
proceeds from the sale of Capital Stock to the extent used to repurchase or
acquire shares of Capital Stock of the Company pursuant to clause (2)(ii) of
the next succeeding paragraph); plus (y) without duplication of any amounts
included in clause (iii) (x) above, 100% of the aggregate net cash proceeds of
any equity contribution received by the Company from a holder of the Company's
Capital Stock; plus (z) to the extent that any Investment (other than a
Permitted Investment) that was made after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash received
with respect to such sale, liquidation or repayment of such Investment (less
the cost of such sale, liquidation or repayment, if any) and (B) the initial
amount of such Investment, but only to the extent not included in the
calculation of Consolidated Net Income. Any net cash proceeds included in the
foregoing clauses (iii)(x) or (iii)(y) shall not be included in clause (x)(A)
or clause (x)(B) of the definition of "Permitted Investments" to the extent
actually utilized to make a Restricted Payment under this paragraph.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date
62
<PAGE>
of declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no Event of Default shall have
occurred and be continuing as a consequence thereof, the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
(3) payments for the purpose of and in an amount equal to the amount required
to permit the Company to redeem or repurchase shares of its Capital Stock or
options in respect thereof, in each case in connection with the repurchase
provisions under employee stock option or stock purchase agreements or other
agreements to compensate management employees; provided that such redemptions
or repurchases pursuant to this clause (3) shall not exceed $15 million in the
aggregate after the Issue Date (which amount shall be increased by the amount
of any cash proceeds to the Company from (x) sales of its Capital Stock to
management employees subsequent to the Issue Date and (y) any "key-man" life
insurance policies which are used to make such redemptions or repurchases); (4)
the payment of fees and compensation as permitted under clause (i) of paragraph
(b) of the "Limitation on Transactions with Affiliates" covenant; (5) so long
as no Default or Event of Default shall have occurred and be continuing,
payments not to exceed $100,000 in the aggregate, to enable the Company to make
payments to holders of its Capital Stock in lieu of issuance of fractional
shares of its Capital Stock; (6) repurchases of Capital Stock deemed to occur
upon the exercise of stock options if such Capital Stock represents a portion
of the exercise price thereof; (7) Restricted Payments made pursuant to the
Merger Agreement; (8) the Company or any Restricted Subsidiary from making
payments in respect of any redemption, repurchase, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the Company or
options, stock appreciation or similar securities, in each case held by then
current or former officers, directors or employees of the Company or any of its
Subsidiaries (or their estates or beneficiaries under their estates) or by an
employee benefit plan, upon death, disability, retirement or termination of
employment, not to exceed $10 million in the aggregate after the Issue Date;
(9) repurchases of payment-in-kind preferred stock; provided that (i) such
repurchases do not exceed $15,000,000 in the aggregate over the life of the
Notes and (ii) such preferred stock repurchased shall have been issued on or
prior to the Issue Date; and (10) the Company or any Restricted Subsidiary from
purchasing all (but not less then all), excluding directors' qualifying shares,
of the Capital Stock or other ownership interests in a Subsidiary of the
Company which Capital Stock or other ownership interests were not theretofore
owned by the Company or a Subsidiary of the Company, such that after giving
effect to such purchase such Subsidiary becomes a Restricted Subsidiary of the
Company. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, (a) amounts expended (to the extent such expenditure is in
the form of cash or other property other than Qualified Capital Stock) pursuant
to clauses (1 ), (3), (8) and (9) of this paragraph shall be included in such
calculation, provided that such expenditures pursuant to clause (3) shall not
be included to the extent of cash proceeds received by the Company from any
"key man" life insurance policies, and (b) amounts expended pursuant to clauses
(2), (4), (5), (6), (7) and (10) shall be excluded from such calculation.
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of any such Indebtedness, (i) the Company may incur Indebtedness if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than 2.0 to 1.0 and (ii) any Restricted Subsidiary of the Company
may incur Indebtedness if on the date of the incurrence of such Indebtedness,
after giving effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio of the Company is greater than 3.0 to 1.0.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
entered into on terms that are fair and reasonable to, and in the best interests
of, the Company or such Restricted Subsidiary, as the case may be, as determined
in good faith by the Company's Board of Directors; provided, however, that for a
transaction or series of related transactions with an aggregate value of $5
million or more, at the Company's option (i) such determination shall
63
<PAGE>
be made in good faith by a majority of the disinterested members of the Board
of the Directors of the Company or (ii) the Board of Directors of the Company
or any such Restricted Subsidiary party to such Affiliate Transaction shall
have received a favorable opinion from a nationally recognized investment
banking firm that such Affiliate Transaction is fair from a financial point of
view to the Company or such Restricted Subsidiary; provided, further, that for
a transaction or series of related transactions with an aggregate value of $15
million or more, the Board of Directors of the Company shall have received a
favorable opinion from a nationally recognized investment banking firm that
such Affiliate Transaction is fair from a financial point of view to the
Company or such Restricted Subsidiary.
(b) The foregoing restrictions shall not apply to (i) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary of the Company as
determined in good faith by the Company's Board of Directors; (ii) transactions
exclusively between or among the Company and any of its Restricted Subsidiaries
or exclusively between or among such Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by the Indenture; (iii) transactions
effected as part of a Qualified Receivables Transaction; (iv) any agreement as
in effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (v) Restricted
Payments permitted by the Indenture; (vi) any Permitted Investment; (vii)
transactions permitted by, and complying with, the provisions of the covenant
described under "Merger, Consolidation and Sale of Assets"; (viii) any payment,
issuance of securities or other payments, awards or grants, in cash or
otherwise, pursuant to, or the funding of, employment arrangements and Plans
approved by the Board of Directors of the Company; (ix) the grant of stock
options or similar rights to employees and directors of the Company and its
Subsidiaries pursuant to Plans and employment contracts approved by the Board
of Directors of the Company; (x) loans or advances to officers, directors or
employees of the Company or its Restricted Subsidiaries not in excess of $5
million at any one time outstanding; (xi) the granting or performance of
registration rights under a written registration rights agreement approved by
the Board of Directors of the Company; (xii) transactions with Persons solely
in their capacity as holders of Indebtedness or Capital Stock of the Company or
any of its Restricted Subsidiaries, where such Persons are treated no more
favorably than holders of Indebtedness or Capital Stock of the Company or such
Restricted Subsidiary generally; (xiii) any agreement to do any of the
foregoing; (xiv) the payment, on a quarterly basis, of management fees to THL
Co. and/or any Affiliate of THL Co. in accordance with the management
arrangements to be entered into in January 1998 between THL Co. and/or any
Affiliate of THL Co. and Fisher in an aggregate amount (for all such Persons
taken together) not to exceed $250,000 in any fiscal quarter of the Company,
(xv) reimbursement of THL Co. and/or any Affiliate of THL Co. for their
reasonable out-of-pocket expenses incurred by them in connection with
performing management services for the Company and its Subsidiaries; (xvi) the
payment of one time fees to THL Co. and/or Affiliates of THL Co. in connection
with each acquisition of a company or a line of business by the Company or its
Subsidiaries, such fees to be payable at the time of each such acquisition and
not to exceed 1% of the aggregate consideration paid by the Company and its
Subsidiaries for any such acquisition; and (xvii) transactions entered into on
the Issue Date in connection with the Recapitalization and the financing
therefor.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens
(other than Permitted Liens) of any kind against or upon any of their
respective property or assets, or any proceeds, income or profit therefrom
which secure Senior Subordinated Indebtedness or Subordinated Obligations,
unless (i) in the case of Liens securing Subordinated Obligations, the Notes
are secured by a Lien on such property, assets, proceeds, income or profit that
is senior in priority to such Liens and (ii) in the case of Liens securing
Senior Subordinated Indebtedness, the Notes are equally and ratably secured by
a Lien on such property, assets, proceeds, income or profit.
Prohibition on Incurrence of Senior Subordinated Debt. Neither the Company
nor any Subsidiary Guarantor will incur or suffer to exist Indebtedness that is
senior in right of payment to the Notes or such Subsidiary Guarantor's
Guarantee and subordinate in right of payment to any other Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
64
<PAGE>
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary of the Company; or (c) transfer any of its property or
assets to the Company or any other Restricted Subsidiary of the Company, except
for such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) the Indenture; (3) non-assignment provisions of any
contract or any lease entered into in the ordinary course of business; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to the Company or any Restricted Subsidiary of the Company, or
the properties or assets of any such Person, other than the Person or the
properties or assets of the Person so acquired; provided, however, that such
Acquired Indebtedness was not incurred in connection with, or in anticipation
or contemplation of an acquisition by the Company or the Restricted Subsidiary;
(5) agreements existing on the Issue Date (including, without limitation, the
New Credit Facility and the Merger Agreement); (6) restrictions on the transfer
of assets subject to any Lien permitted under the Indenture imposed by the
holder of such Lien; (7) restrictions imposed by any agreement to sell assets
permitted under the Indenture to any Person pending the closing of such sale;
(8) any agreement or instrument governing Capital Stock of any Person that is
acquired after the Issue Date; (9) Indebtedness or other contractual
requirements of a Receivables Entity in connection with a Qualified Receivables
Transaction; provided that such restrictions apply only to such Receivables
Entity and such Restricted Subsidiary is engaged in the Qualified Receivables
Transaction; or (10) an agreement effecting a refinancing, replacement or
substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above; provided, however, that
the provisions relating to such encumbrance or restriction contained in any
such refinancing, replacement or substitution agreement are no less favorable
to the Company or the Holders in any material respect as determined by the
Board of Directors of the Company than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4) or (5).
Limitation on Preferred Stock of Subsidiaries. The Company will not permit
any of its Restricted Subsidiaries to issue any Preferred Stock (other than to
the Company or to a Restricted Subsidiary of the Company) or permit any Person
(other than the Company or a Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or a series of related transactions, consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person or Persons
unless (i) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person is a corporation existing under the
laws of the United States, any state thereof or the District of Columbia and
such surviving Person shall expressly assume all the obligations of the Company
under the Notes and the Indenture; (ii) immediately after giving effect to such
transaction (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction and the other
adjustments referred to in the definition of "Consolidated Fixed Charge
Coverage Ratio"), the Company or the surviving Person is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant; (iii) immediately before and immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be incurred
in connection with the transaction), no Default or Event of Default shall have
occurred and be continuing; and (iv) the Company has delivered to the Trustee
an officers' certificate and opinion of counsel, each stating that such
consolidation, merger or transfer complies with the Indenture, that the
surviving Person agrees to be bound thereby and by the Notes and the
Registration Rights Agreement, and that all conditions precedent in the
Indenture relating to such transaction have been satisfied. For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, the Capital
Stock of which constitutes all or substantially all of the properties and
assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company. Notwithstanding
the foregoing clauses (ii) and (iii) of the preceding sentence, (a) any
Restricted Subsidiary of the Company may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and (b) the
Company may merge with an Affiliate that is (x) a corporation that has no
material assets or liabilities and which was incorporated solely for the
purpose of reincorporating the Company in another jurisdiction or (y) a
Restricted Subsidiary of the Company so long as all assets of the Company and
the Restricted Subsidiaries immediately prior to such transaction are owned by
such Restricted Subsidiary and its Restricted Subsidiaries immediately after
the consummation thereof.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, the surviving entity shall succeed
65
<PAGE>
to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors); (ii) at least 75% of the consideration
received by the Company or such Restricted Subsidiary, as the case may be, from
such Asset Sale shall be cash or Cash Equivalents and is received at the time
of such disposition; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet or
in the notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets and from which the Company and its
Restricted Subsidiaries are unconditionally released and (y) any notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are promptly, but in no event more than 60 days after receipt,
converted by the Company or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents received) shall be
deemed to be cash for purposes of this provision; and (iii) upon the
consummation of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 365 days of receipt thereof either (A) to prepay Senior
Indebtedness and, in the case of any Senior Indebtedness under any revolving
credit facility, effect a permanent reduction in the availability under such
revolving credit facility, (B) to reinvest in Productive Assets, or (C) a
combination of prepayment and investment permitted by the foregoing clauses
(iii) (A) and (iii) (B). On the 366th day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (iii) (A), (iii) (B) and (iii) (C) of the
immediately preceding sentence (each, a "Net Proceeds Offer Trigger Date"),
such aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date as permitted in clauses (iii) (A),
(iii) (B) and (iii) (C) of the immediately preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase for cash (the "Net Proceeds Offer") on
a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than
45 days following the applicable Net Proceeds Offer Trigger Date, from all
Holders on a pro rata basis at least that amount of Notes equal to the Note
Offer Amount at a price in cash equal to 100% of the principal amount of the
Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the
date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant. Any
offer to purchase with respect to Other Debt shall be made and consummated
concurrently with any Net Proceeds Offer.
"Other Debt" shall mean other Indebtedness of the Company that ranks pari
passu with the Notes and requires that an offer to purchase such Other Debt be
made upon consummation of an Asset Sale.
"Note Offer Amount" means (i) if an offer to purchase Other Debt is not
being made, the amount of the Net Proceeds Offer Amount and (ii) if an offer to
purchase Other Debt is being made, an amount equal to the product of (x) the
Net Proceeds Offer Amount and (y) a fraction the numerator of which is the
aggregate amount of Notes tendered pursuant to such offer to purchase and the
denominator of which is the aggregate amount of Notes and Other Debt tendered
pursuant to such offer to purchase.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$10 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Restricted Subsidiaries aggregates at least $10 million, at
which time the Company or such Restricted Subsidiary shall apply all Net Cash
Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred
to make a Net Proceeds Offer (the first date the aggregate of all such deferred
Net Proceeds Offer Amounts is equal to $10 million or more shall be deemed to
be a "Net Proceeds Offer Trigger Date").
Notwithstanding the immediately preceding paragraphs of this covenant, the
Company and its Restricted Subsidiaries will be permitted to consummate an
Asset Sale without complying with such paragraphs to the extent
66
<PAGE>
(i) at least 75% of the consideration for such Asset Sale constitutes
Productive Assets and (ii) such Asset Sale is for at least fair market value
(as determined in good faith by the Company's Board of Directors); provided
that any consideration not constituting Productive Assets received by the
Company or any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds and shall be subject to the provisions of the two preceding
paragraphs; provided, that at the time of entering into such transaction or
immediately after giving effect thereto, no Default or Event of Default shall
have occurred or be continuing or would occur as a consequence thereof.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A
Net Proceeds Offer shall remain open for a period of 20 business days or such
longer period as may be required by law. To the extent that the aggregate
amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net
Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer
Amount for general corporate purposes. Upon completion of any such Net Proceeds
Offer, the Net Proceeds Offer Amount shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Guarantees by Restricted Subsidiaries. The Company will not
permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee
the payment of any Indebtedness of the Company, other than guarantees incurred
pursuant to clause (ii) of the definition of "Permitted Indebtedness," unless
such Restricted Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Restricted Subsidiary's guarantee of the
Notes (a "Guarantee"), such Guarantee to be a senior subordinated unsecured
obligation of such Restricted Subsidiary; provided that if any Subsidiary
Guarantor is released from its guarantee with respect to Indebtedness
outstanding under the New Credit Facility, such Subsidiary Guarantor shall
automatically be released from its obligations as a Subsidiary Guarantor.
Neither the Company nor any such Subsidiary Guarantor shall be required to make
a notation on the Notes to reflect any such Guarantee. Nothing in this covenant
shall be construed to permit any Restricted Subsidiary of the Company to incur
Indebtedness otherwise prohibited by the "Limitation on Incurrence of
Additional Indebtedness" covenant.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar, related or ancillary
to the businesses in which the Company and its Restricted Subsidiaries are
engaged on the Issue Date.
Events of Default
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest (including liquidated damages, if any, under
the Registration Rights Agreement) on any Notes when the same becomes due and
payable and the default continues for a period of 30 days (whether or not such
payment shall be prohibited by the subordination provisions of the Indenture);
(ii) the failure to pay the principal on any Notes, when such principal becomes
due and payable, at maturity, upon redemption or otherwise (including the
failure to make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or a Net Proceeds Offer) (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture); (iii) a default
in the observance or performance of the covenant set forth under "Certain
Covenants--Merger, Consolidation and Sale of Assets" above; (iv) a default in
the observance or performance of any other covenant or agreement contained in
the Indenture which default continues for a period of 30 days after the Company
receives written notice specifying the default (and demanding that such default
be remedied) from the Trustee or the Holders of at least 25% of the outstanding
principal amount of the Notes; (v) the failure to pay at final maturity (giving
effect to any applicable grace periods and any extensions thereof) the
principal amount of any Indebtedness of the Company or any
67
<PAGE>
Restricted Subsidiary (other than a Receivables Entity) of the Company, or the
acceleration of the final stated maturity of any such Indebtedness if the
aggregate principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay principal
at final maturity or which has been accelerated, aggregates $15 million or more
at any time; (vi) one or more judgments in an aggregate amount in excess of $15
million shall have been rendered against the Company or any of its Significant
Subsidiaries and such judgments remain undischarged, unpaid and unstayed for a
period of 60 days after such judgment or judgments become final and
non-appealable, and in the event such judgment is covered by insurance, an
enforcement proceeding has been commenced by any creditor upon such judgment,
which is not promptly stayed; and (vii) certain events of bankruptcy affecting
the Company or any of its Significant Subsidiaries.
Upon the happening of any Event of Default specified in the Indenture, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the Notes to be due
and payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration," and the
same shall become immediately due and payable. If an Event of Default with
respect to bankruptcy proceedings of the Company occurs and is continuing, then
such amount shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holder of Notes.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) or (vii) of the
description above of Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. The holders of a majority in principal amount of the
Notes may waive any existing Default or Event of Default under the Indenture,
and its consequences, except a default in the payment of the principal of or
interest on any Notes.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of the Notes to receive payments in
respect of the principal of, premium, if any, and interest on the Notes when
such payments are due, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payments, (iii) the rights, powers, trust, duties and immunities of the Trustee
and the Company's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, reorganization and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
68
<PAGE>
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Notes cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the holders of the Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case it such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default with respect to the Indenture resulting from the incurrence of
Indebtedness, all or a portion of which will be used to defease the Notes
concurrently with such incurrence); (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under, the Indenture or any other material 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; (vi) the Company shall have delivered to
the Trustee an officers' certificate stating that the deposit was not made by
the Company with the intent of preferring the holders of the Notes over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; (vii) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with; (viii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness of the Company other than the Notes and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 91st day following the deposit and that no Holder of the Notes is an
insider of the Company, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (ix) certain other customary conditions precedent are satisfied.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under the Indenture by the
Company; and (iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
Modification of the Indenture
From time to time, the Company and the Trustee, without the consent of the
Holders of the Notes, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such
change does not, in the opinion of the Trustee, adversely affect the rights of
any of the Holders in any material respect. In formulating its opinion on such
matters, the Trustee will be entitled to rely on such evidence as it deems
69
<PAGE>
appropriate, including, without limitation, solely on an opinion of counsel.
Other modifications and amendments of the Indenture may be made with the
consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture, except that, without the consent
of each holder of the Notes affected thereby, no amendment may: (i) reduce the
amount of Notes whose holders must consent to an amendment; (ii) reduce the
rate of or change or have the effect of changing the time for payment of
interest, including defaulted interest, on any Notes; (iii) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make
any Notes payable in money other than that stated in the Notes; (v) make any
change in provisions of the Indenture protecting the right of each holder of a
Note to receive payment of principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment, or permitting
holders of a majority in principal amount of the Notes to waive Defaults or
Events of Default (other than Defaults or Events of Default with respect to the
payment of principal of or interest on the Notes); (vi) amend, change or modify
in any material respect the obligation of the Company to make and consummate a
Change of Control Offer or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto; or (vii) modify the
subordination provisions (including the related definitions) of the Indenture
to adversely affect the holders of Notes in any material respect. Any amendment
or modification of the subordination provisions of the Indenture that is
adverse to any Senior Indebtedness outstanding at the time shall not be
effective as to the holders of such Senior Indebtedness without the written
consent of such holders.
Additional Information
The Indenture provides that the Company will deliver to the Trustee within
15 days after the filing of the same with the Commission, copies of the
quarterly and annual reports and of the information, documents and other
reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company
will also comply with the other provisions of the Trust Indenture Act [sec]
314(a).
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the definition of other terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness (i) of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or (ii) assumed in connection with the acquisition of assets
from such Person, in each case whether or not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition. Acquired Indebtedness
shall be deemed to have been incurred, with respect to clause (i) of the
preceding sentence, on the date such Person becomes a Restricted Subsidiary of
the Company and, with respect to clause (ii) of the preceding sentence, on the
date of consummation of such acquisition of assets.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the foregoing, no Person (other than the Company or
any Subsidiary of the Company) in whom a Receivables Entity makes an Investment
in connection with a Qualified Receivables Transaction shall be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"all or substantially all" shall have the meaning given such phrase in the
Revised Model Business Corporation Act.
"Applicable Premium" means, with respect to a Note, the greater of (i)
1.0% of the then outstanding principal amount of such Note or (ii) the excess
of (A) the present value of the required interest and principal payments due on
such Note, computed using a discount rate equal to the Treasury Rate plus 50
basis points, over (B) the then
70
<PAGE>
outstanding principal amount of such Note; provided that in no event will the
Applicable Premium exceed the amount of the applicable redemption price upon an
optional redemption less 100%, at any time on or after February 1, 2003.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
the Company of (a) any Capital Stock of any Restricted Subsidiary of the
Company; or (b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) any transaction or
series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration of less than $5 million, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted under "Merger, Consolidation and
Sale of Assets," (iii) the sale or discount, in each case without recourse, of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof, (iv) the factoring of
accounts receivable arising in the ordinary course of business pursuant to
arrangements customary in the industry, (v) the licensing of intellectual
property, (vi) disposals or replacements of obsolete equipment in the ordinary
course of business, (vii) the sale, lease, conveyance, disposition or other
transfer by the Company or any Restricted Subsidiary of assets or property in
transactions constituting Investments that are not prohibited under the
"Limitation on Restricted Payments" covenant, (viii) sales of accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" to a Receivables Entity, (ix) transfers of
accounts receivable and related assets of the type specified in the definition
of "Qualified Receivables Transaction" (or a fractional undivided interest
therein) by a Receivables Entity in a Qualified Receivables Transaction, (x)
leases or subleases to third persons not interfering in any material respect
with the business of the Company or any of its Restricted Subsidiaries and (xi)
the sale, issuance or transfer of Capital Stock representing up to 30% of the
fully-diluted equity ownership of one or more of (a) Fisher Technology Group,
(b) UniKix Technologies, (c) Electronic Commerce Division and (d) SPS to one or
more of their respective officers, directors or employees in connection with
the compensation of such employees. For the purposes of clause (viii), Purchase
Money Notes shall be deemed to be cash.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable under or in respect of the New
Credit Facility and any related notes, collateral documents, letters of credit
and guarantees, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary of the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, indemnities, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of corporate stock, including each class of common stock
and preferred stock of such Person and (ii) with respect to any Person that is
not a corporation, any and all partnership or other equity interests of such
Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United
71
<PAGE>
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances (or, with respect
to foreign banks, similar instruments) maturing within one year from the date
of acquisition thereof issued by any bank organized under the laws of the
United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $200 million; (v) certificates of
deposit or bankers' acceptances or similar instruments maturing within one year
from the date of acquisition thereof issued by any foreign bank that is a
lender under the New Credit Facility having at the date of acquisition thereof
combined capital and surplus of not less than $500 million; (vi) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with any bank meeting
the qualifications specified in clause (iv) or clause (v) above; and (vii)
investments in money market funds which invest substantially all their assets
in securities of the types described in clauses (i) through (vi) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons (other than one or more
Permitted Holders) for purposes of Section 13(d) of the Exchange Act (a
"Group"), together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of the Indenture); (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than one or more Permitted Holders) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing 50% or more of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Change of Control Triggering Event" means the occurrence of a Change of
Control and the failure of the Notes to have a Minimum Rating on the 30th day
after the occurrence of such Change of Control.
"Company" means Fisher Scientific International Inc., a Delaware
corporation.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period, (B) Consolidated Interest Expense, (C) Consolidated
Non-cash Charges, (D) cash charges attributable to the exercise of employee
options vesting upon the consummation of the Recapitalization and (E) for any
four quarter period that includes one or more fiscal quarters of fiscal 1997 or
1998, cash restructuring or nonrecurring charges, in an aggregate amount not to
exceed $20 million.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof) occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period, (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (including
pro
72
<PAGE>
forma adjustments for cost savings ("Cost Savings Adjustments") that the
Company reasonably believes in good faith could have been achieved during the
Four Quarter Period as a result of such acquisition or disposition (provided
that both (A) such cost savings were identified and quantified in an Officers'
Certificate delivered to the Trustee at the time of the consummation of the
acquisition or disposition and (B) with respect to each acquisition or
disposition completed prior to the 90th day preceding such date of
determination, actions were commenced or initiated by the Company within 90
days of such acquisition or disposition to effect such cost savings identified
in such Officers' Certificate and with respect to any other acquisition or
disposition, such Officers' Certificate sets forth the specific steps to be
taken within the 90 days after such acquisition or disposition to accomplish
such cost savings) attributable to the assets which are the subject of the
Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability
for any such Indebtedness or Acquired Indebtedness) occurred on the first day
of the Four Quarter Period, (iii) with respect to any such Four Quarter Period
commencing prior to the Recapitalization, the Recapitalization (including any
Cost Savings Adjustments), which shall be deemed to have taken place on the
first day of such Four Quarter Period, and (iv) any asset sales or asset
acquisitions (including any Consolidated EBITDA (including any Cost Savings
Adjustments) attributable to the assets which are the subject of the asset
acquisition or asset sale during the Four Quarter Period) that have been made
by any Person that has become a Restricted Subsidiary of the Company or has
been merged with or into the Company or any Restricted Subsidiary of the
Company during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date that
would have constituted Asset Sales or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary of the Company or
subsequent to such Person's merger into the Company, as if such asset sale or
asset acquisition (including the incurrence, assumption or liability for any
Indebtedness or Acquired Indebtedness in connection therewith) occurred on the
first day of the Four Quarter Period; provided that to the extent that clause
(ii) or (iv) of this sentence requires that pro forma effect be given to an
asset sale or asset acquisition, such pro forma calculation shall be based upon
the four full fiscal quarters immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed of for which financial information is available. If such Person or any
of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness
of a third Person, the preceding sentence shall give effect to the incurrence
of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the Transaction Date will be deemed to have been in effect during
the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs relating to the
Recapitalization and the financing therefor or relating to retired or existing
Indebtedness and amortization or write-off of customary debt issuance costs
relating to future Indebtedness incurred in the ordinary course of business)
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
Federal, state and local tax rate of such Person expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (i) the aggregate of all cash and
non-cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis
in conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
73
<PAGE>
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $5 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP, (b) gains and losses due solely to fluctuations in
currency values and the related tax effects according to GAAP, (c) items
classified as extraordinary, unusual or nonrecurring gains and losses, and the
related tax effects according to GAAP, (d) the net income (or loss) of any
Person acquired in a pooling of interests transaction accrued prior to the date
it becomes a Restricted Subsidiary of the Company or is merged or consolidated
with the Company or any Restricted Subsidiary of the Company, (e) the net
income of any Restricted Subsidiary of the Company to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is restricted by contract, operation of law or otherwise, (f)
the net loss of any Person other than a Restricted Subsidiary of the Company,
(g) the net income of any Person, other than a Restricted Subsidiary, except to
the extent of cash dividends or distributions paid to the Company or a
Restricted Subsidiary of the Company by such Person unless, in the case of a
Restricted Subsidiary of the Company who receives such dividends or
distributions, such Restricted Subsidiary is subject to clause (e) above, (h)
one time non-cash compensation charges, including any arising from existing
stock options resulting from any merger or recapitalization transaction, and
(i) bonus payments to be paid to senior management of the Company following the
consummation of the Merger (but no later than March 31, 1998) in an aggregate
amount not to exceed $10 million.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
require an accrual of or a reserve for cash charges for any future period).
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date, (ii) was nominated for election or elected to such
Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of a Permitted Holder or was nominated by a
Permitted Holder or any designees of a Permitted Holder on the Board of
Directors.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness or another writing as
"Designated Senior Indebtedness" for purposes of the Indenture.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event (other than an event which would constitute a Change of Control
Triggering Event), matures (excluding any maturity as the result of an optional
redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof (except, in each case, upon the occurrence of a Change of
Control Triggering Event) on or prior to the final maturity date of the Notes.
"fair market value" means, unless otherwise specified, with respect to any
asset or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
74
<PAGE>
"fiscal 1998" means the year ended December 31, 1998.
"Foreign Subsidiary" means a Restricted Subsidiary of the Company (i) that
is organized in a jurisdiction other than the United States of America or a
state thereof or the District of Columbia and (ii) with respect to which at
least 90% of its sales (as determined in accordance with GAAP) are generated by
operations located in jurisdictions outside the United States of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Indebtedness" means with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business), (v) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any lien on any property or asset of such Person but
which obligations are not assumed by such Person, the amount of such obligation
being deemed to be the lesser of the fair market value of such property or
asset or the amount of the obligation so secured, (viii) all obligations under
currency swap agreements and interest swap agreements of such Person and (ix)
all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in
good faith by the Board of Directors of the issuer of such Disqualified Capital
Stock and (y) any transfer of accounts receivable or other assets which
constitute a sale for purposes of GAAP shall not constitute Indebtedness
hereunder.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means, with respect to any
Person, any direct or indirect loan or other extension of credit (including,
without limitation, a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, such other Person. "Investment" shall
exclude extensions of trade credit by the Company and its Restricted
Subsidiaries on commercially reasonable terms in accordance with normal trade
practices of the Company or such Restricted Subsidiary, as the case may be. For
the purposes of the "Limitation on Restricted Payments" covenant, (i) the
Company shall be deemed to have made an "Investment" equal to the fair market
value of the net assets of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and the
aggregate amount of Investments made on the Issue Date shall exclude (to the
extent the designation as an Unrestricted Subsidiary was included as a
Restricted Payment) the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary, not to exceed the amount of the Investment deemed made
at the date of designation thereof as an Unrestricted Subsidiary, and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, writedowns or write-offs with respect
75
<PAGE>
to such Investment, reduced by the payment of dividends or distributions
(including tax sharing payments) in connection with such Investment or any
other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts
shall reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% (or 80%
in the case of clause (ix) of the definition of "Permitted Investments") of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted
Subsidiary not sold or disposed of.
"Investors" means one or more of (i) Merrill Lynch, Pierce, Fenner & Smith
Incorporated, (ii) Chase Equity Associates, L.P., (iii) DLJ Merchant Banking,
L.P., (iv) members of management of the Company and (v) any Affiliate of any of
the foregoing.
"Issue Date" means January 21, 1998, the date of original issuance of the
Old Notes.
"Joint Venture" means a corporation, partnership or other business entity,
other than a Subsidiary of the Company, engaged or proposed to be engaged in
the same or a similar line of business as the Company in which the Company
owns, directly or indirectly, not less than 30% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers and trustees thereof, with the balance of the
ownership interests being held by one or more investors.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Merger Agreement" means the Second Amended and Restated Plan of Merger
dated as of November 14, 1997 by and between FSI Merger Corp. and the Company.
"Minimum Rating" means (i) a rating of at least BBB- (or equivalent
successor rating) by S&P and (ii) a rating of at least Baa3 (or equivalent
successor rating) by Moody's.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Subsidiaries from such Asset Sale net of
(a) out-of-pocket expenses and fees relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions), (b) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements, (c) repayment of Senior Indebtedness that is
required to be repaid in connection with such Asset Sale, (d) any portion of
cash proceeds which the Company determines in good faith should be reserved for
post-closing adjustments, it being understood and agreed that on the day that
all such post-closing adjustments have been determined, the amount (if any) by
which the reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its Subsidiaries
shall constitute Net Cash Proceeds on such date; provided that, in the case of
the sale by the Company of an asset constituting an Investment made after the
Issue Date (other than a Permitted Investment), the "Net Cash Proceeds" in
respect of such Asset Sale shall not include the lesser of (x) the cash
received with respect to such Asset Sale and (y) the initial amount of such
Investment, less, in the case of clause (y), all amounts (up to an amount not
to exceed the initial amount of such Investment) received by the Company with
respect to such Investment, whether by dividend, sale, liquidation or
repayment, in each case prior to the date of such Asset Sale.
"New Credit Facility" means the credit agreement dated as of January 21,
1998, among the Company, the other borrowers thereto from time to time, if any,
the lenders party thereto from time to time and The Chase Manhattan Bank, as
administrative agent, Merrill Lynch Capital Corporation, as syndication agent
and DLJ Capital Funding, Inc. as documentation agent, together with the related
documents thereto (including, without limitation, any guarantee agreements,
promissory notes and collateral documents), in each case as such agreements may
be
76
<PAGE>
amended, supplemented or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid or extended from time to
time (whether with the original agents and lenders or other agents and lenders
or otherwise, and whether provided under the original New Credit Facility or
one or more other credit agreements or otherwise) including, without
limitation, to increase the amount of available borrowings thereunder or to add
Restricted Subsidiaries as additional borrowers or guarantors or otherwise.
"Permitted Holder" means and includes (i) the Principal or any of its
Affiliates, (ii) the Investors or any of their Affiliates, (iii) any
corporation the outstanding voting power of the capital stock of which is
beneficially owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of the voting power of
the capital stock of the Company, (iii) any Plan, (iv) any underwriter during
the period engaged in a firm commitment underwriting on behalf of the Company
with respect to the shares of capital stock being underwritten or (v) the
Company or any Subsidiary of the Company.
"Permitted Indebtedness" means, without duplication, (i) the Notes, (ii)
Indebtedness incurred pursuant to the New Credit Facility in an aggregate
principal amount at any time outstanding not to exceed $469.2 million less (A)
the amount of all mandatory principal payments actually made by the Company in
respect of term loans thereunder (excluding any such payments to the extent
refinanced at the time of payment under a New Credit Facility) and (B) in the
case of a revolving facility, reduced by any required permanent repayments
actually made (which are accompanied by a corresponding permanent commitment
reduction) thereunder (excluding any such repayments and commitment reductions
to the extent refinanced and replaced at the time under a New Credit Facility),
(iii) Indebtedness of Foreign Subsidiaries incurred solely for working capital
purposes of such Foreign Subsidiaries, (iv) other Indebtedness of the Company
and its Restricted Subsidiaries outstanding on the Issue Date reduced by the
amount of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon, (v) Interest Swap Obligations of
the Company or any of its Restricted Subsidiaries covering Indebtedness of the
Company or any of its Restricted Subsidiaries; provided that any Indebtedness
to which any such Interest Swap Obligations correspond is otherwise permitted
to be incurred under the Indenture; provided, further, that such Interest Swap
Obligations are entered into, in the judgment of the Company, to protect the
Company and its Restricted Subsidiaries from fluctuation in interest rates on
their respective outstanding Indebtedness, (vi) Indebtedness of the Company or
any of its Restricted Subsidiaries under Currency Agreements entered into, in
the judgment of the Company, to protect the Company or such Restricted
Subsidiary from foreign currency exchange rates, (vii) intercompany
Indebtedness owed by any Restricted Subsidiary of the Company to the Company or
any Restricted Subsidiary of the Company or by the Company to any Restricted
Subsidiary, (viii) Acquired Indebtedness of the Company or any Restricted
Subsidiary of the Company to the extent the Company could have incurred such
Indebtedness in accordance with the "Limitation on Incurrence of Additional
Indebtedness" covenant on the date such Indebtedness became Acquired
Indebtedness; provided that, in the case of Acquired Indebtedness of a
Restricted Subsidiary of the Company, such Acquired Indebtedness was not
incurred in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company, (ix) Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or other similar instrument inadvertently drawn against insufficient
funds in the ordinary course of business; provided that such Indebtedness is
extinguished within five business days of its incurrence, (x) any refinancing,
modification, replacement, renewal, restatement, refunding, deferral,
extension, substitution, supplement, reissuance or resale of existing or future
Indebtedness, including any additional Indebtedness incurred to pay interest or
premiums required by the instruments governing such existing or future
Indebtedness as in effect at the time of issuance thereof ("Required Premiums")
and fees in connection therewith; provided that any such event shall not (1)
result in an increase in the aggregate principal amount of Permitted
Indebtedness (except to the extent such increase is a result of a simultaneous
incurrence of additional Indebtedness (A) to pay Required Premiums and related
fees or (B) otherwise permitted to be incurred under the Indenture) of the
Company and its Restricted Subsidiaries and (2) create Indebtedness with a
Weighted Average Life to Maturity at the time such Indebtedness is incurred
that is less than the Weighted Average Life to Maturity at such time of the
Indebtedness being refinanced, modified, replaced, renewed, restated, refunded,
deferred, extended, substituted, supplemented, reissued or resold (except that
this subclause (2) will not apply in the event the Indebtedness being
refinanced, modified, replaced, renewed, restated, refunded, deferred,
extended, substituted, supplemented, reissued or resold was originally incurred
in reliance upon clause (vii) or (xvi) of this definition); provided that no
Restricted Subsidiary of the Company may refinance any Indebtedness pursuant to
this clause (x) other than its own Indebtedness, (xi) Indebtedness (including
Capitalized Lease Obligations) incurred by the Company or any Restricted
Subsidiary to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or the
77
<PAGE>
Capital Stock of any Person owning such assets) in an aggregate principal
amount outstanding not to exceed $30 million at the time of any incurrence
thereof (which amount shall be deemed not to include any such Indebtedness
incurred in whole or in part under the New Credit Facility to the extent
permitted by clause (ii) above), (xii) the incurrence by a Receivables Entity
of Indebtedness in a Qualified Receivables Transaction that is not recourse to
the Company or any Restricted Subsidiary of the Company (except for Standard
Securitization Undertakings), (xiii) Indebtedness incurred by the Company or
any of its Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business,
including, without limitation, letters of credit in respect of workers'
compensation claims or self-insurance, or other Indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims, (xiv)
Indebtedness arising from agreements of the Company or a Restricted Subsidiary
of the Company providing for indemnification, adjustment of purchase price,
earn out or other similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Restricted
Subsidiary of the Company, other than guarantees of Indebtedness incurred by
any Person acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition, provided that the
maximum assumable liability in respect of all such Indebtedness shall at no
time exceed the gross proceeds actually received by the Company and its
Restricted Subsidiaries in connection with such disposition, (xv) obligations
in respect of performance and surety bonds and completion guarantees provided
by the Company or any Restricted Subsidiary of the Company in the ordinary
course of business, (xvi) Indebtedness consisting of guarantees (x) by the
Company of Indebtedness, leases and any other obligation or liability permitted
to be incurred under the Indenture by Restricted Subsidiaries of the Company,
and (y) subject to "Limitation on Guarantees by Restricted Subsidiaries," by
Restricted Subsidiaries of the Company of Indebtedness, leases and any other
obligation or liability permitted to be incurred under the Indenture by the
Company or other Restricted Subsidiaries of the Company, and (xvii) additional
Indebtedness of the Company or any Restricted Subsidiary in an aggregate
principal amount not to exceed $20 million at any one time outstanding (which
amount should not be deemed to include any such Indebtedness incurred in whole
or in part under the New Credit Facility to the extent permitted by clause (ii)
above).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Restricted Subsidiary of the
Company (whether existing on the Issue Date or created thereafter) and
Investments in the Company by any Restricted Subsidiary of the Company; (ii)
cash and Cash Equivalents; (iii) Investments existing on the Issue Date and
Investments made on the Issue Date pursuant to the Merger Agreement; (iv) loans
and advances to employees, officers and directors of the Company and its
Restricted Subsidiaries not in excess of $1 million at any one time
outstanding; (v) accounts receivable owing to the Company or any Restricted
Subsidiary created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms; provided however,
that such trade terms may include such concessionary trade terms as the Company
or such Restricted Subsidiary deems reasonable under the circumstances; (vi)
Currency Agreements and Interest Swap Obligations entered into by the Company
or any of its Restricted Subsidiaries for bona fide business reasons and not
for speculative purposes, and otherwise in compliance with the Indenture; (vii)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (viii) guarantees by the
Company or any of its Restricted Subsidiaries of Indebtedness otherwise
permitted to be incurred by the Company or any of its Restricted Subsidiaries
under the Indenture; (ix) Investments by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such Investment (A)
such Person becomes a Restricted Subsidiary of the Company or (B) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
all or substantially all of its assets to, or is liquidated into, the Company
or a Restricted Subsidiary of the Company; (x) additional Investments having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (x) that are at the time outstanding, not exceeding $5
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value), plus an amount equal to (A) 100% of the aggregate
net cash proceeds received by the Company from any Person (other than a
Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date of Qualified Capital Stock of the Company (including Qualified Capital
Stock issued upon the conversion of convertible Indebtedness or in exchange for
outstanding Indebtedness or as capital contributions to the Company (other than
from a Subsidiary) ) and (B) without duplication of any amounts included in
clause (x) (A) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock, that in the case of amounts described in clause (x) (A) or (x) (B) are
applied by the Company within 180 days after receipt, to make additional
Permitted Investments under this clause
78
<PAGE>
(x) (such additional Permitted Investments being referred to collectively as
"Stock Permitted Investments"); (xi) any Investment by the Company or a
Restricted Subsidiary of the Company in a Receivables Entity or any Investment
by a Receivables Entity in any other Person in connection with a Qualified
Receivables Transaction, including investments of funds held in accounts
permitted or required by the arrangments governing such Qualified Receivables
Transaction or any related Indebtedness; provided that any Investment in a
Receivables Entity is in the form of a Purchase Money Note, contribution of
additional Receivables or an equity interest; (xii) Investments received by the
Company or its Restricted Subsidiaries as consideration for asset sales,
including Asset Sales; provided in the case of an Asset Sale, (A) such
Investment does not exceed 25% of the consideration received for such Asset
Sale and (B) such Asset Sale is otherwise effected in compliance with the
"Limitation on Asset Sales" covenant; (xiii) Investments by the Company or its
Restricted Subsidiaries in Joint Ventures in an aggregate amount not in excess
of $25 million; and (xiv) that portion of any Investment where the
consideration provided by the Company is Capital Stock of the Company (other
than Disqualified Capital Stock). Any net cash proceeds that are used by the
Company or any of its Restricted Subsidiaries to make Stock Permitted
Investments pursuant to clause (x) of this definition shall not be included in
subclauses (x) and (y) of clause (iii) of the first paragraph of the
"Limitation on Restricted Payments" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens securing the Notes;
(ii) Liens securing Acquired Indebtedness incurred in reliance on clause
(viii) of the definition of Permitted Indebtedness; provided that such
Liens do not extend to or cover any property or assets of the Company or of
any of its Restricted Subsidiaries other than the property or assets that
secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary of
the Company;
(iii) Liens existing on the Issue Date, together with any Liens securing
Indebtedness incurred in reliance on clause (xi) of the definition of
Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the Issue Date; provided that the Liens securing the
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced;
(iv) Liens in favor of the Company on the property or assets, or any
proceeds, income or profit therefrom, of any Restricted Subsidiary; and
(v) other Liens securing Senior Subordinated Indebtedness, provided that
the maximum aggregate amount of outstanding obligations secured thereby
shall not at any time exceed $5 million.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof or any other entity.
"Plan" means any employee benefit plan, retirement plan, deferred
compensation plan, restricted stock plan, health, life, disability or other
insurance plan or program, employee stock purchase plan, employee stock
ownership plan, pension plan, stock option plan or similar plan or arrangement
of the Company or any Subsidiary of the Company, or other successor plan
thereof, and "Plans" shall have a correlative meaning.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Principal" means Thomas H. Lee Company and its Affiliates.
"Productive Assets" means assets (including Capital Stock of a Person that
directly or indirectly owns assets) of a kind used or usable in the businesses
of the Company and its Restricted Subsidiaries as, or related to such business,
conducted on the date of the relevant Asset Sale.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note (a) shall be repaid from cash
available to the Receivables Entity, other than (i) amounts required to be
established as reserves pursuant to agreements, (ii) amounts paid to investors
in respect of interest, (iii) principal and other amounts owing to such
investors and amounts owing
79
<PAGE>
to such investors and (iv) amounts paid in connection with the purchase of
newly generated receivables and (b) may be subordinated to the payments
described in (a).
"Qualified Capital Stock" means any stock that is not Disqualified Capital
Stock.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by
the Company or any of its Subsidiaries) and (b) any other Person (in the case
of a transfer by a Receivables Entity), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable. The grant of a security interest in any accounts
receivable of the Company or any of its Restricted Subsidiaries to secure Bank
Indebtedness shall not be deemed a Qualified Receivables Transaction.
"Recapitalization" means the transactions contemplated by the Merger
Agreement, together with the financings therefor.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable and related assets) which engages in no activities other
than in connection with the financing of accounts receivable, all proceeds
thereof and all rights (contractual or other), collateral and other assets
relating thereto, and any business or activities incidental or related to such
business, and which is designated by the Board of Directors of the Company (as
provided below) as a Receivables Entity (a) no portion of the Indebtedness or
any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms which the Company reasonably
believes to be no less favorable to the Company or such Subsidiary than those
that might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable, and (c) to which neither the
Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results other than through the contribution of
additional Receivables, related security and collections thereto and proceeds
of the foregoing. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the resolution of the Board of Directors of the Company giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding
principal amount of such Designated Senior Indebtedness in respect of any
Designated Senior Indebtedness.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
80
<PAGE>
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such
Property.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" means (i) the Bank Indebtedness and (ii) all
Indebtedness of the Company, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary of the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Notes; provided, however, that Senior
Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary of the Company, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company which is expressly subordinate in right of payment
to any other Indebtedness of the Company, including any Senior Subordinated
Indebtedness and any Subordinated Obligations, (5) any obligations with respect
to any Capital Stock or (6) that portion of any Indebtedness incurred in
violation of the Indenture provisions set forth under "Limitation on Incurrence
of Additional Indebtedness" (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s) of
such obligation or their representative and the Trustee shall have received an
Officers' Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of the
Indenture).
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness
is to rank pari passu with the Notes and is not by its express terms
subordinate in right of payment to any Indebtedness of the Company which is not
Senior Indebtedness.
"Significant Subsidiary" means, as of any date of determination, for any
Person, each Restricted Subsidiary of such Person which (i) for the most recent
fiscal year of such Person accounted for more than 10% of consolidated revenues
or consolidated net income of such Person or (ii) as at the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of such Person.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which the Company reasonably believes to be customary in an accounts
receivable transaction.
"Subsidiary Guarantor" means a Restricted Subsidiary of the Company that
executes and delivers a supplemental Indenture pursuant to the "Limitation on
Guarantees by Restricted Subsidiaries" covenant.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter incurred) which is expressly
subordinate in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two business days prior to the
date fixed for prepayment (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining term to February 1, 2003; provided, however, that
if the then remaining term to February 1, 2003 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are
81
<PAGE>
given, except that if the then remaining term to February 1, 2003 is less than
one year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be sued.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) the Company
certifies to the Trustee that such designation complies with the "Limitation on
Restricted Payments" covenant and (y) each Subsidiary to be so designated and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to
which the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation and treating all Indebtedness of such Unrestricted
Subsidiary as being incurred on such date, the Company is able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" means any Restricted Subsidiary of the Company
all the outstanding voting securities of which (other than directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned, directly or indirectly, by
the Company.
Book-Entry Delivery and Form
The certificates representing the New Notes will be issued in fully
registered form. Except as described below, the New Notes initially will be
represented by a single, global Note, in definitive, fully registered form
without interest coupons (the "Global Note") and will be deposited with the
Trustee as custodian for DTC and registered in the name of Cede & Co. or such
other nominee as DTC may designate.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Upon the issuance of the Global Note, DTC or its custodian will credit, on
its internal system, the respective principal amounts of the New Notes
represented by such Global Note to the accounts of persons who have accounts
with DTC. Ownership of beneficial interests in the Global Note will be limited
to persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
82
<PAGE>
So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the New Notes represented by such Global Note
for all purposes under the Indenture and the New Notes. No beneficial owners of
an interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures in addition to those provided for
under the Indenture. Owners of beneficial interests in the Global Note will not
be entitled to have the New Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Notes in definitive form and will not be considered to be the
owners or holders of any New Notes under the Global Note. Accordingly, each
person owning a beneficial interest in the Global Note must rely on the
procedures of DTC and, if such person is not a participant, on the procedures
of the participant through which such person owns its interests, to exercise
any right of a holder of New Notes under the Global Note. The Company
understands that under existing industry practice, in the event an owner of a
beneficial interest in the Global Note desires to take any action that DTC, as
the holder of the Global Note, is entitled to take, DTC would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payments of the principal of, premium, if any, and interest on the New
Notes represented by the Global Note will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. Neither the Company, the Trustee,
nor any paying agent will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in the Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment
of principal of, premium, if any, or interest in respect of the Global Note
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of such
Global Note, as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfer between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of Notes
in certificated form ("Certificated Notes") for any reason, including to sell
Notes to persons in states which require such delivery of such Notes or to
pledge such Notes, such holder must transfer its interest in the Global Note,
in accordance with the normal procedures of DTC and the procedures set forth in
the Indenture.
Unless and until they are exchanged in whole or in part for certificated
New Notes in definitive form, the Global Note may not be transferred except as
a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC.
Beneficial owners of New Notes registered in the name of DTC or its
nominee will be entitled to be issued, upon request, New Notes in definitive
certificated form.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for New Notes in the form of Certificated Notes. Upon any such
issuance, the Trustee is required to register such Certificated Notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). In addition, if DTC is at any time unwilling or unable
to continue as a depositary for the Global Note and a successor depositary is
not appointed by the Company within 90 days, the Company will issue
Certificated Notes in exchange for the Global Note.
83
<PAGE>
EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the initial issuance and sale of the Old Notes, the
Initial Purchasers and their assignees became entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement
with the Initial Purchasers, for the benefit of the holders of the Old Notes,
Fisher is obligated, at its expense, to use its best efforts (i) to file with
the Commission the Exchange Offer Registration Statement with respect to the
Exchange Offer for the New Notes on or before March 22, 1998, (ii) to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act by June 5, 1998, (iii) to keep the Exchange Offer Registration
Statement effective until the closing of the Exchange Offer, and (iv) to cause
the Exchange Offer to be consummated by July 5, 1998. Promptly after the
Exchange Offer Registration Statement has been declared effective, Fisher will
offer the New Notes in exchange for surrender of the Old Notes. Fisher will
keep the Exchange Offer open for not less than 30 days (or longer if required
by applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Old Notes. For each Old Note validly tendered to Fisher pursuant
to the Exchange Offer and not withdrawn by the holder thereof, the holder of
such Old Note will receive a New Note having a principal amount equal to that
of the tendered Old Note. Interest on each New Note will accrue from the last
interest payment date on which interest was paid on the tendered Old Note in
exchange therefor or, if no interest has been paid on such Old Note, from the
date of the original issue of the Old Note.
Based on an interpretation of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, Fisher believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of Old Notes who is an "affiliate" of the Company or who intends
to participate in the Exchange Offer for the purpose of distributing the New
Notes (i) will not be able to rely on the interpretation by the staff of the
Commission set forth in the above referenced no-action letters, (ii) will not
be able to tender Old Notes in the Exchange Offer and (iii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the New Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Notes who wishes to exchange Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from Fisher for its own account, (ii) any
New Notes to be received by it were acquired in the ordinary course of its
business and (iii) at the time of commencement of the Exchange Offer, it has no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes. In addition, in connection
with any resales of New Notes, any broker-dealer (a "Participating
Broker-Dealer") who acquired the New Notes for its own account as a result of
market-making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act. The Commission has taken the
position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the New Notes (other than a resale of an
unsold allotment from the original sale of the Old Notes) with the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement, Fisher is required to allow Participating Broker-Dealers and
other persons, if any, subject to similar prospectus delivery requirements, to
use the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such New Notes.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit Fisher to effect the Exchange Offer,
or if for any other reason the Exchange Offer Registration Statement is not
declared effective by June 5, 1998 or the Exchange Offer is not consummated by
July 5, 1998, upon the request of any of the Initial Purchasers or if any
Initial Purchaser is not permitted by applicable law or interpretations of the
staff of the Commission to participate in the Exchange Offer and thereby
receive freely tradeable New Notes, or if a holder of the Old Notes is not
permitted by applicable law to participate in the Exchange Offer or elects to
participate in the Exchange Offer but does not receive fully tradable New Notes
pursuant to the Exchange Offer, Fisher will, in lieu of effecting the
registration of the New Notes pursuant to the Exchange Offer Registration
84
<PAGE>
Statement and at the Company's cost, (a) as promptly as practicable, file with
the Commission the Shelf Registration Statement covering resales of the
Transfer Restricted Notes (as defined herein), (b) use its best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act by by June 5, 1998 (or within 30 days of the request by any
Initial Purchaser) and (c) use its best efforts to keep effective the Shelf
Registration Statement for a period of two years after its effective date (or
for such shorter period that will terminate when all of the Notes covered by
the Shelf Registration Statement have been sold pursuant thereto or cease to be
outstanding). Fisher will, in the event of the filing of a Shelf Registration
Statement, provide to each holder of the Notes copies of the prospectus which
is a part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement for the Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Notes. A holder of Notes who sells such Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver the prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations).
For purposes of the foregoing, "Transfer Restricted Notes" means each Old
Note until (i) the date on which such Note has been exchanged for a freely
transferable New Note in the Exchange Offer, (ii) the date on which such Note
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement, (iii) the date on which such
Note is sold to the public pursuant to Rule 144 under the Securities Act or
(iv) until such Note ceases to be outstanding.
In the event that (i) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to March 22, 1998, (ii) the Exchange
Offer Registration Statement is not declared effective on or prior to June 5,
1998 or (iii) the Exchange Offer is not consummated on or prior to the July 5,
1998 or a Shelf Registration Statement is not declared effective on or prior to
June 5, 1998 (or, if a Shelf Registration Statement is required to be filed
because of the request by any Initial Purchaser, 30 days following the request
by any such Initial Purchaser that the Company file the Shelf Registration
Statement) (each such event referred to in clauses (i) through (iii) above, a
"Registration Default"), Fisher will generally be obligated to pay liquidated
damages to each holder of Transfer Restricted Securities, during the period of
such Registration Default, in an amount equal to $0.192 per week per $1,000
amount of the Old Notes constituting Transfer Restricted Notes held by such
holder until the applicable Registration Statement is filed or declared
effective, the Exchange Offer is consummated or the Shelf Registration
Statement against becomes effective, as the case may be. All accrued liquidated
damages shall be paid to holders in the same manner as interest payments on the
Old Notes on semi-annual payment dates which correspond to interest payment
dates for the Old Notes. Following the cure of all Registration Defaults, the
accrual of liquidated damages will cease.
Interest on each New Note will accrue from January 21, 1998 or from the
most recent interest payment date to which interest was paid on the Old Note
surrendered in exchange therefor or on the New Note, as the case may be. The
New Notes will bear interest at 9% per annum, except that, if any interest
accrues on the New Notes in respect of any period prior to their issuance, such
interest will accrue at the rate or rates borne by the Notes from time to time
during such period.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, which is filed as an exhibit to the Registration Statement to which
this Prospectus forms a part.
85
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax consequences associated with the exchange of the Old Notes for the
New Notes pursuant to the Exchange Offer and the ownership and disposition of
the New Notes. This summary applies only to a beneficial owner of a New Note
who acquired an Old Note at the initial offering from an Initial Purchaser for
the original offering price thereof and who acquires the New Note pursuant to
the Exchange Offer. This discussion is based on provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect on the date hereof and all of which are subject to change, possibly with
retroactive effect. This discussion does not address the tax consequences to
subsequent purchasers of the New Notes and is limited to investors who hold the
New Notes as capital assets. Furthermore, this discussion does not address all
aspects of United States federal income taxation that may be applicable to
investors in light of their particular circumstances, or to investors subject
to special treatment under United States federal income tax law (including,
without limitation, certain financial institutions, insurance companies,
tax-exempt entities, dealers in securities or persons who have acquired the New
Notes as part of a straddle, hedge, conversion transaction or other integrated
investment).
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH PURCHASER OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NEW NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE
OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN
APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
United States Taxation of United States Holders
As used herein, (A) the term "United States Holder" means a beneficial
owner of a Note that is, for United States federal income tax purposes, (i) a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject
to United States federal income taxation regardless of its source and (iv) a
trust if a United States court is able to exercise primary supervision over the
administration of such trust and one or more United States persons have the
authority to control all substantial decisions of such trust and (B) the term
"Non-U.S. Holder" means a beneficial owner of a Note that is not a United
States Holder.
Exchange Offer
The exchange of an Old Note for a New Note pursuant to the Exchange Offer
will not constitute a "significant modification" of the Old Note for United
States federal income tax purposes and, accordingly, the New Note received will
be treated as a continuation of the Old Note in the hands of such holder. As a
result, there will be no United States federal income tax consequences to a
United States Holder who exchanges an Old Note for a New Note pursuant to the
Exchange Offer and any such holder will have the same adjusted tax basis and
holding period in the New Note as it had in the Old Note immediately before the
exchange.
Payments of Interest and Liquidated Damages
Stated interest payable on a New Note generally will be included in the
gross income of a United States Holder as ordinary interest income at the time
accrued or received, in accordance with such United States Holder's method of
accounting for United States federal income tax purposes. Fisher intends to
take the position that the payment of liquidated damages on the Notes is an
"incidental contingency" within the meaning of Treasury regulations applicable
to debt instruments that provide for one or more contingent payments and,
accordingly, a United States Holder generally should include a payment of
liquidated damages in income as ordinary income when such payment is received.
Such position is binding on a United States Holder unless such holder discloses
to the Internal Revenue Service (the "IRS") that it is taking a contrary
position.
Disposition of the New Notes
Upon the sale, exchange, retirement at maturity or other taxable
disposition of a New Note (collectively, a "disposition"), a United States
Holder generally will recognize capital gain or loss equal to the difference
between the amount realized by such holder (except to the extent such amount is
attributable to accrued interest, which will be treated as ordinary interest
income) and such holder's adjusted tax basis in the New Note. Such capital gain
86
<PAGE>
or loss will be long-term capital gain or loss if such United States Holder's
holding period for the New Note exceeds one year at the time of the
disposition. Recently enacted United States tax legislation reduced the maximum
federal income tax rate applicable to long-term capital gains in certain
instances. Prospective investors should consult their tax advisors regarding
the possible effect on such investors of such legislation.
United States Taxation of Non-U.S. Holders
Payments of Interest
In general, payments of interest received by a Non-U.S. Holder will not be
subject to United States federal withholding tax, provided that (i)(a) the
Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Fisher entitled to vote,
(b) the Non-U.S. Holder is not a controlled foreign corporation that is related
to Fisher actually or constructively through stock ownership, and (c) the
beneficial owner of the New Note, under penalties of perjury, either directly
or through a financial institution which holds the New Note on behalf of the
Non-U.S. Holder and holds customers' securities in the ordinary course of its
trade or business, provides Fisher or its agent with the beneficial owner's
name and address and certifies, under penalties of perjury, that it is not a
United States Holder, (ii) the interest received on the New Note is effectively
connected with the conduct by the Non-U.S. Holder of a trade or business within
the United States and the Non-U.S. Holder complies with certain reporting
requirements; or (iii) the Non-U.S. Holder is entitled to the benefits of an
income tax treaty under which the interest is exempt from United States
withholding tax and the Non-U.S. Holder complies with certain reporting
requirements. Payments of interest not exempt from United States federal
withholding tax as described above will be subject to such withholding tax at
the rate of 30% (subject to reduction under an applicable income tax treaty).
Disposition of the New Notes
A Non-U.S. Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain
realized on the disposition of a New Note, unless (i) the gain is effectively
connected with a United States trade or business conducted by the Non-U.S.
Holder or (ii) the Non-U.S. Holder is an individual who is present in the
United States for 183 or more days during the taxable year of the disposition
and certain other requirements are satisfied. In addition, an exchange of an
Old Note for a New Note pursuant to the Exchange Offer will not constitute a
taxable exchange of the Old Note for Non-U.S. Holders. See "United States
Taxation of United States Holders--Exchange Offer."
Effectively Connected Income
If interest and other payments received by a Non-U.S. Holder with respect
to the New Notes (including proceeds from the disposition of the New Notes) are
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States (or the Non-U.S. Holder is otherwise subject
to United States federal income taxation on a net basis with respect to such
holder's ownership of the New Notes), such Non-U.S. Holder will generally be
subject to the rules described above under "United States Taxation of United
States Holders" (subject to any modification provided under an applicable
income tax treaty). Such Non-U.S. Holder may also be subject to the "branch
profits tax" if such holder is a corporation.
Backup Withholding and Information Reporting
Certain non-corporate United States Holders may be subject to backup
withholding at a rate of 31% on payments of principal, premium and interest on,
and the proceeds of the disposition of, the New Notes. In general, backup
withholding will be imposed only if the United States Holder (i) fails to
furnish its taxpayer identification number ("TIN"), which, for an individual,
would be his or her Social Security number, (ii) furnishes an incorrect TIN,
(iii) is notified by the IRS that it has failed to report payments of interest
or dividends or (iv) under certain circumstances, fails to certify, under
penalty of perjury, that it has furnished a correct TIN and has been notified
by the IRS that it is subject to backup withholding tax for failure to report
interest or dividend payments. In addition, such payments of principal and
interest to United States Holders will generally be subject to information
reporting. United States Holders should consult their tax advisors regarding
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption, if applicable.
Backup withholding generally will not apply to payments made to a Non-U.S.
Holder of a New Note who provides the certification described under "United
States Taxation of Non-U.S. Holders--Payments of Interest" or
87
<PAGE>
otherwise establishes an exemption from backup withholding. Payments by a
United Stares office of a broker of the proceeds of a disposition of the New
Notes generally will be subject to backup withholding at a rate of 31% unless
the Non-U.S. Holder certifies it is a Non-U.S. Holder under penalties of
perjury or otherwise establishes an exemption.
The amount of any backup withholding imposed on a payment to a holder of a
New Note will be allowed as a credit against such holder's United States
federal income tax liability and may entitle such holder to a refund, provided
that the required information is furnished to the IRS.
Recently Issued Treasury Regulations
On October 6, 1997, the U.S. Treasury Department issued final Treasury
regulations governing information reporting and the certification procedures
regarding withholding and backup withholding on certain amounts paid to
Non-U.S. Holders after December 31, 1998. The new Treasury regulations
generally would not alter the treatment of Non-U.S. Holders described above.
The new Treasury regulations would alter the procedures for claiming the
benefits of an income tax treaty and may change the certification procedures
relating to the receipt by intermediaries of payments on behalf of a beneficial
owner of a New Note. Prospective investors should consult their tax advisors
concerning the effect, if any, of such new Treasury regulations on an
investment in the New Notes.
88
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. For a period of 180 days after the Expiration Date, Fisher
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 1998 (90 days from the date of this Prospectus), all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, Fisher will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. Fisher has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Notes)
other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements included in this Prospectus and
incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which is included herein, and
are so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
89
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Financial Statements:
Independent Auditors' Report ............................................................. F-2
Statements of Operations for the years ended December 31, 1997, 1996 and 1995 ............ F-3
Balance Sheets as of December 31, 1997 and 1996 .......................................... F-4
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 ............ F-5
Statements of Changes in Stockholders' Equity for the years ended December 31, 1997, 1996
and
1995 .................................................................................... F-6
Notes to Financial Statements ............................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Fisher Scientific International Inc.:
We have audited the accompanying balance sheets of Fisher Scientific
International Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related statements of operations, cash flows, and changes in stockholders'
equity for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Fisher Scientific International Inc. and
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 18, 1998
(March 9, 1998 as to Note 2)
F-2
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Sales ............................................... $ 2,175.3 $ 2,144.4 $ 1,435.8
Cost of sales ....................................... 1,583.6 1,565.9 1,048.9
Selling, general and administrative expense ......... 518.8 483.9 334.4
Restructuring and other charges ..................... 51.8 -- 34.3
--------- --------- ---------
Income from operations .............................. 21.1 94.6 18.2
Interest expense .................................... 23.0 27.1 15.0
Other (income) expense, net ......................... 3.2 (0.1) (1.1)
--------- --------- ---------
(Loss) income before income taxes ................... (5.1) 67.6 4.3
Income tax provision ................................ 25.4 30.8 1.1
--------- --------- ---------
Net (loss) income ................................... $ (30.5) $ 36.8 $ 3.2
========= ========= =========
Net (loss) income per common share:
Basic .............................................. $ (1.50) $ 2.01 $ 0.20
========= ========= =========
Diluted ............................................ $ (1.50) $ 1.90 $ 0.20
========= ========= =========
</TABLE>
See the accompanying notes to financial statements.
F-3
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
BALANCE SHEETS
(in millions, except share data)
ASSETS
<TABLE>
<CAPTION>
Pro Forma
December 31, December 31,
-------------------------------------------
1997 1997 1996
------------- ------------ ------------
(unaudited)
(Note 2)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ...................................... $ 25.9 $ 18.2 $ 24.7
Receivables, net ............................................... 147.1 297.1 316.6
Inventories .................................................... 223.8 223.8 256.0
Other current assets ........................................... 53.3 53.3 55.5
--------- --------- ---------
Total current assets ......................................... 450.1 592.4 652.8
Property, plant and equipment, net .............................. 223.6 223.6 209.5
Goodwill ........................................................ 251.4 251.4 292.7
Other assets .................................................... 141.8 109.1 107.7
--------- --------- ---------
Total assets ................................................. $ 1,066.9 $ 1,176.5 $ 1,262.7
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt ................................................ $ 19.7 $ 19.7 $ 14.6
Accounts payable ............................................... 199.8 199.8 234.5
Accrued and other current liabilities .......................... 107.5 135.4 143.9
--------- --------- ---------
Total current liabilities .................................... 327.0 354.9 393.0
Long-term debt .................................................. 850.0 267.8 281.5
Other liabilities ............................................... 245.5 206.7 202.0
--------- --------- ---------
Total liabilities ............................................ 1,422.5 829.4 876.5
--------- --------- ---------
Commitments and contingencies (Note 15)
Stockholders' equity (deficit):
Preferred stock ($.01 par value; 15,000,000 shares
authorized, none outstanding) ................................. -- -- --
Common stock ($.01 par value; 50,000,000 shares
authorized; 8,004,787, 20,356,764 and 20,131,498
shares issued and outstanding at pro forma
December 31, 1997, December 31, 1997 and 1996,
respectively) ................................................. 0.1 0.2 0.2
Capital in excess of par value ................................. 305.3 278.9 270.7
Retained earnings (deficit) .................................... (603.5) 96.7 128.4
Other .......................................................... (57.5) (28.7) (13.1)
--------- --------- ---------
Total stockholders' equity (deficit) ......................... (355.6) 347.1 386.2
--------- --------- ---------
Total liabilities and stockholders' equity (deficit) ......... $ 1,066.9 $ 1,176.5 $ 1,262.7
========= ========= =========
</TABLE>
See the accompanying notes to financial statements
F-4
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income ............................................ $ (30.5) $ 36.8 $ 3.2
Adjustments to reconcile net (loss) income to cash
provided by operating activities:
Restructuring and other charges, net of cash
expended .................................................. 51.6 -- 32.5
Depreciation and amortization .............................. 47.0 44.6 28.9
Loss (gain) on sale of property, plant and equipment,
and write-off of assets ................................... 0.9 (3.0) --
Gain on sale of businesses and investments ................. (0.7) -- --
Deferred income taxes ...................................... (1.3) 12.3 (13.1)
Changes in working capital:
Receivables, net ........................................... 22.0 (22.3) (0.1)
Inventories ................................................ 32.0 (13.7) (20.6)
Other current assets ....................................... 4.1 9.4 (4.7)
Accounts payable ........................................... (41.7) 12.3 53.5
Accrued and other current liabilities ...................... (14.8) (22.1) (12.6)
Other assets and liabilities ................................ (22.5) (5.3) (12.1)
-------- ------- --------
Cash provided by operating activities ...................... 46.1 49.0 54.9
-------- ------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired .......................... (11.6) (10.4) (326.6)
Capital expenditures ........................................ (59.2) (40.7) (24.6)
Proceeds from sale of property, plant and equipment ......... 19.1 6.9 --
Marketable securities proceeds and maturities ............... 7.8 3.0 21.3
Other ....................................................... (6.8) (0.8) (2.9)
-------- ------- --------
Cash used in investing activities .......................... (50.7) (42.0) (332.8)
-------- ------- --------
Cash flows from financing activities:
Proceeds from stock options exercised ....................... 6.7 7.9 3.3
Dividends paid .............................................. (1.2) (1.5) (1.3)
Long-term debt proceeds ..................................... 107.3 29.8 457.2
Long-term debt payments ..................................... (114.7) (82.2) (154.5)
-------- ------- --------
Cash (used in) provided by financing activities ............ (1.9) (46.0) 304.7
-------- ------- --------
Net change in cash and cash equivalents ...................... (6.5) (39.0) 26.8
Cash and cash equivalents--beginning of year ................. 24.7 63.7 36.9
-------- ------- --------
Cash and cash equivalents--end of year ....................... $ 18.2 $ 24.7 $ 63.7
======== ======= ========
Supplemental Cash Flow Information:
Cash paid during the year for: ..............................
Income taxes ................................................ $ 19.6 $ 10.7 $ 12.7
======== ======= ========
Interest .................................................... $ 23.0 $ 27.7 $ 10.9
======== ======= ========
</TABLE>
See the accompanying notes to financial statements.
F-5
<PAGE>
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Marketable
Capital in Securities Foreign Shares Minimum
Common Excess of Retained Available Currency Held In Pension
Stock Par Value Earnings For Sale Translation Trust Liability Total
-------- ------------ ---------- -------------- ------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 0.2 $ 130.7 $ 91.2 $ (0.7) $ (2.8) $ -- $ -- $ 218.6
Net Income ................... -- -- 3.2 -- -- -- -- 3.2
Proceeds from stock
options ..................... -- 3.3 -- -- -- -- -- 3.3
Tax benefit from exercise
of stock options ............ -- 1.5 -- -- -- -- -- 1.5
Dividends ($0.08 per
share) ...................... -- -- (1.3) -- -- -- -- (1.3)
Change in unrealized gain
(loss) on marketable
securities available for
sale, net ................... -- -- -- 0.7 -- -- -- 0.7
------ -------- ------- ------ ------- ------ ------ --------
Balance, December 31, 1995 0.2 135.5 93.1 -- (2.8) -- -- 226.0
Net Income ................... -- -- 36.8 -- -- -- -- 36.8
Proceeds from stock
options ..................... -- 7.9 -- -- -- -- -- 7.9
Tax benefit from exercise
of stock options ............ -- 1.9 -- -- -- -- -- 1.9
Dividends ($0.08 per
share) ...................... -- -- (1.5) -- -- -- -- (1.5)
Conversion of Convertible
Subordinated Notes .......... -- 125.4 -- -- -- -- -- 125.4
Shares held in trust ......... -- -- -- -- -- (6.0) -- (6.0)
Currency translation
adjustment .................. -- -- -- -- (4.3) -- -- (4.3)
------ -------- ------- ------ ------- ------ ------ --------
Balance, December 31, 1996 0.2 270.7 128.4 -- (7.1) (6.0) -- 386.2
Net loss ..................... -- -- (30.5) -- -- -- -- (30.5)
Proceeds from stock
options ..................... -- 6.7 -- -- -- -- -- 6.7
Tax benefit from exercise
of stock options ............ -- 1.5 -- -- -- -- -- 1.5
Dividends ($0.06 per
share) ...................... -- -- (1.2) -- -- -- -- (1.2)
Shares held in trust ......... -- -- -- -- -- (0.1) -- (0.1)
Currency translation
adjustment .................. -- -- -- -- (14.5) -- -- (14.5)
Minimum pension liability..... -- -- -- -- -- -- (1.0) (1.0)
------ -------- ------- ------ ------- ------ ------ --------
Balance, December 31, 1997 $ 0.2 $ 278.9 $ 96.7 $ -- $ (21.6) $ (6.1) $ (1.0) $ 347.1
====== ======== ======= ====== ======= ====== ====== ========
</TABLE>
See the accompanying notes to financial statements.
F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Formation and Background
Fisher Scientific International Inc. ("Fisher" and, collectively with its
subsidiaries, the "Company") was formed in September 1991. The Company's
operations are conducted by wholly owned and majority-owned subsidiaries, joint
ventures, equity interests and agents, located in North and South America,
Europe, the Far East, the Middle East and Africa. The Company's activities
relate principally to one business segment; scientific and clinical products.
This includes operations engaged in the supply, marketing, service and
manufacture of scientific, clinical, educational, occupational health and
safety products. Other activities include strategic procurement services.
The Company provides more than 245,000 products and services to research,
health care, industrial, educational and governmental markets in 145 countries.
The Company serves scientists engaged in biomedical, biotechnology,
pharmaceutical, chemical and other fields of research and development, and is a
supplier to clinical laboratories, hospitals, health care alliances,
physicians' offices, environmental testing centers, remediation companies,
quality-control laboratories and many other customers. The Company also
represents customers as a third-party purchaser and integrator of suppliers of
hundreds of thousands of scientific products, maintenance, repair and operating
(MRO) materials and other supplies. The Company's largest supplier represented
approximately 11% of 1997 sales.
Note 2--Subsequent Event--Recapitalization and Merger
Pursuant to the Second Amended and Restated Agreement and Plan of Merger
(as amended, the "Merger Agreement") dated as of November 14, 1997, between
Fisher and FSI Merger Corp. ("FSI"), a Delaware corporation formed by Thomas H.
Lee Company ("THL Co."), providing for the merger of FSI with and into Fisher
and the recapitalization of Fisher (collectively, the "Recapitalization"),
which was consummated on January 21, 1998, approximately 87% of the fully
diluted common stock of Fisher was converted into the right to receive $48.25
per share in cash (approximately $955.0 million in the aggregate) pursuant to
an election process that provided stockholders the right to elect for each
share of Fisher Common Stock held, subject to proration, either $48.25 in cash
or to retain one share of stock in the recapitalized company. Pursuant to the
Merger Agreement, vesting of all outstanding options accelerated.
The Recapitalization has been accounted for as a recapitalization which
will have no impact on the historical basis of assets and liabilities. The
unaudited pro forma balance sheet reflects the following adjustments related to
the Recapitalization as if it occurred on December 31, 1997: (i) excess cash at
closing, (ii) $150.0 million of proceeds and the corresponding decrease in
accounts receivable pursuant to a securitization of accounts receivable (see
Note 13), (iii) capitalization of transaction-related deferred financing fees
in other assets, (iv) an accrual for loss on sale of accounts receivable and
income tax accrual adjustments to accrued and other current liabilities
primarily related to the tax benefits applicable to the exercise of employee
stock options on the date of the Recapitalization, (v) additional long-term
debt of $694.2 million net of repayment of debt outstanding of $112.0 million
(see Note 13), (vi) adjustments to other liabilities related to obligations to
employees for Fisher shares held in trust and compensatory options granted to
certain executives and (vii) stockholders' equity adjustments reflecting the
repurchase of common stock and conversion of options to cash of $955.0 million,
the equity contribution by FSI of $303.0 million, fees and expenses related to
the Recapitalization of $33.8 and other adjustments associated with (ii)
through (vi) above. The unaudited pro forma balance sheet data for December 31,
1997 does not purport to indicate balance sheet data as of any future date.
Subsequent to the Recapitalization, on March 9, 1998 Fisher's Board of
Directors declared a five-for-one stock split on the Fisher Common Stock. Four
additional shares will be issued for each share of common stock held by
shareholders of record as of the close of business on March 19, 1998. New
shares will be distributed on April 1, 1998.
NOTE 3--Summary of Significant Accounting Policies
Principles of Consolidation--The financial statements contain the accounts
of Fisher and all majority-owned subsidiaries. Intercompany accounts and
transactions are eliminated.
F-7
<PAGE>
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassifications--Certain prior year amounts have been reclassified to
conform to their current presentation.
Cash Equivalents and Short-term Investments--Cash equivalents consist
primarily of highly liquid investments with insignificant interest rate risk
and original maturities of three months or less at the date of acquisition.
Similar investments with original maturities beyond three months are considered
short-term marketable securities.
Inventories--Inventories are valued at the lower of cost or market, cost
being determined principally by the last-in, first-out ("LIFO") method for
inventories of Fisher Scientific Company L.L.C., and by the first-in, first-out
("FIFO") method for all other subsidiaries.
Other Current Assets--Other current assets primarily consist of deferred
income taxes of $43.7 million and $41.6 million at December 31, 1997 and 1996,
respectively.
Property, Plant and Equipment--Property, plant and equipment is recorded
at cost and is generally depreciated based upon the following estimated useful
lives: buildings and improvements 5 to 33 years, machinery and equipment 3 to
12 years, and office furniture and equipment 3 to 10 years. For financial
statement purposes, depreciation is computed principally using the
straight-line method. For tax purposes, depreciation is generally computed by
accelerated methods based on allowable useful lives.
Goodwill--Goodwill is being amortized for financial statement purposes on
a straight-line basis over 25 to 40 years. The amounts presented are net of
accumulated amortization of $50.5 million and $44.0 million at December 31,
1997 and 1996, respectively.
Intangible Assets--Intangible assets are being amortized on a
straight-line basis over their estimated useful lives, ranging up to 20 years,
are included in Other Assets and are stated net of accumulated amortization of
$12.1 million and $8.6 million at December 31, 1997 and 1996, respectively.
During 1997, 1996 and 1995, the Company amortized $3.5 million, $2.9 million,
and $2.8 million, respectively, of intangible assets.
Impairment of Long-Lived Assets--Impairment losses are recorded on
long-lived assets used in operations when indicators of impairment are present
and the anticipated undiscounted operating cash flow generated by those assets
are less than the assets' carrying value. During 1997, the Company recorded an
impairment loss of $38.3 million. See Note 19.
Revenue Recognition--The Company recognizes revenue from product sales at
the time products are shipped.
Income Taxes--Deferred income taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities, using
expected rates in effect in the years in which the differences are expected to
reverse.
Deferred Debt Issue Costs--Deferred debt issue costs of $3.3 million and
$4.0 million at December 31, 1997 and 1996, respectively, relate to Fisher's
7-1/8% Notes and Credit Facility debt. Deferred debt issue costs are included in
Other Assets and are amortized using the effective interest rate method over
the term of the related debt. During 1997, 1996 and 1995, the Company amortized
$0.7 million, $0.7 million and $2.2 million, respectively, of capitalized debt
costs.
Environmental accruals are recorded based on current interpretations of
environmental laws and regulations when it is probable that a liability has
been incurred and the amount of such liability can be reasonably estimated.
These amounts do not include third-party recoveries. See Note 15 for additional
information.
Other (income) expense, net represents interest income on cash and cash
equivalents and other non-operating income and expense items, including income
resulting from Fisher's inactive insurance subsidiary.
Foreign Currency Translation--Assets and liabilities of Fisher's foreign
subsidiaries are translated into U.S. dollars using year-end exchange rates.
Revenues and expenses of foreign subsidiaries are translated at the average
exchange rates in effect during the year. Adjustments resulting from financial
statement translations are included
F-8
<PAGE>
in a separate component of stockholders' equity. Gains and losses resulting
from foreign currency transactions are reported on the income statement line
item "other (income) expense, net," when recognized.
Financial Instruments--The Company enters into forward currency contracts
to hedge exposure to fluctuations in foreign currency rates. Gains and losses
on the Company's forward currency contracts generally offset gains and losses
on certain firm commitments of the Company. Gains and losses on these positions
are deferred and included in the basis of the transaction when it is completed.
At December 31, 1997 the outstanding forward currency contracts all mature
within twelve months. Cash flows from forward currency contracts accounted for
as hedges are classified in the Statement of Cash Flows in the same category as
the item being hedged or on a basis consistent with the nature of the
instrument.
Earnings Per Share--In February 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No. 128
("SFAS No. 128"), "Earnings per Share" which establishes standards for
computing and presenting earnings per share. The new standard replaces the
presentation of primary earnings per share prescribed by Accounting Principles
Board Opinion No. 15 ("APB 15"), "Earnings per Share" with a presentation of
basic earnings per share and also requires dual presentation of basic and
diluted earnings per share on the face of the statement of operations for all
entities with complex capital structures. Basic earnings per share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted earnings per share is computed similarly to fully-diluted earnings per
share pursuant to APB 15. The Company adopted SFAS No. 128 in the fourth
quarter of fiscal 1997 and has restated all prior periods in its financial
statements. The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computation for the
years ended December 31, 1997, 1996 and 1995 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
Basic Earnings Per Share:
Net Income (Loss) $ (30.5) $ 36.8 $ 3.2
Average Shares of Common Stock
Outstanding 20.3 18.3 16.2
-------- ------ ------
Basic Earnings (Loss) Per Share $ (1.50) $ 2.01 $ 0.20
======== ====== ======
Diluted Earnings Per Share:
Net Income (Loss) $ (30.5) $ 36.8 $ 3.2
Interest Expense of Convertible
Subordinated Notes, Net of Tax -- 2.1 --
-------- ------ -------
(30.5) 38.9 3.2
Average Shares of Common Stock
Outstanding 20.3 18.3 16.2
Effective of Dilutive Securities:
Convertible Subordinated Notes -- 1.7 --
Common Stock Equivalents -- 0.5 --
-------- ------ -------
Total Shares Used in Diluted Earnings
Per Share Calculation 20.3 20.5 16.2
======== ====== =======
Diluted Earnings (Loss) Per Share $ (1.50) $ 1.90 $ 0.20
======== ====== =======
</TABLE>
Options to purchase 50,000, 65,000 and 504,000 shares of Fisher Common
Stock were outstanding as of December 31, 1997, 1996 and 1995, respectively,
but were not included in the computation of diluted earnings per share because
the option's exercise price was greater than the average market price.
During 1995 the Company had convertible subordinated notes outstanding
which were convertible into 3,600,000 shares of Fisher Common Stock, but were
not included in the computation of diluted earnings per share because they were
anti-dilutive. Additionally, during 1997 and 1995 the Company had common stock
equivalents
F-9
<PAGE>
of 600,000 and 200,000, respectively, that were excluded from the diluted
earnings per share calculation as inclusion would have been anti-dilutive.
Accounting Pronouncements--During 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130) and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS No. 131) which
are required to be adopted by Fisher in its fiscal 1998 financial statements.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components in the financial statements and requires companies to
disclose comprehensive income as part of the basic financial statements. SFAS
No. 131 establishes standards for reporting information on operating segments
in financial statements. Fisher is currently reviewing the impact SFAS No. 131
may have on additional disclosure, if any, in its financial statements.
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 96-1, "Environmental Remediation Liabilities", which addresses
accounting and reporting for environmental remediation liabilities. The
implementation of SOP 96-1 during 1997 did not have a material effect on the
Company's financial statements.
NOTE 4--Acquisitions
During 1997, the Company made several small acquisitions including the
acquisition of two laboratory products distributors: Switzerland (Winiger) and
Malaysia (CW Medical). The Company also acquired the remaining 50% interest in
its laboratory products distributor joint venture in Korea during 1997. These
acquisitions were accounted for as purchases; operations of the companies and
businesses acquired have been included in the accompanying financial statements
from their respective dates of acquisition. These acquisitions are not material
to the Company's financial statements. During 1996, the Company made several
small acquisitions, including the acquisition of a transaction-processing
software company in the United States, (UniKix Technologies (formerly a
division of Bull H.N. Information Systems, Inc.)), and a majority interest in a
laboratory products distributor in Mexico. The Company also completed the
acquisition of the remaining minority interests in its laboratory product
distributor subsidiaries in Germany. These acquisitions were accounted for as
purchases and are not material to the Company's financial statements.
In October 1995, Fisher purchased the principal businesses of the
laboratory supplies division of Fisons plc. ("Fisons"), a company organized
under the laws of England. The total consideration, after final purchase price
adjustments, was $304 million, including $295 million in cash and the
assumption of $9 million of certain external debt relating to the acquired
businesses. The purchase included the acquisition of all of the issued and
outstanding shares of Curtin Matheson Scientific Inc. ("CMS"), a corporation
headquartered in Houston, Texas, and the goodwill and substantially all of the
net assets of Fisons Scientific Equipment ("FSE"), a division of Fisons, with
headquarters in Loughborough, United Kingdom.
The following unaudited pro forma financial information presents the
consolidated results of operations as if the acquisitions of CMS and FSE had
occurred at the beginning of the period presented (in millions, except per
share amounts).
Year Ended
December 31, 1995
------------------
Sales .................... $ 2,046.9
Net income ............... 1.1
Earnings per common share:
Basic ................... $ 0.07
Diluted ................. 0.07
The pro forma financial information includes the results of CMS and FSE
combined with the Company's historical results (including the 1995
restructuring charge described in Note 19), the effects of the purchase
accounting allocations and adjustments to interest expense to reflect
borrowings to finance the acquisitions described in Note 13. The pro forma
financial information does not purport to present what the Company's results of
operations would actually have been had the acquisition of CMS and FSE occurred
on the assumed date, nor does it project the Company's results of operations
for any future period.
F-10
<PAGE>
The Company's balance sheet at December 31, 1996 includes the estimated
fair value of assets and liabilities acquired in connection with the
acquisitions of CMS and FSE and other smaller companies. The allocation of the
purchase price of CMS and FSE included liabilities for estimated costs to
terminate acquired leases in order to consolidate logistics facilities and to
sever and relocate employees related to acquired logistics, customer service
information services and administrative functions, which amounted to
approximately 8% of the total consideration, after final purchase price
adjustments. During 1997 and 1996, approximately $4 million, and $5 million,
respectively, of severance and $1 million and $2 million in 1997 and 1996,
respectively, of other exit costs were paid and charged against these
liabilities. These actions are expected to be substantially completed by the
end of 1999. The goodwill related to the acquisitions of CMS and FSE is being
amortized over 40 years.
The excess of the purchase price over the fair value of all net assets
acquired in 1997 and 1996 was approximately $10 million and $32 million
(including approximately $18 million related to finalizing the purchase price
allocation for the 1995 CMS and FSE acquisition), respectively, and is being
amortized over 25 to 40 years.
NOTE 5--Stockholders' Equity
Fisher's authorized capital stock consists of 50,000,000 shares of Common
Stock, par value $.01 per share ("Fisher Common Stock"), of which 20,356,764,
20,131,498, and 16,257,349 shares were outstanding at December 31, 1997, 1996,
and 1995, respectively, and 15,000,000 shares of preferred stock, par value
$.01 per share (the "Fisher Preferred Stock"), none of which were outstanding
at the above dates. After the Recapitalization, Fisher's authorized capital
stock consists of 45,817,625 shares of Fisher Common Stock, par value $.01 per
share, 4,182,375 shares of non-voting Common Stock, par value $.01 per share
and 15,000,000 shares of Preferred Stock, par value $.01 per share, of which
7,197,729 shares of Fisher Common Stock and 807,058 shares of non-voting Common
Stock were outstanding at January 21, 1998. Of the total 8,004,787 shares of
Fisher Common Stock, 750,901 represents shares owned by employees as a result
of the conversion of stock options and 228,857 represents shares retained by
management pursuant to the stock election process. In addition, warrants to
purchase 516,663 shares of Fisher Common Stock at $48.25 per share were issued
as part of the Recapitalization.
The Fisher Preferred Stock and the Fisher Common Stock are each issuable
in one or more series or classes, any or all of which may have such voting
powers, full or limited, or no voting powers, and such designations,
preferences and related participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as are set forth in the
Restated Certificate of Incorporation of Fisher or any amendment thereto, or in
the resolution or resolutions providing for the issue of such stock adopted by
Fisher's Board of Directors, which is expressly authorized to set such terms
for any such issue.
On June 9, 1997, the Board of Directors of Fisher declared a dividend of
one preferred share purchase right (a "Right") for each outstanding share of
Fisher Common Stock of Fisher. The dividend was payable on June 19, 1997 to
stockholders of record on that date. The description of all terms of the Rights
are set forth in a Rights Agreement between the Company and ChaseMellon
Shareholder Services, L.L.C. as amended by the First Amendment to the Rights
Agreement (the "Rights Agreement"). Until the occurrence of a Distribution Date
(as defined in the Rights Agreement), the Rights will be evidenced by the
Fisher Common Stock certificates and may be transferred only with the Common
Stock. Each Right, when exercisable, entitles the registered holder to purchase
from Fisher one one-hundredth of a share of Series A Junior Participating
Preferred Stock, without par value (the "Preferred Shares"), of Fisher at a
price of $190 per one one-hundredth of a Preferred Share, subject to
adjustment. There are 500,000 authorized shares of Series A Junior Preferred
Stock. When issued, each Preferred Share is entitled to an aggregate dividend
of 100 times the dividend declared per share of Fisher Common Stock.
Additionally, in the event of liquidation, the holders of the Preferred Shares
will be entitled to an aggregate payment of 100 times the payment made per
share of Fisher Common Stock. Each Preferred Share will also have 100 votes. In
the event of a transaction in which Fisher Common Stock is exchanged, each
Preferred Share will be entitled to receive 100 times the amount received per
share of Fisher Common Stock.
The Rights will expire on June 8, 2007 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by Fisher.
F-11
<PAGE>
NOTE 6--Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash in banks,
investments in marketable securities, receivables and debt. In addition, the
Company has forward currency contracts that hedge certain firm commitments and
balance sheet exposures.
The carrying amounts for cash and cash equivalents, receivables and
short-term debt approximate fair value due to the short-term nature of these
instruments. The fair value of marketable securities at December 31, 1997 based
on quoted market prices was $3.0 million which approximates the carrying value.
The marketable securities portfolio is held-to-maturity and consists
principally of U.S. government securities maturing in 2004. The carrying and
fair values of long-term debt were $267.8 million and $257.6 million,
respectively, at December 31, 1997 and $281.5 million and $280.9 million,
respectively, at December 31, 1996. The fair value of the long-term fixed rate
debt was estimated based on current quotes from bond traders making a market in
the debt instrument. The fair value of debt with variable rates approximates
the net carrying value. The Company has off-balance sheet standby letters of
credit with a notional amount of $33.7 million with no unrealized gain or loss
at December 31, 1997.
None of the Company's financial instruments represent a concentration of
credit risk because the Company deals with a variety of major banks worldwide,
and its accounts receivable are spread among a number of major customers and
geographic areas. None of the Company's off-balance-sheet financial instruments
would result in a significant loss to the Company if the other party failed to
perform according to the terms of its agreement, as any such loss would
generally be limited to the unrealized gain in any contract.
NOTE 7--Income Taxes
The domestic and foreign components of income (loss) before income taxes
are as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Domestic .................................. $ 44.4 $ 69.2 $ 18.4
Foreign ................................... (49.5) (1.6) (14.1)
------- ------- -------
(Loss) income before income taxes ......... $ (5.1) $ 67.6 $ 4.3
======= ======= =======
</TABLE>
The components of the income tax provision (benefit) are as follows (in
millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Current income tax expense:
Federal ............................. $ 16.8 $ 11.6 $ 8.2
State ............................... 5.9 5.8 4.2
Foreign ............................. 4.0 1.1 1.8
------- ------- -------
Total current ...................... 26.7 18.5 14.2
------- ------- -------
Deferred income tax expense (benefit):
Federal ............................. (2.5) 11.8 (4.4)
State ............................... (0.3) 1.1 (2.4)
Foreign ............................. 1.5 (0.6) (6.3)
------- ------- -------
Total deferred ..................... (1.3) 12.3 (13.1)
------- ------- -------
Total income tax provision ........... $ 25.4 $ 30.8 $ 1.1
======= ======= =======
</TABLE>
The principal items accounting for the differences in taxes on income
(loss) computed at the applicable U.S. statutory rate and as recorded are as
follows (in millions):
F-12
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Taxes computed at statutory rate ...................... $ (1.8) $ 23.7 $ 1.5
Foreign taxes over U.S. rate and foreign losses not tax
benefited ............................................ 21.4 1.8 1.0
State income taxes (net of federal benefit) ........... 3.6 4.5 1.2
Increase in valuation allowance ....................... 2.4 -- --
Utilization of loss carryforwards ..................... -- -- (2.8)
Other ................................................. (0.2) 0.8 0.2
------- ------- ------
Income tax provision .................................. $ 25.4 $ 30.8 $ 1.1
======= ======= ======
</TABLE>
The 1995 income tax provision includes a $2.8 million tax benefit for the
utilization of certain domestic net operating loss carryforwards that were
previously not considered realizable.
The tax effects of temporary items that gave rise to significant portions
of the deferred tax accounts are as follows (in millions):
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Postretirement benefit costs other than pensions ......... $ 38.0 $ 34.2
Environmental accruals ................................... 13.6 14.1
Operating loss and tax credit carryforwards .............. 28.5 20.4
Goodwill writeoff ........................................ 8.0 --
Accrued employee benefits ................................ 5.8 12.2
Restructuring accruals ................................... 9.4 6.4
Other items not deductible until paid .................... 48.1 43.8
------- -------
Gross deferred tax assets ................................ 151.4 131.1
Less valuation allowance ................................. (31.4) (11.8)
------- -------
$ 120.0 $ 119.3
======= =======
Deferred tax liabilities:
Goodwill ................................................. $ 15.8 $ 21.1
Property, plant and equipment ............................ 11.5 7.1
Other .................................................... 11.9 8.3
------- -------
$ 39.2 $ 36.5
======= =======
</TABLE>
The deferred tax asset includes the benefit of net operating loss
carryforwards subject to appropriate valuation allowances. The Company
evaluates the tax benefits of operating loss carryforwards on an ongoing basis
taking into consideration such factors as the future reversals of existing
taxable temporary differences, projected future operating results, the
available carryforward period and other circumstances. At December 31, 1997,
the Company had accumulated foreign net operating loss carryforwards for tax
purposes of approximately $73 million. These net operating losses expire as
follows (in millions):
1998 ...................................................... $ 2.0
1999 ...................................................... 2.4
2000 ...................................................... 1.2
2001 ...................................................... 1.1
2002 ...................................................... 3.6
No Expiration ............................................. 62.7
------
$ 73.0
======
Statement of Financial Accounting Standards No. 109 requires that deferred
tax assets be reduced by a valuation allowance if it is more likely than not
that some portion or all of the deferred tax asset will not be realized. The
increase in the valuation allowance in 1997 is due to increases in foreign net
operating losses and the goodwill
F-13
<PAGE>
write-offs for which tax benefits are not expected to be realized. At December
31, 1997 and 1996, $2.3 million and $3.1 million, respectively, relates to
deferred tax assets applicable to net operating loss carryforwards of acquired
companies (subsequent recognition of tax benefits, if any, will result in a
reduction of goodwill).
At December 31, 1997, the Company had not recognized a deferred tax
liability on approximately $18 million of undistributed earnings of foreign
subsidiaries as these earnings are considered to be permanently reinvested.
These earnings could become subject to additional tax if they were remitted as
dividends or if the Company should sell its stock in the subsidiaries. The
amount of additional tax on these earnings has not been determined.
See Note 18 for a description of the Tax Sharing Agreement entered into by
the Company.
NOTE 8--Receivables
The following is a summary of receivables at December 31 (in millions):
1997 1996
----------- -----------
Trade and other receivables ............ $ 320.9 $ 337.4
Allowance for doubtful accounts ........ (23.8) (20.8)
-------- --------
$ 297.1 $ 316.6
======== ========
Provisions for doubtful accounts were $5.5 million, $4.4 million and $3.0
million and write-offs were $3.6 million, $1.6 million and $1.7 million for the
years ending December 31, 1997, 1996 and 1995, respectively. Allowances of
companies acquired at their acquisition date were $1.1 million and $4.7 million
in 1997 and 1996, respectively.
NOTE 9--Inventories
The following is a summary of inventories by major category at December 31
(in millions):
1997 1996
---------- ----------
Raw materials ......................... $ 17.5 $ 11.2
Work in process ....................... 3.2 3.0
Finished products ..................... 203.1 241.8
------- -------
$ 223.8 $ 256.0
======= =======
Inventories valued using the LIFO method amounted to $169.6 million at
December 31, 1997 and $195.2 million at December 31, 1996, which were below
estimated replacement cost by approximately $28.8 million and $26.9 million for
the years ended December 31, 1997 and 1996, respectively.
NOTE 10--Property, Plant and Equipment
The following is a summary of property, plant and equipment by major class
of asset at December 31 (in millions):
1997 1996
----------- -----------
Land, buildings and improvements ........ $ 154.9 $ 145.7
Machinery, equipment and other .......... 159.1 181.8
-------- --------
$ 314.0 327.5
Accumulated depreciation ................ (90.4) (118.0)
-------- --------
$ 223.6 $ 209.5
======== ========
F-14
<PAGE>
NOTE 11--Other Assets
The following is a summary of other assets at December 31 (in millions):
1997 1996
--------- ----------
Marketable securities .......... $ 3.0 $ 11.4
Deferred income taxes .......... 37.1 41.7
Intangible assets .............. 23.0 24.0
Other .......................... 46.0 30.6
------- -------
$ 109.1 $ 107.7
======= =======
NOTE 12--Accrued and Other Current Liabilities
The following is a summary of accrued and other current liabilities at
December 31 (in millions):
1997 1996
---------- ----------
Wages and benefits ............ $ 29.3 $ 36.2
Other ......................... 106.1 107.7
------- -------
$ 135.4 $ 143.9
======= =======
NOTE 13--Debt
The following is a summary of debt and other obligations at December 31
(in millions):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Old Credit Facilities ............................................ $ 100.6 $ 116.8
7-1/8% Notes (net of a discount of $1.0 million and $1.1 million
in 1997 and 1996, respectively) ................................ 149.0 148.9
Other ............................................................ 37.9 30.4
Less current portion of long-term debt ........................... (19.7) (14.6)
-------- --------
Long-term debt ................................................... $ 267.8 $ 281.5
======== ========
</TABLE>
At December 31, 1997, the Company had $100.6 million outstanding under its
pre-existing credit facilities (the "Old Credit Facilities"), $60.0 million of
which is denominated in U.S. dollars and the remainder in British Pounds.
Borrowings under the Old Credit Facilities were repaid on the date of the
Recapitalization. On December 31, 1997, $173.5 million was available under the
Old Credit Facilities as a revolving line of credit and for letters of credit.
Fisher is required to pay a commitment fee based on certain of the Company's
coverage ratios. At December 31, 1997, the rate was 0.2% per annum on the
unused portion of the Old Credit Facilities. All borrowings under the Old
Credit Facilities bore interest, at Fisher's option, at either the Bank's Base
Rate or at LIBOR plus a margin, based on certain of the Company's coverage
ratios. At December 31, 1997, the rate was approximately 6.87%. The Old Credit
Facilities contain certain affirmative and negative covenants including: (i)
restrictions on acquisitions, mergers, consolidations and sales of certain
assets by the Company, (ii) restrictions on the Company's ability to enter into
transactions with affiliates, (iii) restrictions on the Company's ability to
incur additional indebtedness and to make certain loans, advances and
investments; and (iv) requirements to maintain certain levels of net worth,
interest coverage and debt to earnings before interest, taxes, depreciation and
amortization. Under the Old Credit Facilities, the Company was prohibited from
paying dividends at December 31, 1997, as certain financial ratios (as defined)
were not achieved.
The Company also has outstanding $150.0 million aggregate principal amount
of 7-1/8% Notes due December 15, 2005, which were sold on December 18, 1995 at a
price to the public equal to 99.184% of principal bringing the effective
interest rate to 7.5%. The estimated fair market value of the 7-1/8% Notes at
December 31, 1997, based on quotes from bond traders making a market in the
7-1/8% Notes, was approximately $138.8 million.
In connection with the Recapitalization, (See Note 2), effective January
21, 1998, Fisher entered into new debt financing arrangements, consisting of
$469.2 million of senior bank financing (the "New Credit Facility"), a $150
million receivable securitization facility (the "Receivables Securitization
Facility") and $400 million of 9% Senior Subordinated Notes due 2008 (the "9%
Notes"). The full proceeds of the 9% Notes, together with a portion of the
proceeds of the New Credit Facility were used to finance the conversion into
cash of the shares of Fisher Common
F-15
<PAGE>
Stock then outstanding which were not retained by existing stockholders and
employees, to refinance $107.8 million of indebtedness of the Company
outstanding on the date of the Recapitalization and to pay related fees and
expenses of the Recapitalization. In addition, the New Credit Facility will be
used to provide for the Company's working capital requirements.
The New Credit Facility consists of (i) a $294.2 million term loan
facility (the "Term Facility") consisting of (a) a $125.0 million tranche A
term loan ("Tranche A"), (b) a $100.0 million tranche B term loan ("Tranche B")
and (c) a $69.2 million tranche C term loan ("Tranche C"); and (ii) a $175.0
million revolving credit facility (the "Revolving Credit Facility"). Borrowings
under the Term Facility bear interest at a rate equal to, at the Company's
option, the following: with respect to Tranche A, LIBOR plus 2.25% or Prime
Rate plus 1.25%; with respect to Tranche B, LIBOR plus 2.50% or Prime Rate plus
1.50%; and with respect to Tranche C, LIBOR plus 2.75% or Prime Rate plus
1.75%. Borrowings made under the Revolving Credit Facility bear interest at a
rate equal to, at Fisher's option, LIBOR plus 2.25%, or the Prime Rate plus
1.25%. The Company will also pay to the lenders a commitment fee equal to .50%
per annum of the undrawn portion of each lender's commitment from time to time.
The LIBOR and Prime Rate margins and the commitment fees are subject to
reductions, based on various tests of the Company's financial performance. The
tranches of the Term Facility have the following maturity periods from the date
of inception: Tranche A-6 years, Tranche B-7 years and Tranche C-7.75 years.
The Revolving Credit Facility expires 6 years from the date of inception.
The obligations of Fisher and the subsidiary borrowers under the New
Credit Facility are secured by substantially all assets of the Company and its
material domestic subsidiaries, a pledge of the stock of all domestic
subsidiaries, and a pledge of 65% of the stock of material foreign subsidiaries
which are direct subsidiaries of Fisher or one of its material domestic
subsidiaries. Obligations of each foreign subsidiary borrower are secured by a
pledge of 100% of the shares of such borrowers. The obligations of Fisher and
the subsidiary borrowers are further guaranteed by Fisher and each material
domestic subsidiary of Fisher.
The New Credit Facility contains covenants of Fisher and the subsidiary
borrowers, including, without limitation, restrictions on (i) indebtedness,
(ii) the sale of assets, (iii) mergers, acquisitions and other business
combinations, (iv) restrictions on the payment of cash dividends to
shareholders, and (v) various financial covenants. The financial covenants
include requirements to maintain certain levels of interest coverage, debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
minimum EBITDA and to limit capital expenditures. In addition to the mandatory
repayment schedule discussed below, loans under the Term Facility are required
to be prepaid with 50% of excess cash flow (as defined in the New Credit
Facility and subject to certain limits as specified therein) and certain equity
issuances of Fisher, and 100% of net-cash proceeds of certain asset sales,
certain insurance and condemnation proceeds and certain debt issuances of the
Company. The mandatory repayment schedule of the Term Facility, over the next
five years and thereafter is as follows: $0.0 million in 1998, $6.0 million in
1999, $17.0 million in 2000, $22.0 million in 2001, $37.0 million in 2002, and
$212.2 million in the aggregate in years subsequent to 2002.
The Receivables Securitization Facility relates to the sale, on a
revolving basis, of certain of the Company's accounts receivable to a
bankruptcy remote subsidiary of Fisher which entered into an agreement to
transfer, on a revolving basis, an undivided percentage ownership interest in a
designated pool of accounts receivable up to a maximum amount based on a
defined calculated percentage of the outstanding accounts receivable balance.
The facility has a maturity of five years and the effective interest rate is
approximately LIBOR plus 50 basis points.
The 9% Notes will mature on February 1, 2008 with interest payable
semiannually in arrears on February 1 and August 1 of each year commencing
August 1, 1998. The 9% Notes are unsecured senior subordinated obligations of
the Company, subordinated in right of payment to all existing and future senior
indebtedness and rank pari passu in light of payment with all other existing
and future senior subordinated indebtedness of the Company.
The 9% Notes are redeemable at the option of Fisher at any time after
February 1, 2003 at an initial redemption price of 104.5%, declining ratably to
par on or after February 1, 2006. In addition, on or prior to February 1, 2001,
F-16
<PAGE>
Fisher may redeem up to 40% of the original principal amount of the 9% Notes at
a redemption price of 109% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption with the net cash proceeds
of one or more public equity offerings, provided that at least 60% of the
aggregate principal amount of the 9% Notes originally issued remain outstanding
immediately after the occurrence of such redemption. Upon a Change of Control
Triggering Event (as defined in the Indenture under which the 9% Notes are
issued), Fisher will be required to make an offer to purchase all outstanding
9% Notes at 101% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of purchase.
The Indenture under which the 9% Notes are issued contains covenants that
restrict, among other things, (i) the ability of the Company and its
subsidiaries to incur additional indebtedness, (ii) pay dividends or make
certain other restricted payments, (iii) merge or consolidate with any other
person, and (iv) other various covenants which are customary for transactions
of this type.
NOTE 14--Other Liabilities
The following is a summary of other liabilities at December 31 (in
millions):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Postretirement benefit costs other than pensions .......... $ 74.7 $ 77.1
Insurance ................................................. 11.2 12.5
Environmental ............................................. 32.3 34.7
Other ..................................................... 88.5 77.7
------- -------
$ 206.7 $ 202.0
======= =======
</TABLE>
NOTE 15--Commitments and Contingencies
The following is a summary of annual future minimum lease and rental
commitments under operating leases as of December 31, 1997 (in millions):
1998 ............................... $ 19.3
1999 ............................... 15.0
2000 ............................... 11.2
2001 ............................... 7.9
2002 ............................... 5.7
Thereafter ......................... 23.0
-------
Net minimum lease payments ......... $ 82.1
=======
Total rental expense included in the accompanying income statements amounted to
$18.7 million in 1997, $16.9 million in 1996, and $10.5 million in 1995.
There are various lawsuits and claims pending against the Company
involving contract, product liability and other issues. In addition, the
Company has assumed certain insurance liabilities, including liabilities
related to an inactive insurance subsidiary, primarily related to certain
historical businesses of its former parent, including those related to workers'
compensation, employers', automobile, general and product liability. In view of
the Company's financial condition and the accruals established for related
matters, based on management's knowledge to date, management does not believe
that the ultimate liability, if any, related to these matters will have a
material adverse effect on the Company's financial condition or results of
operations.
The Company is currently involved in various stages of investigation and
remediation relative to environmental protection matters. The potential costs
related to environmental matters and the possible impact on future operations
are difficult to predict given the uncertainties regarding the extent of the
required cleanup, the complexity and interpretation of applicable laws and
regulations, the varying costs of alternative cleanup methods and the extent of
the Company's responsibility. Accruals for environmental liabilities are
recorded, based on current interpretations of environmental laws and
regulations, when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. Estimates are established
based upon reports prepared by environmental specialists, management's
knowledge to date and its experience with the foregoing environmental matters,
and include potential costs for investigation, remediation, operation and
maintenance of cleanup sites and related capital expenditures. Accrued
liabilities for environmental matters were $35.1 million and $37.6 million at
December 31,
F-17
<PAGE>
1997 and 1996, respectively. Although these amounts do not include third-party
recoveries, certain sites may be subject to indemnification. The Company has
accounted for environmental liabilities in accordance with Accounting Standards
Statement of Position 96-1, "Environmental Remediation Liabilities," which
addresses accounting and reporting for environmental remediation liabilities.
Management believes this accrual is adequate for the environmental liabilities
expected to be incurred and, as a result, believes that the ultimate liability
incurred with respect to environmental matters will not have a material adverse
effect on the Company's financial condition or results of operations. However,
future events, such as changes in existing laws and regulations, changes in
agency direction or enforcement policies or changes in the conduct of the
Company's operations, may give rise to additional compliance costs which could
have a material adverse effect on the Company's financial condition or results
of operations.
The Company is dealing with "year 2000" issues at a number of its
operating units. Year 2000 issues exist when dates in computer systems are
recorded using two digits (rather than four) and are then used for arithmetic
operations, comparisons or sorting. A two-digit date recording may recognize a
date using "00" as 1900 rather than 2000, which could cause the Company's
computer systems to perform inaccurate computations. The Company's year 2000
issues relate not only to its own systems but also to those of its customers
and suppliers. It is anticipated that the Company's program to enhance its
systems capabilities which calls for the replacement of many of its present
computer systems, including its order entry, purchasing and financial systems,
will be replaced, and other year 2000 activities of the Company with respect to
systems not being replaced, will resolve the year 2000 issue with respect to
the Company's internal systems and that such activities will result in
approximately $35 million of aggregate spending in 1998 and 1999. Although
management believes its program to address year 2000 issues is adequate, there
is no guarantee that the program is in fact adequate or that the systems
replacements and modifications will be completed on time. Even if the Company's
year 2000 conversion is completed, the failure of the Company's suppliers and
customers to address the year 2000 issue could result in disruption or
significantly impact the Company.
At December 31, 1997, the Company had letters of credit outstanding
totaling $33.7 million, which primarily represent guarantees with respect to
various insurance activities as well as performance letters of credit issued in
the normal course of business. Approximately $8.4 million of the insurance
related letters of credit relate to Fisher's inactive insurance subsidiary and
are collateralized by the cash and marketable securities of such subsidiary.
NOTE 16--Retirement Benefits
Defined Benefit Pension Plans
The Company has defined benefit pension plans available to substantially
all employees that are either fully paid for by the Company or provide for
mandatory employee contributions as a condition of participation. Effective
July 1, 1997, the Company amended the U.S. plans to change the current pension
benefit formula to reflect that of a cash balance account. Under the new cash
balance account, a participating employee's annual postretirement pension
benefit is determined by the employee's credited service and average annual
earnings during the employee's service with the Company, or predecessors of the
Company. The Company's funding policy is to contribute annually the statutorily
required minimum amount as actuarially determined.
The net periodic pension cost (income) of these plans included the
following components for the years ended December 31 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -----------
<S> <C> <C> <C>
Service cost ........................................... $ 6.5 $ 6.2 $ 2.8
Interest cost on projected benefit obligation .......... 12.3 11.5 9.6
Actual (return) loss on assets ......................... (41.7) (16.8) (29.3)
Net amortization and deferral .......................... 24.6 1.8 16.3
------- ------- -------
Net periodic pension cost (income) ..................... $ 1.7 $ 2.7 $ (0.6)
======= ======= =======
</TABLE>
During 1996, certain of the Company's defined benefit plans with deficits
(plan assets less than the projected benefit obligation) totaling $6.4 million
as of December 31, 1995 were merged into a plan with a surplus (plan assets in
excess of the projected benefit obligation) of $23.9 million as of December 31,
1995. The funded status at December 31, 1997 and 1996 for all defined benefit
plans was as follows (in millions):
F-18
<PAGE>
<TABLE>
<CAPTION>
1997 Plans with 1996 Plans with
-------------------------- -------------------------
Surplus Deficit Surplus Deficit
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Actuarial present value of vested
benefit obligation .................... $ (157.2) $ (8.3) $ (127.6) $ (3.9)
======== ======= ======== ======
Accumulated benefit obligation ......... (164.1) (9.2) (137.7) (4.4)
======== ======= ======== ======
Projected benefit obligation ........... (169.5) (12.8) (157.1) (7.8)
Plan assets at fair value .............. 211.9 1.1 179.6 1.1
-------- ------- -------- ------
Plan assets in excess of (less than)
projected benefit obligation .......... $ 42.4 $ (11.7) $ 22.5 $ (6.7)
======== ======= ======== ======
</TABLE>
Certain changes in the items shown above are not recognized as they occur,
but are amortized systematically over subsequent periods. Unrecognized amounts
still to be amortized and the amounts included in the balance sheet of the
Company at December 31, 1997 and 1996 appear below (in millions):
<TABLE>
<CAPTION>
1997 Plans with 1996 Plans with
----------------------- ----------------------
Surplus Deficit Surplus Deficit
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Plan assets in excess of (less than)
projected benefit obligation ........... $ 42.4 $ (11.7) $ 22.5 $ (6.7)
Unrecognized transition asset ........... (3.8) (0.2) (4.9) (0.2)
Unrecognized prior service cost ......... (10.5) 2.1 0.4 0.6
Unrecognized net (gain) loss ............ (21.7) 4.9 (13.2) 2.9
Additional minimum liability ............ -- (3.8) -- --
------- ------- ------- ------
Prepaid (accrued) pension cost .......... $ 6.4 $ (8.7) $ 4.8 $ (3.4)
======= ======= ======= ======
</TABLE>
The Company has established a separate trust intended to cover the 1997
Plan deficit. At December 31, 1997 the assets held by the trust were
approximately $8.2 million and are recorded within other assets.
The development of the net periodic pension cost and the projected benefit
obligation was based upon the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Discount rate .............................................. 7.25% 7.5% 7.5%
Average rate of increase in employee compensation .......... 4.5% 4.5% 4.5%
Expected long-term rate of return on assets ................ 9.75% 9.0% 9.0%
</TABLE>
The date used to measure plan assets and liabilities was October 31 in
each year. Plan assets are invested primarily in stocks, bonds, short-term
securities and cash equivalents.
Defined Contribution Plan
The Company maintains a defined contribution savings and profit sharing
plan (the "Plan"). The Plan allows eligible employees to participate after six
months and 500 hours of service. Participants may elect to contribute between
1% and 15% of their annual compensation as defined in the Plan. The Company is
obligated to contribute an amount equal to 25% of each employee's basic
contribution, as defined, and may, at the discretion of the Company, contribute
additional amounts. Through June 30, 1997, certain employees participated in a
Company sponsored retirement account in lieu of a defined benefit pension plan.
Generally, the Company made a contribution equal to a certain percentage of a
participating employee's annual salary into the defined contribution plan.
Effective July 1, 1997, the Company amended the Plan for consistency among all
the Company's employees. As a result, future contributions to the retirement
account were eliminated and the assets of the Curtis Matheson Scientific
Savings Incentive Plan were merged into the Plan. For the years ended December
31, 1997, 1996 and 1995 the Company's contributions to the Plan were $3.2
million, $5.0 million and $3.0 million, respectively.
Postretirement Benefits Other Than Pensions
The Company, generally at its own discretion, provides a postretirement
health care program that is administered by the Company to employees who elect
to and are eligible to participate. The Company funds a portion of the costs of
this program on a self-insured and insured-premium basis and, for the years
ended December
F-19
<PAGE>
31, 1997, 1996 and 1995, made premium payments totaling $1.5 million, $1.4
million and $1.1 million, respectively. The funded status of the Company's
postretirement programs was as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees ............................................................ $ 15.2 $ 14.5
Fully eligible active plan participants ............................. 8.8 7.7
Other active plan participants ...................................... 10.3 9.6
------- -------
34.3 31.8
Plan assets at fair value ............................................ -- 0.2
------- -------
Accumulated postretirement benefit obligation in excess of plan assets 34.3 31.6
Prior service benefit ................................................ 16.0 18.1
Unrecognized net gain from past experience different from that
assumed and from assumption changes ................................. 25.4 28.4
------- -------
Accrued postretirement benefit costs other than pensions ............. $ 75.7 $ 78.1
======= =======
</TABLE>
Net periodic postretirement health care benefit obligation income includes
the following components for the years ended December 31 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost attributed to service during the period .......... $ 0.8 $ 0.7 $ 0.9
Interest cost on accumulated postretirement health care
benefit obligation ........................................... 2.3 2.2 1.9
Net amortization and deferral ................................. (4.1) (4.1) (4.0)
------ ------ ------
Net periodic postretirement health care benefit obligation
income ....................................................... $ (1.0) $ (1.2) $ (1.2)
====== ====== ======
</TABLE>
In 1993, the Company amended certain of its existing postretirement health
care programs creating an unrecognized prior service benefit. The unrecognized
prior service benefit is being amortized over approximately 13 years, providing
a $2 million credit to postretirement costs in 1997, 1996 and 1995.
The weighted average discount rate used in determining the accumulated
postretirement health care benefit obligation was 7.25% for December 31, 1997,
and 7.5% for both December 31, 1996, and December 31, 1995. An 8.8% annual rate
of increase in per capita cost of covered health care benefits was assumed for
1997 which decreases to 7.2% for 2000 and thereafter. Because of limitations on
the Company's contributions under the amended health care program, changes in
the health care trend rate assumption do not have a significant effect on the
amounts reported. To illustrate, a change in the assumed health care cost trend
rate by 1 percentage point effective January 1997 would change the accumulated
postretirement benefit obligation as of December 31, 1997 by approximately $2.1
million and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year ended December 31, 1997 by
approximately $0.3 million.
NOTE 17--Stock and Other Plans
Stock Plan
At December 31, 1997, Fisher has three stock option plans, the 1991 Stock
Plan, as amended, (the "1991 Plan"), the 1995 Operating Unit Stock Plan
("OUSP") and the 1997 Equity-Based Incentive Plan (the "1997 Plan"). Following
adoption of the 1997 Plan by the shareholders on May 13, 1997, all of the stock
available for award under the 1991 Plan was incorporated into the 1997 Plan and
made subject to the terms of the 1997 Plan. Outstanding awards under the 1991
Plan remained subject to the terms of the 1991 Plan. Fisher may grant options
for up to 4,604,000 shares of stock under the 1991 Plan and the 1997 Plan and
1,500,000 shares of stock under the OUSP to officers, employees and other
individuals who provide services to the Company. Under these plans, the Company
granted options of 3,134,238 shares and 1,262,153 shares, respectively, through
December 31, 1997. Outstanding options under these stock plans were granted at
100% of market value on the date of grant. The 1991 Plan, the 1997 Plan and
OUSP options have a ten-year term, vest after three years and expire 90 days
after the last day of an employee's employment; 12 months if the employee
retires. In 1995, the Compensation Committee granted stock options to
executives as part of a new program, the Equity Ownership Program ("EOP"),
designed to encourage the Company's executives to make significant,
F-20
<PAGE>
long-term personal investments in Fisher Common Stock. Under the EOP, certain
senior corporate executives made commitments in 1995 to purchase approximately
200,000 shares of Fisher Common Stock during 1996, and were granted options on
a matching basis in 1995; that is, a specified number of options were awarded
for each share the executive committed to purchase during the period. This
purchase commitment was fulfilled in 1996. The EOP options were granted at the
market price of the Fisher Common Stock on the date of the purchase
commitments, and vest over a three-year period. Shares purchased by the
executives in satisfaction of the purchase commitment must be held for the
applicable vesting period covering the related option. The EOP requires full
financing by the executive without Company loans or guarantees. In addition,
other participants were offered the opportunity to receive options under the
EOP upon their purchase of shares of Fisher Common Stock. In light of the
considerable changes to the Company's business and organization during 1995,
the equity-based components of the Incentive Compensation Plan was terminated;
options held by substantially all participants in respect of the performance
period covering 1996 were surrendered, and the Compensation Committee will not
establish any objectives under the Incentive Compensation Plan in the future.
Certain 1995 grants under the EOP and OUSP were conditional upon the
cancellation of certain existing non-vested options held by the executive or
employee. For purposes of the following tables all such cancellations are
presumed to have occurred at December 31, 1995.
A summary of the status of the Company's three stock option plans at
December 31, 1997, 1996 and 1995 and changes during the years then ended is
presented in the table:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
-------- ---------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year ......... 3,630 $31.44 3,552 $28.93 2,473 $24.72
Granted (1) .............................. 474 38.98 694 37.48 2,243 32.66
Exercised ................................ (229) 29.00 (405) 19.28 (218) 15.29
Canceled/Expired/Forfeited(2) ............ (361) 44.97 (211) 32.44 (946) 29.92
----- ------ ----- -----
Outstanding at end of year ............... 3,514 $32.23 3,630 $31.44 3,552 $28.93
===== ===== =====
Exercisable at end of year ............... 1,835 $29.90 1,237 $26.94 938 $18.82
Weighted average fair value of options
granted ................................. $11.52 $9.87 $10.73
</TABLE>
- ------------
(1) 1995 includes 1,084,000 shares granted under the EOP in consideration of
participants' commitments to purchase shares of Fisher Common Stock.
(2) 1995 includes options issued under the Incentive Compensation Plan in
respect to the performance plan covering 1996 that were surrendered in
connection with the termination of such plan.
Pursuant to the Merger Agreement, the vesting of all options accelerated
on the date of the Recapitalization. Of the 3,514,000 options outstanding at
December 31, 1997, approximately 1,344,000 were converted to cash and the
remainder were converted to Fisher Common Stock. When options were converted,
the Company recorded compensation expense of approximately $56 million as
employees did not exercise the options with cash but rather received cash or
shares equal to the product of (x) the total number of shares of Fisher Common
Stock subject to option and (y) the excess of $48.25 over the exercise price per
share of Fisher Common Stock subject to such option, subject to any required
withholdings of taxes. In connection with the Recapitalization, the Company
adopted the 1998 Equity Incentive Plan ("1998 Plan"), under which up to
10,000,000 (post split) shares of Fisher Common Stock are reserved for issuance.
Awards under the 1998 Plan may be made in the form of options (whether incentive
or otherwise), stock appreciation rights, restricted stock, dividend equivalents
and other stock-based awards. Pursuant to the Recapitalization, the Company
granted options to purchase 2,643,220 shares of Fisher Common Stock having a
ten-year term and vesting on a pro rata basis over 5 years. The options have an
exercise price equal to $48.25, the fair market value of a share of Fisher
Common Stock on the date of grant. The Company also granted options to purchase
1,904,000 shares of Fisher Common Stock having a ten-year term and vesting nine
years from the date of grant, unless sooner vested upon the achievement of
certain performance targets and other factors. These options have an exercise
price equal to $96.50 per share. In addition, the Company granted to two
executives, options to purchase 2,583,300 shares of Fisher Common Stock having a
ten-year term and vesting nine years from the date of grant, unless sooner
vested upon the achievement of certain performance
F-21
<PAGE>
targets or unless "put" to the Company by the executive or "called" by the
Company in accordance with their terms. The total "put"/"call" right is
limited to $10 million (plus interest) and was issued in exchange for a
three-year non-compete pursuant to which the executives will agree not to
participate in the scientific instrument or clinical research laboratory
business in the United States. The Company recorded $10 million of compensation
expense related to this "put"/"call" right in January of 1998.
Restricted Unit Plan
Pursuant to the restricted unit plan of Fisher, each non-employee director
of Fisher received a one-time grant of 5,000 units upon becoming a director of
Fisher. The units represent the right to receive an equivalent number of shares
of Fisher Common Stock upon separation from service as a member of the Board of
Directors, subject to certain restrictions. The units are subject to certain
transfer restrictions for a specified period during which the director has the
right to receive dividends. The units vest 25% for each year of service.
Unvested units are generally forfeited if the director ceases to be a
non-employee director prior to the end of the restricted period. During 1996
and 1991, 5,000 and 20,000 units, respectively, were granted under the
restricted unit plan. Pursuant to the Merger Agreement, the vesting of all
units accelerated and the units were converted to cash.
SFAS 123 Pro Forma Disclosures
Had compensation cost for options granted subsequent to January 1, 1995
been based upon fair value determined under SFAS No. 123, the Company's 1997,
1996 and 1995 net income (loss) would have been ($35.9) million, $31.7 million
and $3.0 million, respectively, with basic earnings (loss) per share of
($1.77), $1.73 and $0.18 and diluted earnings (loss) per share of ($1.77),
$1.66 and $0.18. The fair value of each option grant is estimated on the date
of grant using a binomial option pricing model with the following weighted
average assumptions used for grants in 1997, 1996 and 1995: risk-free interest
rates of approximately 6.5%, 6.5% and 5.5% for the 1991 Plan options and 6.3%,
6.0% and 6.0% for the OUSP options; an annual dividend of $0.08 per share;
expected lives of 7 years for the 1991 Plan options and 3 years for the OUSP
options and expected volatility of 25% for grants in 1995 and 1996, and 30% for
grants in 1997. Because the SFAS 123 method of accounting has not been applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
NOTE 18--Tax Sharing Agreement
Fisher and its former parent are parties to a Tax Sharing Agreement that
provides for (i) the payment of taxes for periods during which Fisher and its
former parent were included in the same consolidated, combined or unitary group
for federal, state or local income tax purposes, (ii) the allocation of the
responsibility for the filing of tax returns, (iii) the cooperation of the
parties in realizing certain tax benefits, (iv) the conduct of tax audits and
(v) various related matters. The Company paid approximately $1.4 million
pursuant to this agreement in 1995.
NOTE 19--Restructuring and Other Charges
Following the execution of the Merger Agreement during the fourth quarter
of 1997 and in conjunction with the annual business planning process, the
Company evaluated its business strategy for both its domestic and international
operations, and, as a result, adopted a plan of restructuring (the "1997
Restructuring Plan") and recorded restructuring and other charges of $51.8
million. The charges include costs associated with the closure of additional
logistics and customer-service centers and related asset write-offs in the
United States and internationally and the impairment of goodwill and property,
plant and equipment related to certain international operations and the
impairment of systems-related assets. The restructuring and other charges
consist of $38.3 million related to noncash asset impairments, $9.1 million of
accruals for employee separation arrangements and $4.4 million of exit costs.
Asset impairments include $31.5 million of goodwill and $1.3 million of
property, plant and equipment related to the Company's international
operations. The remaining amounts relate to facilities to be closed under the
U.S. restructuring plan and to system-related assets. The charge for employee
separation arrangements accrues for the termination and other severance costs
associated with the approximately 520 salaried and hourly employees who have
been or will be severed as a result of the 1997 Restructuring Plan.
Approximately 20 employees were terminated as of December 31, 1997. The exit
costs consist principally of future rent, net of estimated sublease rentals,
and other costs related to leased facilities which as a result of the 1997
Restructuring Plan will be closed prior to the contractual termination date of
the leases.
F-22
<PAGE>
In the third quarter of 1995, the Company adopted a restructuring plan
aimed at improving the efficiency and reducing the costs of its global
logistics, customer service and administrative functions (the "1995
Restructuring Plan"). As a result, the Company recorded a restructuring charge
of $34.3 million. The 1995 Restructuring Plan, which anticipated the
integration of the former Fisons businesses, including CMS, with the Company,
included the elimination and in some cases relocation of certain administrative
functions, reorganization of the research sales force and the consolidation and
relocation of certain logistics and customer service systems and locations
throughout the world. Implementation of the 1995 Restructuring Plan is expected
to be completed in conjunction with the 1997 Restructuring Plan. The
restructuring charge consisted of $18.2 million related to noncash asset
impairments, $12.0 million of employee separation arrangements and $4.1 million
of exit costs.
Asset impairments were recorded primarily for certain owned facilities
which were closed and sold in 1996. The net book value of each facility has
been adjusted to its estimated fair market value less costs to sell. The charge
for employee separation arrangements accrues for the termination and other
severance costs associated with the approximately 300 salaried and hourly
employees severed as a result of the 1995 Restructuring Plan, all of which were
terminated prior to December 31, 1997. The exit costs were recorded primarily
to accrue for future rent, net of estimated sublease rentals, and other costs
related to leased facilities that as a result of the 1995 Restructuring Plan
will be closed prior to the contractual termination date of the leases.
The following table summarizes the recorded accruals and impairments
related to the 1997 and 1995 Restructuring Plans (in millions):
<TABLE>
<CAPTION>
Employee
Separations
Asset and Other Exit
Impairments Costs Total
------------- --------------- ----------
<S> <C> <C> <C>
1995 Restructuring Plan
Restructuring charge .................... $ 18.2 $ 16.1 $ 34.3
Cash payments ........................... -- (1.8) (1.8)
Noncash items ........................... (18.2) (0.3) (18.5)
------- ------- -------
Balance as of December 31, 1995 ......... -- 14.0 14.0
Adjustments ............................. 0.8 (0.8) --
Cash payments ........................... -- (6.5) (6.5)
Noncash items ........................... (0.8) -- (0.8)
------- ------- -------
Balance as of December 31, 1996 ......... -- 6.7 6.7
Cash payments ........................... -- (1.9) (1.9)
------- ------- -------
Balance as of December 31, 1997 ......... $ -- $ 4.8 $ 4.8
======= ======= =======
1997 Restructuring Plan
Restructuring and other charges ......... $ 38.3 $ 13.5 $ 51.8
Cash payments ........................... -- (0.2) (0.2)
Noncash items ........................... (38.3) -- (38.3)
------- ------- -------
Balance as of December 31, 1997 ......... $ -- $ 13.3 $ 13.3
======= ======= =======
</TABLE>
The 1995 and 1997 Restructuring Plans also include opening new logistics
facilities and relocating certain customer service and administrative
functions. In accordance with Financial Accounting Standards Board Emerging
Issues Task Force Issue 94-3, "Liability Recognition for Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)", certain costs
resulting from the relocation of inventories, relocation of employees, hiring
and training new employees, and costs resulting from the temporary duplication
of certain operations have not been included in the restructuring charge and
are recognized as incurred.
During the third quarter of 1991, Fisher recorded a $20.0 million
restructuring charge relating primarily to improving operations of its North
American distribution system through consolidation and expansion of certain
facilities. This plan is substantially complete and the remaining $2.6 million
of accruals will be substantially expended by the end of 1998.
The Company's restructuring liabilities are evaluated quarterly, taking
into consideration restructuring activity to date and the status of the
restructuring plans.
F-23
<PAGE>
NOTE 20--Geographical Financial Information
The Company's operations are conducted in one business segment. Selected
geographical financial information for the years ended December 31, 1997, 1996
and 1995 is shown below (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net Sales:
Domestic ........................ $ 1,784.7 $ 1,777.0 $ 1,153.4
Europe .......................... 269.7 265.1 179.5
Other International ............. 120.9 102.3 102.9
---------- ---------- ----------
$ 2,175.3 $ 2,144.4 $ 1,435.8
========== ========== ==========
Income (loss) from Operations:
Domestic (1) .................... $ 70.8 $ 100.2 $ 34.0
Europe (1) ...................... (38.3) (6.2) (13.6)
Other International (1) ......... (11.4) 0.6 (2.2)
---------- ---------- ----------
$ 21.1 $ 94.6 $ 18.2
========== ========== ==========
Identifiable Assets:
Domestic ........................ $ 814.0 $ 851.8 $ 850.4
Europe .......................... 230.6 277.4 275.1
Other International ............. 68.7 65.6 51.2
Corporate and Other ............. 63.2 67.9 93.8
---------- ---------- ----------
$ 1,176.5 $ 1,262.7 $ 1,270.5
========== ========== ==========
</TABLE>
- ------------
(1) Income (loss) from operations includes restructuring and other charges in
domestic, Europe and other international operations of $10.4 million,
$31.3 million and $10.1 million, respectively, in 1997 and $33.0 million,
$1.3 million and $0.0, respectively, in 1995.
Income from operations is revenue less related costs and direct and
allocated expenses. Identifiable corporate and other assets consist principally
of cash, marketable securities, and the assets of Fisher's inactive insurance
subsidiary. Intercompany sales and transfers between segments were not material
for the years ended December 31, 1997, 1996 or 1995.
NOTE 21--Unaudited Quarterly Financial Information
The following is a summary of quarterly financial information for 1997 and
1996 (in millions, except per share amounts):
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------------
First Second Third Fourth Year
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Sales ........................... $526.7 $542.6 $554.8 $551.2 $2,175.3
Gross profit .................... 146.3 148.5 153.0 143.9 591.7
Net income (loss) (a) ........... 11.0 9.6 3.9 (55.0) (30.5)
Earnings (loss) per common share:
Basic .......................... $ 0.54 $ 0.48 $ 0.19 $(2.70) $ (1.50)
Diluted ........................ 0.53 0.47 0.18 (2.70) (1.50)
</TABLE>
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------
First Second Third Fourth Year
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Sales .......................... $516.0 $532.2 $541.0 $555.2 $2,144.4
Gross profit ................... 135.6 142.9 146.4 153.6 578.5
Net income ..................... 4.5 8.4 11.5 12.4 36.8
Earnings per common share:
Basic ......................... $ 0.27 $ 0.51 $ 0.58 $ 0.62 $ 2.01
Diluted ....................... 0.27 0.46 0.56 0.60 1.90
</TABLE>
- ------------
NOTE: Amounts may not add due to rounding.
(a) During the fourth quarter of 1997, the Company recorded $51.8 million
($47.0 million, net of tax) of restructuring and other charges. See Note
19.
F-24
<PAGE>
======================================= =======================================
No dealer, salesperson or any
other individual has been authorized $400,000,000
to give any information or make any
representations, other than those
contained in this Prospectus in
connection with the offer made by this
Prospectus, and, if given or made,
such information or representations
must not be relied upon as having been
authorized by the Company, Thomas H.
Lee Company or the Initial Purchasers.
This Prospectus does not constitute an
offer to sell or a solicitation of an
offer to buy any security other than
those to which it relates nor does it [FISHER SCIENTIFIC
constitute an offer to sell, or a INTERNATIONAL INC. LOGO]
solicitation of an offer to buy the
securities offered hereby, in any
jurisdiction where, or to any person
to whom, it is unlawful to make such
offer or solicitation. Neither the
delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication
that there has not been a change in
the facts set forth in this Prospectus
or in the affairs of the Company since
the date hereof.
------------------------------ 9% Senior Subordinated
TABLE OF CONTENTS Notes due 2008
Page
----
Forward-Looking Statements ..... i
Available Information .......... i
Incorporation of Certain
Documents by Reference ...... i
Summary ........................ 1
Risk Factors ................... 12
The Recapitalization ........... 18
Use of Proceeds ................ 18
Capitalization ................. 19
Unaudited Pro Forma
Financial Statements ........ 20
Management's Discussion
and Analysis of
Financial Condition
and Results of Operations ... 26 ----------
The Exchange Offer ............. 34 PROSPECTUS
Business ....................... 40 ----------
Management ..................... 46
Security Ownership of
Certain Beneficial
Owners and Management ....... 53
Certain Transactions and
Other Matters ............... 55
Description of Other
Indebtedness ................ 56
Description of Other
Financing ................... 57
Description of the Notes ....... 58
Exchange Offer;
Registration Rights ......... 84
Certain Federal Income
Tax Considerations .......... 86
Plan of Distribution ........... 89
Legal Matters .................. 89
Independent Auditors ........... 89
Index to Financial Statements .. F-1 , 1998
Until , 1998 (90 days
following the date of this
Prospectus), all dealers effecting
transactions in the New Notes whether
or not participating in the Exchange
Offer may be required to deliver a
Prospectus.
======================================= =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes and empowers
the Registrant to indemnify the directors, officers, employees and agents of the
Registrant against liabilities incurred in connection with, and related expenses
resulting from, any claim, action or suit brought against any such person as a
result of his relationship with the Registrant, provided that such persons acted
in good faith and in a manner such person reasonably believed to be in, and not
opposed to, the best interests of the Registrant in connection with the acts or
events on which such claim, action or suit is based. The finding of either civil
or criminal liability on the part of such persons in connection with such acts
or events is not necessarily determinative of the question of whether such
persons have met the required standard of conduct and are, accordingly, entitled
to be indemnified. The foregoing statements are subject to the detailed
provisions of Section 145 of the General Corporation Law of the State of
Delaware.
The Registrant's Restated Certificate of Incorporation provides that each
person who at any time is or shall have been a director or officer of the
Registrant, or is or shall have been serving another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity
at the request of the Registrant, and his heirs, executors and administrators,
shall be indemnified by the Company in accordance with and to the full extent
permitted by the General Corporation Law of the State of Delaware. Section 15 of
the Registrant's Restated Certificate of Incorporation facilitates enforcement
of indemnification rights by establishing the indemnification right as a
contract right pursuant to which the person entitled thereto may bring suit as
if the indemnification provisions of the Restated Certificate of Incorporation
were set forth in a separate written contract between the Registrant and the
director or officer.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of Exhibits to this Registration
Statement:
EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------
3.1 -- Certificate of Designations of Series A Junior Participating
Preferred Stock, dated June 9, 1997. (1)
3.2 -- Restated Certificate of Incorporation of the Company. (2)
3.3 -- Bylaws of the Company. (3)
4.1 -- Indenture dated as of January 21, 1998 between Fisher Scientific
International Inc. and State Street Bank and Trust Company N.A. (4)
4.2 -- Senior Debt Securities Indenture dated as of December 18, 1995
between the Company and Mellon Bank, N.A., as Trustee. (2)
4.3 -- Certificate of Designations of Series A Junior Participating
Preferred Stock, dated June 9, 1997 (see Exhibit 3.1).
4.4 -- Rights Agreement dated as of June 9, 1997, between the Company and
ChaseMellon Shareholder Services L.L.P., as Rights Agent, which
includes the form of Right Certificate as Exhibit A and the Summary
of Rights to Purchase Common Shares as Exhibit B. (5)
4.5 -- First Amendment to Rights Agreement, dated as of August 7, 1997,
between the Company and ChaseMellon Shareholder Services, L.L.C. (6)
4.6 -- Commitment Letters in connection with the Recapitalization. (7)
4.7 -- Specimen Certificate of Common Stock, $.01 par value per share, of
the Company. (8)
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding
legality of securities being registered.*
10.1 -- Registration Rights Agreement dated as of January 21, 1998 among the
Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation.*
10.2 -- Second Amended and Restated Agreement and Plan of Merger, dated as
of November 14, 1997, by and between the Company and FSI Merger
Corp. (7).
II-1
<PAGE>
10.3 -- Investors' Agreement dated January 21, 1998 among (i) Thomas H. Lee
Equity Fund III, L.P., certain individuals associated with THL,
THL-CCI Limited Partnership, THL Foreign Fund III, L.P., and THL FSI
Equity Investors, L.P. (collectively, the "THL Entities"), (ii) DLJ
Merchant Banking Parnters II, L.P., DLJ Offshore Partners II, C.V.,
DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., DLJ Merchant
Banking Partners II-A, L.P., DLJ Diversified Partners-A, L.P., DLJ
Millenium Partners, L.P., DLJ Millenium Partners, A, L.P., UK
Investment Plan 1997 Partners DLJ EAB Partners, L.P., DLJESC II,
L.P. and DLJ First ESC, L.P. (collectively, the "DLJ Entities"),
(iii) Chase Equity Associates, L.P. ("Chase Equity") and (iv)
Merrill Lynch KECALP L.P. 1997, KECALP Inc., and ML IBK Positions,
Inc. (1)
10.4 -- Credit Agreement dated as of January 21, 1998 among the Company,
certain subsidiaries of the Company, various lending institutions,
The Chase Manhattan Bank, as Administrative Agent, The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent, Chase
Manhattan International Limited, as U.K. Administrative Agent,
Merrill Lynch Capital Corporation, as Syndication Agent, and DLJ
Capital Funding, Inc., as Documentation Agent. (4)
10.5 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Michael D. Dingman. (1)
10.6 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Denis N. Maiorani. (1)
10.7 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Paul M. Meister. (1)
10.8 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Paul M. Montrone. (1)
10.9 -- Rights Agreement dated as of June 9, 1997, between the Company and
ChaseMellon Shareholder Services L.L.P., as Rights Agent, which
includes the form of Right Certificate as Exhibit A and the Summary
of Rights to Purchase Common Shares as Exhibit B (see Exhibit 4.4).
10.10 -- First Amendment to Rights Agreement, dated as of August 7, 1997,
between the Company and ChaseMellon Shareholder Services, L.L.C.
(see Exhibit 4.4).
10.11 -- Second Amended and Restated Agreement and Plan of Merger, dated as
of November 14, 1997, by and between the Company and FSI Merger
Corp. (see Exhibit 10.1).
10.12 -- Commitment Letters in connection with the Transaction. (7)
10.13 -- Restated Environmental Matters Agreement, dated as of February 26,
1986, as amended and restated as of July 28, 1989, among
Allied-Signal Inc., The Henley Group, Inc., The Wheelabrator Group
Inc., New Hampshire Oak, Inc. and Fisher Scientific Group Inc. (8)
10.14 -- Amended and Restated Credit Agreement dated as of February 12, 1996,
amending and restating the Term Loan and Revolving Credit Agreement,
dated as of October 16, 1995 among Fisher Scientific International
Inc., Certain Commercial Lending Institutions and Toronto Dominion
(Texas), Inc. (9)
10.15 -- Amendment No. 1 dated February 12, 1996 to the Term Loan Agreement,
dated October 16, 1995 among Fisher Scientific International Inc.,
Fisher Scientific U.K. Limited, Certain Commercial Lending
Institutions and The Toronto Dominion Bank. (9)
10.16 -- 1991 Stock Plan for Executive Employees of Fisher Scientific
International Inc. and its Subsidiaries. (10)
10.17 -- Fisher Scientific International Inc. Retirement Plan. (3)
10.18 -- Fisher Scientific International Inc. Savings and Profit Sharing
Plan. (3)
10.19 -- Fisher Scientific International Inc. Incentive Compensation Plan.
(9)
10.20 -- Restricted Unit Plan for Non-Employee Directors of Fisher Scientific
International Inc. (3)
10.21 -- Fisher Scientific International Inc. Deferred Compensation Plan for
Non-Employee Directors. (3)
10.22 -- Retirement Plan for Non-Employee Directors of Fisher Scientific
International Inc. (3)
10.23 -- Fisher Scientific International Inc. Long-Term Incentive Plan. (10)
10.24 -- 1995 Operating Unit Stock Plan (9)
10.25 -- Employment Agreement, dated May 23, 1995, between Fisher and Michael
J. Quinn. (9)
II-2
<PAGE>
10.26 -- Fisher Scientific International Inc. 1998 Equity and Incentive Plan.
(1)
12.1 -- Statements re: Computation of Ratios.*
21.1 -- List of Subsidiaries of the Company. (11)
23.1 -- Consent of Deloitte & Touche LLP.*
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP.--(included in
Exhibit 5.1).
24.1 -- Powers of attorney (included on the signature pages to this
Registration Statement).
25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939 of
State Street Bank and Trust Company on Form T-1.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Note of Guaranteed Delivery.*
99.3 -- Form of Letter to Clients.*
99.4 -- Form of Letter to Brokers, Dealers, Trust Companies and Other
Nominees.*
- ------------
* Filed herewith
(1) Included as an exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-42777) filed with the Securities and Exchange
Commission on December 19, 1997 and amended on February 2, 1998.
(2) Included as an exhibit to the Company's Registration Statement on Form S-3
(Registration No. 3-99884) filed with the Securities and Exchange
Commission on November 30, 1995 and incorporated herein by reference.
(3) Included in an exhibit to the Company's Form 10-K for the year ended
December 31, 1992, filed with the Securities and Exchange Commission on
March 24, 1993 and incorporated herein by reference.
(4) Included as an exhibit to the Company's Current Report on Form 8-K
(Registration No. 001-10920) filed with the Securities and Exchange
Commission on February 5, 1998.
(5) Included as an exhibit to the Company's Registration Statement on Form 8-A
filed with the Securities and Exchange Commission on June 9, 1997 and
incorporated herein by reference.
(6) Included as an exhibit to the Company's Current Report on Form 8-K dated
August 7, 1997, filed with the Securities and Exchange Commission on August
8, 1997 and incorporated herein by reference.
(7) Included as an Annex to the proxy statement/prospectus included in the
Company's Registration Statement on Form S-4 (Registration No. 333-42777)
filed with the Securities and Exchange Commission on December 19, 1997 and
amended on February 2, 1998.
(8) Included as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-43505) filed with the Securities and Exchange
Commission on October 23, 1991 and incorporated herein by reference.
(9) Included in an exhibit to the Company's Form 10-K for the year ended
December 31, 1995, filed with the Securities and Exchange Commission on
March 21, 1996 and incorporated herein by reference.
(10) Included in an exhibit to the Company's Form 10-K for the year ended
December 31, 1994, filed with the Securities and Exchange Commission on
March 24, 1995 and incorporated herein by reference.
(11) Included as an exhibit to the Company's Form 10-K for the year ended
December 31, 1996, filed with the Securities and Exchange Commission on
March 27, 1997 and incorporated herein by reference.
II-3
<PAGE>
Item 22. Undertakings.
The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) 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.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 20 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Hampton,
State of New Hampshire on the 19th day of March, 1998.
Fisher Scientific International Inc.
By: /s/ Todd M. DuChene
-------------------------------------
Todd M. DuChene
Vice President, General Counsel
and Secretary
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Todd M.
DuChene, Kevin P. Clark and Paul M. Meister, and each of them individually
without the others, as his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
fully to all intents and purposes as he might or could do in person thereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by the virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on its behalf by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Paul M. Montrone President, Chief Executive March 19, 1998
- ----------------------------- and Director (principal
Paul M. Montrone executive officer)
/s/ Paul M. Meister Executive Vice President, March 19, 1998
- ----------------------------- Chief Financial Officer and
Paul M. Meister Director (principal financial
and accounting officer)
/s/ Mitchell J. Blutt Director March 19, 1998
- -----------------------------
Mitchell J. Blutt
/s/ Robert A. Day Director March 19, 1998
- -----------------------------
Robert A. Day
/s/ Anthony J. DiNovi Director March 19, 1998
- -----------------------------
Anthony J. DiNovi
/s/ Michael D. Dingman Director March 19, 1998
- -----------------------------
Michael D. Dingman
/s/ David V. Harkins Director March 19, 1998
- -----------------------------
David V. Harkins
/s/ Scott M. Sperling Director March 19, 1998
- -----------------------------
Scott M. Sperling
/s/ Kent R. Weldon Director March 19, 1998
- -----------------------------
Kent R. Weldon
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------
3.1 -- Certificate of Designations of Series A Junior Participating
Preferred Stock, dated June 9, 1997. (1)
3.2 -- Restated Certificate of Incorporation of the Company. (2)
3.3 -- Bylaws of the Company. (3)
4.1 -- Indenture dated as of January 21, 1998 between Fisher Scientific
International Inc. and State Street Bank and Trust Company N.A. (4)
4.2 -- Senior Debt Securities Indenture dated as of December 18, 1995
between the Company and Mellon Bank, N.A., as Trustee. (2)
4.3 -- Certificate of Designations of Series A Junior Participating
Preferred Stock, dated June 9, 1997 (see Exhibit 3.1).
4.4 -- Rights Agreement dated as of June 9, 1997, between the Company and
ChaseMellon Shareholder Services L.L.P., as Rights Agent, which
includes the form of Right Certificate as Exhibit A and the Summary
of Rights to Purchase Common Shares as Exhibit B. (5)
4.5 -- First Amendment to Rights Agreement, dated as of August 7, 1997,
between the Company and ChaseMellon Shareholder Services, L.L.C. (6)
4.6 -- Commitment Letters in connection with the Recapitalization. (7)
4.7 -- Specimen Certificate of Common Stock, $.01 par value per share, of
the Company. (8)
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding
legality of securities being registered.*
10.1 -- Registration Rights Agreement dated as of January 21, 1998 among the
Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Chase Securities Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation.*
10.2 -- Second Amended and Restated Agreement and Plan of Merger, dated as
of November 14, 1997, by and between the Company and FSI Merger
Corp. (7).
10.3 -- Investors' Agreement dated January 21, 1998 among (i) Thomas H. Lee
Equity Fund III, L.P., certain individuals associated with THL,
THL-CCI Limited Partnership, THL Foreign Fund III, L.P., and THL FSI
Equity Investors, L.P. (collectively, the "THL Entities"), (ii) DLJ
Merchant Banking Parnters II, L.P., DLJ Offshore Partners II, C.V.,
DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., DLJ Merchant
Banking Partners II-A, L.P., DLJ Diversified Partners-A, L.P., DLJ
Millenium Partners, L.P., DLJ Millenium Partners, A, L.P., UK
Investment Plan 1997 Partners DLJ EAB Partners, L.P., DLJESC II,
L.P. and DLJ First ESC, L.P. (collectively, the "DLJ Entities"),
(iii) Chase Equity Associates, L.P. ("Chase Equity") and (iv)
Merrill Lynch KECALP L.P. 1997, KECALP Inc., and ML IBK Positions,
Inc. (1)
10.4 -- Credit Agreement dated as of January 21, 1998 among the Company,
certain subsidiaries of the Company, various lending institutions,
The Chase Manhattan Bank, as Administrative Agent, The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent, Chase
Manhattan International Limited, as U.K. Administrative Agent,
Merrill Lynch Capital Corporation, as Syndication Agent, and DLJ
Capital Funding, Inc., as Documentation Agent. (4)
10.5 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Michael D. Dingman. (1)
10.6 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Denis N. Maiorani. (1)
10.7 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Paul M. Meister. (1)
10.8 -- Change-of-Control Employment Agreement, dated July 31, 1997 between
Fisher and Paul M. Montrone. (1)
II-6
<PAGE>
10.9 -- Rights Agreement dated as of June 9, 1997, between the Company and
ChaseMellon Shareholder Services L.L.P., as Rights Agent, which
includes the form of Right Certificate as Exhibit A and the Summary
of Rights to Purchase Common Shares as Exhibit B (see Exhibit 4.4).
10.10 -- First Amendment to Rights Agreement, dated as of August 7, 1997,
between the Company and ChaseMellon Shareholder Services, L.L.C.
(see Exhibit 4.4).
10.11 -- Second Amended and Restated Agreement and Plan of Merger, dated as
of November 14, 1997, by and between the Company and FSI Merger
Corp. (see Exhibit 10.1).
10.12 -- Commitment Letters in connection with the Transaction. (7)
10.13 -- Restated Environmental Matters Agreement, dated as of February 26,
1986, as amended and restated as of July 28, 1989, among
Allied-Signal Inc., The Henley Group, Inc., The Wheelabrator Group
Inc., New Hampshire Oak, Inc. and Fisher Scientific Group Inc. (8)
10.14 -- Amended and Restated Credit Agreement dated as of February 12, 1996,
amending and restating the Term Loan and Revolving Credit Agreement,
dated as of October 16, 1995 among Fisher Scientific International
Inc., Certain Commercial Lending Institutions and Toronto Dominion
(Texas), Inc. (9)
10.15 -- Amendment No. 1 dated February 12, 1996 to the Term Loan Agreement,
dated October 16, 1995 among Fisher Scientific International Inc.,
Fisher Scientific U.K. Limited, Certain Commercial Lending
Institutions and The Toronto Dominion Bank. (9)
10.16 -- 1991 Stock Plan for Executive Employees of Fisher Scientific
International Inc. and its Subsidiaries. (10)
10.17 -- Fisher Scientific International Inc. Retirement Plan. (3)
10.18 -- Fisher Scientific International Inc. Savings and Profit Sharing
Plan. (3)
10.19 -- Fisher Scientific International Inc. Incentive Compensation Plan.
(9)
10.20 -- Restricted Unit Plan for Non-Employee Directors of Fisher Scientific
International Inc. (3)
10.21 -- Fisher Scientific International Inc. Deferred Compensation Plan for
Non-Employee Directors. (3)
10.22 -- Retirement Plan for Non-Employee Directors of Fisher Scientific
International Inc. (3)
10.23 -- Fisher Scientific International Inc. Long-Term Incentive Plan. (10)
10.24 -- 1995 Operating Unit Stock Plan (9)
10.25 -- Employment Agreement, dated May 23, 1995, between Fisher and Michael
J. Quinn. (9)
10.26 -- Fisher Scientific International Inc. 1998 Equity and Incentive Plan.
(1)
12.1 -- Statements re: Computation of Ratios.*
21.1 -- List of Subsidiaries of the Company. (11)
23.1 -- Consent of Deloitte & Touche LLP.*
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP.--(included in
Exhibit 5.1).
24.1 -- Powers of attorney (included on the signature pages to this
Registration Statement).
25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939 of
State Street Bank and Trust Company on Form T-1.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Note of Guaranteed Delivery.*
99.3 -- Form of Letter to Clients.*
99.4 -- Form of Letter to Brokers, Dealers, Trust Companies and Other
Nominees.*
- ------------
* Filed herewith
(1) Included as an exhibit to the Company's Registration Statements on Form S-4
(Registration No. 333-42777) filed with the Securities and Exchange
Commission on December 19, 1997 and amended on February 2, 1998.
(2) Included as an exhibit to the Company's Registration Statement on Form S-3
(Registration No. 3-99884) filed with the Securities and Exchange
Commission on November 30, 1995 and incorporated herein by reference.
(3) Included in an exhibit to the Company's Form 10-K for the year ended
December 31, 1992, filed with the Securities and Exchange Commission on
March 24, 1993 and incorporated herein by reference.
II-7
<PAGE>
(4) Included as an exhibit to the Company's Cural Report on Form 8-K
(Registration No. 001-10920) filed with the Securities and Exchange
Commission on February 5, 1998.
(5) Included as an exhibit to the Company's Registration Statement on Form 8-A
filed with the Securities and Exchange Commission on June 9, 1997 and
incorporated herein by reference.
(6) Included as an exhibit to the Company's Current Report on Form 8-K dated
August 7, 1997, filed with the Securities and Exchange Commission on August
8, 1997 and incorporated herein by reference.
(7) Included as an Annex to the proxy statement/prospectus included in the
Company's Registration Statement on Form S-4 (Registration No. 333-92777)
filed with the Securities and Exchange Commission on December 19, 1997 and
amended on February 28, 1998.
(8) Included as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-43505) filed with the Securities and Exchange
Commission on October 23, 1991 and incorporated herein by reference.
(9) Included in an exhibit to the Company's Form 10-K for the year ended
December 31, 1995, filed with the Securities and Exchange Commission on
March 21, 1996 and incorporated herein by reference.
(10) Included in an exhibit to the Company's Form 10-K for the year ended
December 31, 1994, filed with the Securities and Exchange Commission on
March 24, 1995 and incorporated herein by reference.
(11) Included as an exhibit to the Company's Form 10-K for the year ended
December 31, 1996, filed with the Securities and Exchange Commission on
March 27, 1997 and incorporated herein by reference.
II-8
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
March 19, 1998
Fisher Scientific International Inc.
Liberty Lane
Hampton, NH 03842
Re: Fisher Scientific International Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to Fisher Scientific
International Inc., a Delaware corporation (the "Company"), in connection with
the public offering of $400,000,000 aggregate principal amount of the Company's
9% Senior Subordinated Notes due 2008 (the "Notes"). The Notes are to be issued
pursuant to an exchange offer (the "Exchange Offer") in exchange for a like
principal amount of the issued and outstanding 9% Senior Subordinated Notes due
2008 of the Company (the "Old Notes") under an Indenture dated as of January 21,
1998 (the "Indenture"), by and among the Company and State Street Bank and Trust
Company, as Trustee (the "Trustee"), as contemplated by the Registration Rights
Agreement dated January 21, 1998 (the "Registration Rights Agreement"), by and
among the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Chase
Securities Inc.
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of
1933, as amended (the "Act").
<PAGE>
Fisher Scientific International Inc.
March 19, 1998
Page 2
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission (the "Commission") on March 18, 1998 under the Act (the "Registration
Statement"); (ii) an executed copy of the Registration Rights Agreement; (iii)
an executed copy of the Indenture; (iv) the Restated Certificate of
Incorporation of the Company, as amended to date; (v) the By-Laws of the
Company, as amended to date; (vi) certain resolutions adopted by the Board of
Directors of the Company relating to the Exchange Offer, the issuance of the Old
Notes and the Notes, the Indenture and related matters; (vii) the Form T-1 of
the Trustee filed as an exhibit to the Registration Statement; and (viii) the
form of the Notes. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Company and
such agreements, certificates of public officials, certificates of officers or
other representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power, corporate
or other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of the
Company and others.
<PAGE>
Fisher Scientific International Inc.
March 19, 1998
Page 3
Members of our firm are admitted to the bar in the State of
New York, and we do not express any opinion as to the laws of any other
jurisdiction other than the Delaware General Corporation Law.
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that when the Notes have been duly executed and authenticated in
accordance with the terms of the Indenture and have been delivered upon
consummation of the Exchange Offer against receipt of Old Notes surrendered in
exchange therefor in accordance with the terms of the Exchange Offer, the Notes
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the extent that
enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
In rendering the opinions set above, we have assumed that the
execution, authentication and delivery by the Company of the Notes do not and
will not violate, conflict with or constitute a default under (i) any agreement
or instrument to which the Company or its properties is subject (except that we
do not make the assumption set forth in this clause (i) with respect to the
Company's Restated Certificate of Incorporation, the Company's By-Laws, the
Indenture, or the Registration Rights Agreement), (ii) any law, rule, or
regulation to which the Company is subject (except that we do not make the
assumption set forth in this clause (ii) with respect to the Delaware General
Corporation Law and those laws, rules and regulations of the State of New York
and the United States of America, in each case, which, in our experience, are
normally applicable to transactions of the type contemplated by the Exchange
Offer (other than the United States federal securities laws, state securities or
Blue Sky laws, antifraud laws and the rules and regulations of the National
Association of Securities Dealers, Inc.), but without our having made any
special investigation with respect to any other laws, rules or
<PAGE>
Fisher Scientific International Inc.
March 19, 1998
Page 4
regulations), (iii) any judicial or regulatory order or decree of any
governmental authority or (iv) any consent, approval, license, authorization or
validation of, or filing, recording or registration with any governmental
authority.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate
Meagher & Flom LLP
------------------------------------
---------------------
Registration Rights Agreement
Dated As of January 21, 1998
among
Fisher Scientific International Inc.
and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Chase Securities Inc.
and
Donaldson, Lufkin & Jenrette Securities Corporation
---------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into this 21st day of January, 1998, among Fisher Scientific
International Inc., a Delaware corporation (the "Company"), and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated January 13, 1998, between the Company and the Initial Purchasers (the
"Purchase Agreement"), which provides for, among other things, the sale by the
Company to the Initial Purchasers of an aggregate of $400 million principal
amount of the Company's 9% Senior Subordinated Notes due 2008, Series A (the
"Securities"). In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees the registration rights set forth in
this Agreement. The execution of this Agreement is a condition to the closing
under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of l934, as
amended from time to time.
"Affiliated Market Maker" shall mean any Initial Purchaser who
is required to by applicable law to deliver a prospectus in connection
with sales or market making activities with respect to the Exchange
Securities.
"Closing Date" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" see the preamble hereto and shall also include the
Company's successors.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Company, provided, however, that such
depositary must have an address in the Borough of Manhattan, in the
City of New York.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2.1 hereof.
-1-
<PAGE>
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, including the Prospectus contained therein, all
exhibits thereto and all documents incorporated by reference therein.
"Exchange Period" see Section 2.1 hereof.
"Exchange Securities" shall mean the 9% Senior Subordinated
Notes due 2008, Series B to be issued by the Company under the
Indenture containing terms identical to the Securities in all material
respects (except that (i) interest thereon shall accrue from the last
date on which interest was paid on the Securities or, if no such
interest has been paid, from January 21, 1998 and (ii) the transfer
restrictions thereon shall be eliminated), to be offered to Holders of
Securities in exchange for Registrable Securities pursuant to the
Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long as it
owns any Registrable Securities, and each of its successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture and each Participating
Broker-Dealer that holds Exchange Securities for so long as such
Participating Broker-Dealer is required to deliver a prospectus meeting
the requirements of the 1933 Act in connection with any resale of such
Exchange Securities.
"Indenture" shall mean the Indenture relating to the
Securities, dated as of January 21, 1998, between the Company and State
Street Bank and Trust Company, as trustee, as the same may be amended,
supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof.
"Initial Purchaser" or "Initial Purchasers" see the preamble
hereto.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Outstanding (as defined in the Indenture)
Registrable Securities; provided that whenever the consent or approval
of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company and
other obligors on the Securities or any Affiliate (as defined in the
Indenture) of the Company shall be disregarded in determining whether
such consent or approval was given by the Holders of such required
percentage amount.
"Participating Broker-Dealer" shall mean any of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and any other broker-dealer
that holds registrable Securities acquired for its own account as a
result of market making activities in the Securities and that will be
the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) of
Exchange Securities to be received by such broker-dealer in the
Exchange Offer.
-2-
<PAGE>
"Person" shall mean an individual, partnership (general or
limited), corporation, limited liability company, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Private Exchange" see Section 2.1 hereof.
"Private Exchange Securities" see Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including any such prospectus supplement with respect to
the terms of the offering of any portion of the Registrable Securities
covered by a Shelf Registration Statement, and by all other amendments
and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference
therein.
"Purchase Agreement" see the preamble hereto.
"Registrable Securities" shall mean the Securities and, if
issued, the Private Exchange Securities; provided, however, the
Securities and, if issued, the Private Exchange Securities shall cease
to be Registrable Securities when (i) a Registration Statement with
respect to such Securities or Private Exchange Securities for the
exchange or resale thereof, as the case may be, shall have been
declared effective under the 1933 Act and such Securities or Private
Exchange Securities, as the case may be, shall have been disposed of
pursuant to such Registration Statement, (ii) such Securities or
Private Exchange Securities, as the case may be, have been sold to the
public pursuant to Rule l44 (or any similar provision then in force,
but not Rule 144A) under the 1933 Act, (iii) such Securities or Private
Exchange Securities, as the case may be, shall have ceased to be
Outstanding (as defined in the Indenture) or (iv) with respect to the
Securities, the Exchange Offer is consummated (except in the case of
Securities purchased from the Company and continued to be held by the
Initial Purchasers and except with respect to any Securities as to
which clause (iv) of Section 2.2 is applicable).
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC or National
Association of Securities Dealers, Inc. (the "NASD") registration and
filing fees, including, if applicable, the fees and expenses of any
"qualified independent underwriter" (and its counsel) that is required
to be retained by any holder of Registrable Securities in accordance
with the rules and regulations of the NASD, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue
sky laws and compliance with the rules of the NASD (including
reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with blue sky qualification of any of the
Exchange Securities or Registrable Securities and any filings with the
NASD), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges, (v) all rating agency fees, (vi) the
-3-
<PAGE>
fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses
of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, (vii) the fees and expenses of the
Trustee, and any exchange agent or custodian, (viii) the reasonable
fees and expenses of the Initial Purchasers in connection with the
Exchange Offer, except for legal expenses which are separately provided
for in clause (ix) hereof, (ix) the reasonable fees, disbursements and
expenses of Cahill Gordon & Reindel (or such other counsel in lieu
thereof reasonably satisfactory to the Majority Holders and the
Company) as special counsel to the Initial Purchasers in the Exchange
Offer and as special counsel representing the Holders of Registrable
Securities and (x) any fees and disbursements of the underwriters
customarily required to be paid by issuers or sellers of securities and
the reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement, but excluding
underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a
Holder.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement,
and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency or government body performing the functions currently
performed by the United States Securities and Exchange Commission.
"Securities" see the preamble hereto.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2.2 hereof.
"Shelf Registration Event" see Section 2.2 hereof.
"Shelf Registration Event Date" see Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2.2 of this Agreement which covers all of the Registrable
Securities or all of the Private Exchange Securities on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"TIA" shall mean the Trust Indenture Act of 1939, as amended
from time to time.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
2. Registration Under the 1933 Act.
-4-
<PAGE>
2.1. Exchange Offer. To the extent not prohibited by any
applicable law or interpretation of the staff of the SEC, the Company shall, for
the benefit of the Holders, at the Company's cost, use its best efforts, to (A)
prepare and, as soon as practicable but not later than 60 days following the
Closing Date, file with the SEC an Exchange Offer Registration Statement on an
appropriate form under the 1933 Act with respect to a proposed Exchange Offer
and the issuance and delivery to the Holders, in exchange for the Registrable
Securities, a like principal amount of Exchange Securities (other than Private
Exchange Securities), (B) cause the Exchange Offer Registration Statement to be
declared effective under the 1933 Act within 135 days of the Closing Date, (C)
keep the Exchange Offer Registration Statement effective until the closing of
the Exchange Offer and (D) cause the Exchange Offer to be consummated not later
than 165 days following the Closing Date. Upon the effectiveness of the Exchange
Offer Registration Statement, the Company shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
eligible and electing to exchange Registrable Securities for Exchange Securities
(assuming that such Holder (a) is not an affiliate of the Company within the
meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering
Registrable Securities acquired directly from the Company for its own account,
(c) acquired the Exchange Securities in the ordinary course of such Holder's
business and (d) has no arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Securities) to transfer such Exchange Securities from and after their receipt
without any limitations or restrictions under the 1933 Act and under state
securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(a) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period
of not less than 30 calendar days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange
Offer;
(d) permit Holders to withdraw tendered Registrable Securities
at any time prior to 5:00 p.m. (New York City Time), on the last business day of
the Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for exchange,
and a statement that such Holder is withdrawing his election to have such
Securities exchanged;
(e) notify each Holder that any Registrable Security not
tendered will remain outstanding and continue to accrue interest, but will not
retain any rights under this Agreement (except in the case of the Initial
Purchasers and Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
-5-
<PAGE>
If any Initial Purchaser determines upon the advice of its
outside counsel that it is not eligible to participate in the Exchange Offer
with respect to the exchange of Securities constituting any portion of an unsold
allotment in the initial distribution, as soon as practicable upon receipt by
the Company of a written request from such Initial Purchaser, the Company shall,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue and deliver to such Initial Purchaser in exchange (the "Private
Exchange") for the Securities held by such Initial Purchaser, a like principal
amount of debt securities of the Company on a senior basis, that are identical
(except that such securities shall bear appropriate transfer restrictions) to
the Exchange Securities (the "Private Exchange Securities").
The Exchange Securities and the Private Exchange Securities
shall be issued under (i) the Indenture or (ii) an indenture identical in all
material respects to the Indenture and which, in either case, has been qualified
under the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from
such qualification and shall provide that the Exchange Securities shall not be
subject to the transfer restrictions set forth in the Indenture but that the
Private Exchange Securities shall be subject to such transfer restrictions. The
Indenture or such indenture shall provide that the Exchange Securities, the
Private Exchange Securities and the Securities shall vote and consent together
on all matters as one class and that none of the Exchange Securities, the
Private Exchange Securities or the Securities will have the right to vote or
consent as a separate class on any matter. The Private Exchange Securities shall
be of the same series as and the Company will seek to cause the CUSIP Service
Bureau to issue the same CUSIP numbers for the Private Exchange Securities as
for the Exchange Securities issued pursuant to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Registrable Securities duly
tendered and not validly withdrawn pursuant to the Exchange Offer or
the Private Exchange;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities so accepted for exchange by the
Company; and
(iii) issue, and cause the Trustee promptly to authenticate
and deliver Exchange Securities or Private Exchange Securities, as the
case may be, to each Holder of Registrable Securities so accepted for
exchange in a principal amount equal to the principal amount of the
Registrable Securities of such Holder so accepted for exchange.
Interest on each Exchange Security and Private Exchange
Security will accrue from the last date on which interest was paid on the
Registrable Securities surrendered in exchange therefor or, if no interest has
been paid on the Registrable Securities, from the date of original issuance. The
Exchange Offer and the Private Exchange shall not be subject to any conditions,
other than (i) that the Exchange Offer or the Private Exchange, or the making of
any exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) the due tendering of Registrable
Securities in accordance with the Exchange Offer and the Private Exchange, (iii)
that each Holder of Registrable Securities exchanged in the Exchange Offer shall
have represented that it is not an affiliate of the Company within the meaning
of Rule 405 under the 1933 Act or, if it is an affiliate, that such holder will
comply with the registration and prospectus delivery requirements of the 1933
Act to the extent applicable, that all Exchange Securities to be received by it
shall be acquired in the ordinary course of its
-6-
<PAGE>
business and that at the time of the consummation of the Exchange Offer it shall
have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange Securities and
shall have made such other representations as may be customary or reasonably
necessary under applicable SEC rules, regulations or interpretations to render
the use of Form S-4 or other appropriate form under the 1933 Act available and
(iv) that no action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency with respect to the Exchange
Offer or the Private Exchange which, in the Company's judgment, would reasonably
be expected to impair the ability of the Company to proceed with the Exchange
Offer or the Private Exchange. The Company shall inform the Initial Purchasers
of the names and addresses of the Holders to whom the Exchange Offer is made,
and the Initial Purchasers shall have the right to contact such Holders and
otherwise facilitate the tender of Registrable Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with
this Section 2.1, the provisions of this Agreement shall continue to apply,
modified as necessary, solely with respect to Registrable Securities that are
Private Exchange Securities, Registrable Securities of the type described in
clause (iv) of Section 2.2 and Exchange Securities held by Participating
Broker-Dealers, and the Company shall have no further obligation to register
Registrable Securities (other than Private Exchange Securities and Securities of
the type described in clause (iv) of Section 2.2) pursuant to Section 2.2 of
this Agreement.
2.2. Shelf Registration. In the event that (i) because of any
changes in law, SEC rules or regulations or applicable interpretations thereof
by the staff of the SEC, the Company reasonably determines that it is not
permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof,
(ii) the Exchange Offer Registration Statement is not declared effective within
135 days following the original issue of the Registrable Securities or the
Exchange Offer is not consummated within 165 days after the original issue of
the Registrable Securities, (iii) upon the request of any of the Initial
Purchasers with respect to any Registrable Securities which it acquired directly
from the Company and, with respect to other Registrable Securities held by it,
if such Initial Purchaser is not permitted, in the opinion of counsel to such
Initial Purchaser, pursuant to applicable law or applicable interpretations of
the staff of the SEC, to participate in the Exchange Offer and thereby receive
securities that are freely tradeable without restriction under the 1933 Act and
applicable blue sky or state securities laws or (iv) if a Holder is not
permitted by applicable law to participate in the Exchange Offer based upon
advice of counsel to the effect that such Holder may not be legally able to
participate in the Exchange Offer or does not receive fully tradeable Exchange
Securities pursuant to the Exchange Offer (any of the events specified in
(i)-(iv) being a "Shelf Registration Event" and the date of occurrence thereof,
the "Shelf Registration Event Date"), then the Company shall, at its cost:
(a) Cause to be filed as promptly as practicable after the
occurrence of such Shelf Registration Event Date, and thereafter shall
use its best efforts to cause to be declared effective as promptly as
practicable but no later than 135 days after the original issue of the
Registrable Securities (or, in the case of a request by any Initial
Purchaser, within 30 days of such request, which shall be no earlier
than 60 days after the Closing Date), a Shelf Registration Statement
relating to the offer and sale of the Registrable Securities by the
Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders participating in the Shelf
Registration and set forth in such Shelf Registration Statement.
-7-
<PAGE>
(b) Use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of two years
(or one year in the case of a request solely by an Initial Purchaser)
from the date the Shelf Registration Statement is declared effective by
the SEC, or for such shorter period that will terminate when all
Registrable Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement or cease to be
outstanding or otherwise to be Registrable Securities (the
"Effectiveness Period"); provided, however, that the Effectiveness
Period in respect of the Shelf Registration Statement shall be extended
to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the 1933 Act and as
otherwise provided herein.
(c) Notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act
and the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any supplement to
such Prospectus (as amended or supplemented from time to time), does
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading.
The Company shall not permit any securities other than
Registrable Securities to the included in the Shelf Registration Statement. The
Company further agrees, if necessary, to supplement or amend the Shelf
Registration Statement, as required by Section 3(b) below, and to furnish to the
Holders of Registrable Securities copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
2.3. Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all expenses of its counsel (other than to the extent a Registration
Expense) underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
2.4. Effectiveness. (a) The Company will be deemed not to have
used its best efforts to cause the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, to become, or to remain,
effective during the requisite period if the Company voluntarily takes any
affirmative action that would, or omits to take any action which omission would,
result in any such Registration Statement not being declared effective or in the
holders of Registrable Securities covered thereby not being able to exchange or
offer and sell such Registrable Securities during that period as and to the
extent contemplated hereby, unless such action is required by applicable law.
(b) An Exchange Offer Registration Statement pursuant to
Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration
-8-
<PAGE>
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have become effective during the
period of such interference, until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume.
2.5. Liquidated Damages. In the event that (a) the Exchange
Offer Registration Statement is not filed with the Commission on or prior to the
60th calendar day following the date of original issue of the Securities, (b)
the Exchange Offer Registration Statement has not been declared effective on or
prior to the 135th calendar day following the date of original issue of the
Securities or (c) the Exchange Offer is not consummated on or prior to the 165th
calendar day following the date of original issue of the Securities or a Shelf
Registration Statement is not declared effective on or prior to the 135th
calendar day following the date of original issue of the Securities (or, if a
Shelf Registration Statement is required to be filed because of the request of
any Initial Purchaser, 30 days following the request by any such Initial
Purchaser that the Company file the Shelf Registration Statement) (each such
event referred to in clauses (a) through (c) above, a "Registration Default"),
the Company will pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of such Registration Default, in an amount equal
to $0.192 per week per $1,000 amount of the Securities constituting Transfer
Restricted Securities held by such Holder until the applicable Registration
Statement is filed or declared effective, the Exchange Offer is consummated or
the Shelf Registration Statement against becomes effective, as the case may be.
All accrued liquidated damages shall be paid to Holders in the same manner as
interest payments on the Securities on semi-annual payment dates which
correspond to interest payment dates for the Securities. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
3. Registration Procedures.
In connection with the obligations of the Company with respect
to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company
shall:
(a) prepare and file with the SEC a Registration Statement,
within the relevant time period specified in Section 2, on the
appropriate form under the 1933 Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling
Holders named therein and by any Affiliated Market Maker, (iii) shall
comply as to form in all material respects with the requirements of the
applicable form and include or incorporate by reference all financial
statements required by the SEC to be filed therewith or incorporated by
reference therein, and (iv) shall comply in all respects with the
requirements of Regulation S-T under the 1933 Act, and use its best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; and cause each Prospectus to be
supplemented if so determined by the Company or requested by the SEC,
by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provision then in force)
under the 1933 Act and comply with the provisions of the 1933 Act, the
1934 Act and the rules and regulations thereunder applicable to them
with respect to the disposition of all securities covered by each
Registration
-9-
<PAGE>
Statement during the applicable period in accordance with the intended
method or methods of distribution by the selling Holders thereof
described in this Agreement (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities and each Affiliate Market Maker, at
least five business days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is being filed and
advising such Holders that the distribution of Registrable Securities
will be made in accordance with the method selected by the Majority
Holders participating in the Shelf Registration; (ii) furnish to each
Holder of Registrable Securities and each Affiliated Market Maker and
to each underwriter of an underwritten offering of Registrable
Securities, if any, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or Affiliated Market
Maker or underwriter may reasonably request, including financial
statements and schedules and, if so requested, all exhibits in order to
facilitate the public sale or other disposition of the Registrable
Securities; and (iii) hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto and by each Affiliated Market Maker in connection
with sales or market making activities.
(d) in the case of a Shelf Registration, to register or
qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
Registrable Securities covered by a Registration Statement and each
underwriter of an underwritten offering of Registrable Securities shall
reasonably request by the time the applicable Registration Statement is
declared effective by the SEC, and do any and all other acts and things
which may be reasonably necessary or advisable to enable each such
Holder and underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder;
provided, however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), or (ii) take any action which would subject it
to general service of process or taxation in any such jurisdiction
where it is not then so subject;
(e) notify promptly each Holder of Registrable Securities
under a Shelf Registration, each Affiliated Market Maker and any
Participating Broker-Dealer who has notified the Company that it is
utilizing the Exchange Offer Registration Statement as provided in
paragraph (f) below and, if requested by such Holder or Affiliated
Market Maker or Participating Broker-Dealer, confirm such advice in
writing promptly (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) in the case of a
Shelf Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable
-10-
<PAGE>
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects, (v) of the
happening of any event or the discovery of any facts during the period
a Shelf Registration Statement is effective which makes any statement
made in such Registration Statement or the related Prospectus untrue in
any material respect or which requires the making of any changes in
such Registration Statement or Prospectus in order to make the
statements therein not misleading, (vi) of the receipt by the Company
of any notification with respect to the suspension of the qualification
of the Registrable Securities or the Exchange Securities, as the case
may be, for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose and (vii) of any determination by
the Company that a post-effective amendment to such Registration
Statement would be appropriate;
(f) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution" which section shall be
reasonably acceptable to Merrill Lynch on behalf of the Participating
Broker-Dealers, and which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect
to the potential "underwriter" status of any broker-dealer that holds
Registrable Securities acquired for its own account as a result of
market-making activities or other trading activities and that will be
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
of Exchange Securities to be received by such broker-dealer in the
Exchange Offer, whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers and its counsel,
represent the prevailing views of the staff of the SEC, including a
statement that any such broker-dealer who receives Exchange Securities
for Registrable Securities pursuant to the Exchange Offer may be deemed
a statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such
Exchange Securities, (ii) furnish to each Participating Broker-Dealer
who has delivered to the Company the notice referred to in Section
3(e), without charge, as many copies of each Prospectus included in the
Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such
Participating Broker-Dealer may reasonably request, (iii) hereby
consent to the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by any
person subject to the prospectus delivery requirements of the SEC,
including all Participating Broker-Dealers, in connection with the sale
or transfer of the Exchange Securities covered by the Prospectus or any
amendment or supplement thereto, and (iv) include in the transmittal
letter or similar documentation to be executed by an exchange offeree
in order to participate in the Exchange Offer (x) the following
provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale
of Exchange Securities received
-11-
<PAGE>
in respect of such Registrable Securities pursuant to the Exchange
Offer;" and
(y) a statement to the effect that by a broker-dealer making
the acknowledgment described in clause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Securities,
the broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration
Statement, the Company agrees, if requested by the Initial Purchaser,
to deliver to the Initial Purchasers on behalf of the Participating
Broker-Dealers upon consummation of the Exchange Offer (i) an opinion
of counsel or opinions of counsel in form and substance reasonably
satisfactory to the Initial Purchasers covering the matters customarily
covered in underwritten offerings and such other matters as may be
reasonably requested (it being agreed that the matters to be covered by
such opinion may be subject to customary qualifications and
exceptions), (ii) an officers' certificate containing certifications
substantially similar to those set forth in Section 5(d) of the
Purchase Agreement and such other certifications as are customarily
delivered in a public offering of debt securities and (iii) as well as
upon effectiveness of the Exchange Offer Registration Statement, a
comfort letter or comfort letters, in customary form if permitted by
Statement on Auditing Standards No. 72 of the American Institute of
Certified Public Accountants (or if such a comfort letter is not
permitted, an agreed upon procedures letter in customary form) from the
Company's independent certified public accountants (and, if necessary,
any other independent certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which
financial statements are, or are required to be, included in the
Registration Statement);
(g) (i) in the case of an Exchange Offer, furnish counsel for
the Initial Purchasers and (ii) in the case of a Shelf Registration,
furnish counsel for the Holders of Registrable Securities copies of any
comment letters received from the SEC or any other request by the SEC
or any state securities authority for amendments or supplements to a
Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities and each Affiliated Market Maker
included within the coverage of such Shelf Registration Statement, and
each underwriter, if any, without charge, at least one conformed copy
of each Registration Statement and any post-effective amendment
thereto, including financial statements and schedules (without
documents incorporated therein by reference and all exhibits thereto,
unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders or the
-12-
<PAGE>
underwriters, if any, may reasonably request at least two business days
prior to the closing of any sale of Registrable Securities pursuant to
such Shelf Registration Statement;
(k) in the case of a Shelf Registration, upon the occurrence
of any circumstance contemplated by Sections 3(e)(v) and 3(e)(vi)
hereof as promptly as practicable after the occurrence of such event,
use its best efforts to prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of
the Registrable Securities or Participating Broker-Dealers or
Affiliated Market Makers, such Prospectus will not contain at the time
of such delivery any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
or will remain so qualified. At such time as such public disclosure is
otherwise made or the Company determines that such disclosure is not
necessary, in each case, to correct any misstatement of a material fact
or to include any omitted material fact, the Company agrees promptly to
notify each Holder of such determination and to furnish each Holder
such number of copies of the Prospectus as amended or supplemented, as
such Holder may reasonably request;
(l) in the case of a Shelf Registration, a reasonable time
prior to the filing of any Registration Statement, any Prospectus, any
amendment to a Registration Statement or supplement to a Prospectus or
any document which is to be incorporated by reference into a
Registration Statement or Prospectus after initial filing of a
Registration Statement, provide copies of such document to the Initial
Purchasers on behalf of such Holders and to each Affiliated Market
Maker; and make representatives of the Company as shall be reasonably
requested by the Holders of Registrable Securities, or the Initial
Purchasers on behalf of such Holders, or Affiliated Market Makers
available for discussion of such document;
(m) obtain a CUSIP number for all Exchange Securities, Private
Exchange Securities or Registrable Securities, as the case may be, not
later than the effective date of a Registration Statement, and provide
the Trustee with printed certificates for the Exchange Securities,
Private Exchange Securities or Registrable Securities, as the case may
be, in a form eligible for deposit with the Depositary;
(n) (i) cause the Indenture or an indenture to be qualified
under the TIA in connection with the registration of the Exchange
Securities or Registrable Securities, as the case may be, (ii)
cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for the Indenture to be so qualified
in accordance with the terms of the TIA and (iii) execute, and use its
best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture or an
indenture to be so qualified in a timely manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions as are reasonably requested in order to expedite or
facilitate the disposition of such Registrable Securities, and in such
connection whether or not an underwriting agreement is entered
-13-
<PAGE>
into and whether or not the registration is an underwritten
registration, if requested by (x) any Initial Purchaser, in the case
where an Initial Purchaser holds Securities acquired by it as part of
its initial distribution and (y) other Holders of Securities covered
thereby:
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters,
if any, as are customarily made by issuers to underwriters in
similar underwritten offerings;
(ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the Holders of a majority
in principal amount of the Registrable Securities being sold)
addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested
in sales of securities or underwritten offerings and such
other matters as may be reasonably requested by such Holders
and underwriters (it being agreed that the matters to be
covered by such opinion may be subject to customary
qualifications and exceptions);
(iii) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public
accountants (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial
statements are, or are required to be, included in the
Registration Statement) addressed to the underwriters, with
copies to each of the selling Holders of Registrable
Securities, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with similar
underwritten offerings in accordance with Statement on
Auditing Standards No. 72 of the American Institute of
Certified Public Accounts;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders
for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions and
procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 4 hereof with
respect to the underwriters and all other parties to be
indemnified pursuant to said Section or, at the request of any
underwriters, in the form customarily provided to such
underwriters in similar types of transactions; and
(vi) deliver such documents and certificates as may
be reasonably requested and as are customarily delivered in
similar offerings to the Holders of a majority in principal
amount of the Registrable Securities being sold and the
managing underwriters, if any.
The above shall be done at each closing under any underwriting or
similar agreement or as and to the extent required thereunder.
-14-
<PAGE>
(p) in the case of a Shelf Registration or if a Prospectus is
required to be delivered by any Participating Broker-Dealer in the case
of an Exchange Offer, make reasonably available for inspection by
representatives of the Holders of the Registrable Securities, any
underwriters participating in any disposition pursuant to a Shelf
Registration Statement, any Participating Broker-Dealer and any counsel
or accountant retained by any of the foregoing (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records")
reasonably necessary to enable such persons to exercise any applicable
due diligence responsibilities, and cause the respective officers,
directors, employees, and any other agents of the Company to supply all
information reasonably requested by any such representative,
underwriter, special counsel or accountant in connection with a
Registration Statement, and make such representatives of the Company
available for discussion of such documents as shall be reasonably
requested by the Initial Purchasers; provided, however, that the
foregoing inspection and information gathering shall be coordinated on
behalf of the Initial Purchasers by Merrill Lynch and on behalf of the
other parties, by one counsel designated by the holders of a Majority
of the Registrable Securities. Records which the Company determines, in
good faith, to be confidential and any records which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or omission in such Registration
Statement or is otherwise required by law, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or is necessary in connection with any
action, suit or proceeding or (iii) the information in such Records has
been made generally available to the public. Each selling Holder of
such Registrable Securities and each such Participating Broker-Dealer
will be required to agree in writing that information obtained by it as
a result of such inspections shall be deemed confidential and shall not
be used by it as the basis for any market transactions in the
securities of the Company unless and until such is made generally
available to the public. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required
to further agree in writing that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company at its expense to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;
(q) (i) in the case of an Exchange Offer Registration
Statement a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the
Initial Purchasers or counsel to the Holders of Registrable Securities
and make such changes in any such document prior to the filing thereof
as the Initial Purchasers to counsel to the Holders of Registrable
Securities and may reasonably request and, except as otherwise required
by applicable law, nor file any such document in a form to which the
Initial Purchasers on behalf of the Holders of Registrable Securities
and counsel to Holders of Registrable Securities shall not have
previously been advised and furnished a copy of or to which the Initial
Purchasers on behalf of the Holders of Registrable Securities shall
reasonably object and make the representatives of the Company available
for discussion of such documents as shall be reasonably requested by
the Initial Purchasers, and
-15-
<PAGE>
(ii) in the case of a Shelf Registration, a reasonable time
prior to filing any Shelf Registration Statement, any Prospectus
forming a part thereof, any amendment to such Shelf Registration
Statement or amendment or supplement to such Prospectus, provide copies
of such document to the Holders of Registrable Securities, to the
Initial Purchasers, to counsel on behalf of the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable
Securities, if any, make such changes in any such document prior to the
filing thereof as the Initial Purchasers, the counsel to the Holders or
the underwriter or underwriters reasonably request and not file any
such document in a form to which the Majority Holders, the Initial
Purchasers on behalf of the Holders of the Registrable Securities,
counsel to the Holders of Registrable Securities or any underwriter
shall reasonably object, and make the representatives of the Company
available for discussion of such document as shall be reasonably
requested by the Holders of Registrable Securities, the Initial
Purchaser on behalf of such Holders, or any underwriter;
(r) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange on which similar debt securities issued by the Company are
then listed if requested by the Majority Holders, or if requested by
the underwriter or underwriters of an underwritten offering of
Registrable Securities, if any;
(s) in the case of a Shelf Registration, use its best efforts
to cause the Registrable Securities to be rerated by the appropriate
rating agencies, if so requested by the Majority Holders, or if
requested by the underwriter or underwriters of an underwritten
offering of Registrable Securities, if any;
(t) comply with all applicable rules and regulations of the
SEC so long as any provision of this Agreement shall be applicable and
make available to its security holders an earnings statement satisfying
the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder
(or any similar rule promulgated under the 1933 Act) no later than the
end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which statement shall cover
said 12-month periods;
(u) cooperate and assist in any filings required to be made
with the NASD and, in the case of a Shelf Registration, in the
performance of any due diligence investigation by any underwriter and
its counsel (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of
the NASD); and
(v) upon consummation of an Exchange Offer or a Private
Exchange, if requested by the Trustee, obtain a customary opinion of
counsel to the Company addressed to the Trustee for the benefit of all
Holders of Registrable Securities participating in the Exchange Offer
or Private Exchange, and which includes an opinion that (i) the Company
has duly authorized, executed and delivered the Exchange Securities
and/or Private Exchange Securities, as applicable and the related
indenture, and (ii) each of the Exchange Securities and related
indenture constitute a legal, valid and binding obligation of
-16-
<PAGE>
the Company, enforceable against the Company in accordance with its
respective terms (in each case with customary exceptions).
The Company may (as a condition to such Holder's participation
in the Shelf Registration) require each Holder of Registrable Securities to
furnish to the Company such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Securities for inclusion in any
Shelf Registration Statement or Prospectus included therein as the Company may
from time to time reasonably request in writing. The Company shall have no
obligation to register under the 1933 Act the Registrable Securities of a seller
who so fails to furnish such information within a reasonable time after
receiving such request. Each Holder as to which any Shelf Registration is being
effected agrees to furnish to the Company all information with respect to such
Holder necessary to make the information previously furnished to the Company by
such Holder not materially misleading.
In the case of a Shelf Registration Statement, each Holder and
each Affiliated Market Maker agrees that, upon receipt of any notice from the
Company of the occurrence of a circumstance contemplated by Sections 3(e)(v) and
3(e)(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Person's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in such Person's possession
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
underwriter or underwriters and manager or managers that will manage such
offering will be selected by the Majority Holders of such Registrable Securities
included in such offering and shall be acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
4. Indemnification; Contribution.
(a) In connection with any Registration Statement, the Company
agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each
Participating Broker-Dealer, each person who participates as an underwriter (any
such person being an "Underwriter") and each Person, if any, who controls any
Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto)
pursuant to which Exchange Securities or Registrable Securities were
registered under the 1933 Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue
statement or
-17-
<PAGE>
alleged untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 4(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by any
indemnified party), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Holder or Underwriter expressly for use in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
provided, further, that the Company shall not be liable to any such Holder,
Participating Broker-Dealer or controlling person, with respect to any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary Prospectus to the extent that any such loss, liability, claim,
damage or expense of any Holder, Participating Broker-Dealer or controlling
person results from the fact that such Holder or Participating Broker-Dealer
sold Securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the final Prospectus as then
amended or supplemented if the Company had previously furnished copies thereof
to such Holder or Participating Broker-Dealer and the loss, liability, claim,
damage or expense of such Holder, Participating Broker-Dealer or controlling
person results from an untrue statement or omission of a material fact contained
in the preliminary Prospectus which was corrected in the final Prospectus. Any
amounts advanced by the Company to an indemnified party pursuant to this Section
4 as a result of such losses shall be returned to the Company if it shall be
finally determined by such a court in a judgment not subject to appeal or final
review that such indemnified party was not entitled to indemnification by the
Company.
(b) Each Holder severally, but not jointly, agrees to
indemnify and hold harmless the Company, the Initial Purchasers, each
Underwriter and the other selling Holders, and each of their respective
directors and officers, and each Person, if any, who controls the Company, the
Initial Purchasers, each Underwriter or any other selling Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in Section 4(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made
-18-
<PAGE>
in the Shelf Registration Statement (or any amendment thereto) or any Prospectus
included therein (or any amendment or supplement thereto) in reliance upon and
in conformity with written information with respect to such Holder furnished to
the Company by such Holder expressly for use in the Shelf Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto); provided, however, that no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Registrable Securities pursuant to such Shelf Registration
Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If an indemnifying party so elects within a reasonable time after
receipt of such notice, an indemnifying party, severally or jointly with any
other indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and reasonably acceptable to the indemnified
parties defendant (or target of) in such action, provided, however, that if (i)
representation of such indemnified party by the same counsel would present a
conflict of interest or (ii) the actual or potential defendants in, or targets
of, any such action include both the indemnified party and the indemnifying
party and any such indemnified party reasonably determines that there may be
legal defenses available to such indemnified party which are different from or
in addition to those available to such indemnifying party, then in the case of
clauses (i) or (ii) of this Section 4(c) such indemnifying party and counsel for
each indemnifying party or parties shall not be entitled to assume such defense.
If an indemnifying party is not entitled to assume the defense of such action as
a result of the proviso to the preceding sentence, counsel for each indemnified
party or parties shall be entitled to conduct the defense of such indemnified
party or parties. If an indemnifying party assumes the defense of such action,
in accordance with and as permitted by the provisions of this paragraph, such
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section
-19-
<PAGE>
4(a)(ii) effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses for counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 4(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(e) If the indemnification provided for in this Section 4 is
for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand, and the Holders and the Initial Purchasers on the other hand, in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Company on the one hand and the
Holders and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, the Holders or the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Holders and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 4. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
4 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities sold by it were offered exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
-20-
<PAGE>
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who
controls an Initial Purchaser or Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Initial Purchaser or Holder, and each director of the
Company and each Person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the principal amount of Securities set forth opposite their respective names
in Schedule A to the Purchase Agreement and not joint.
5. Additional Agreements with Respect to Affiliated Market
Makers.
5.1. From and after the effectiveness of any Registration
Statement, the Company shall, for so long as any Securities, Exchange Securities
or Private Exchange Securities are outstanding and any Affiliated Market Maker
is required by applicable law in the judgment of counsel to the Initial
Purchasers, after consultation with counsel to the Company to deliver a
prospectus in connection with sales or market making activities, periodically
amend each Registration Statement or amend each Prospectus covering Securities,
Exchange Securities or Private Exchange Securities to reflect the occurrence of
any fact or information becoming known to the Company that should be set forth
in an amendment to any such Registration Statement or in a supplement to any
such Prospectus so that each such Prospectus, when delivered by an Affiliated
Market Maker to a purchaser in connection with sales or market marking
activities of such Affiliated Market Maker, will comply with applicable law.
5.2. Prior to filing any amendment to any such Registration
Statement or any supplement to any such Prospectus, the Company shall furnish a
reasonable period of time prior to the proposed filing thereof to each
Affiliated Market Maker and their counsel copies of all such documents proposed
to be filed, which documents shall be subject to review. The Company shall
provide to each Affiliated Market Maker and such counsel such reasonable number
of copies of each filed amendment or supplement as shall be requested and hereby
consents to the use of such Prospectus or any amendment or supplement thereto by
each Affiliated Market Maker in connection with sales or market making
activities with respect to the Securities, Exchange Securities or Private
Exchange Securities.
5.3. In connection with any such sales or market making
activities as contemplated by this Section 5, the Company agrees to indemnify
each Affiliated Market Maker, and if applicable to contribute to such Affiliated
Market Maker and such Affiliated Market Maker agrees to indemnify the Company,
and if applicable to contribute to the Company, in each case in a manner
substantially identical to that specified in Section 4 hereof.
5.4. In the case of a Registration Statement, each Affiliated
Market Maker agrees that, upon receipt of any notice from the Company of the
occurrence of a circumstance contemplated by the following:
(i) the happening of any event or the discovery of any facts
during the period a Registration Statement is effective which makes any
statement made in such Registra-
-21-
<PAGE>
tion Statement or the related Prospectus untrue in any material respect
or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not
misleading; or
(ii) the receipt by the Company of any notification with
respect to the suspension of the qualification of the Exchange
Securities, for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose,
such Affiliated Market Maker will forthwith discontinue disposition of
such Exchange Securities, pursuant to a Registration Statement until
such Person's receipt of the copies of the supplemented or amended
Prospectus in accordance with the following:
that as promptly as practicable after the occurrence of an event
contemplated by (i) and (ii) of this Section 5.4, the Company shall use
its best efforts to prepare a supplement or post-effective amendment to
the Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Exchange
Securities, such Prospectus will not contain at the time of such
delivery any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or will remain
so qualified.
Further, if so directed by the Company, such Affiliated Market
Maker will deliver to the Company (at its expense) all copies in such Person's
possession of the Prospectus covering such Exchange Securities current at the
time of receipt of such notice.
6. Miscellaneous.
6.1. Rule 144 and Rule 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the 1934 Act and
any Registrable Securities remain outstanding, the Company will file the reports
required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the
1934 Act and the rules and regulations adopted by the SEC thereunder. If the
Company ceases to be so required to file such reports, the Company covenants
that it will upon the request of any Holder of Registrable Securities (a) make
publicly available such information as is necessary to permit sales pursuant to
Rule 144 under the 1933 Act, (b) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933
Act and it will take such further action as any Holder of Registrable Securities
may reasonably request, and (c) take such further action that is reasonable in
the circumstances, in each case, to the extent required from time to time to
enable such Holder to sell its Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (i) Rule 144
under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule
144A under the 1933 Act, as such Rule may be amended from time to time, or (iii)
any similar rules or regulations hereafter adopted by the SEC. Upon the request
of any Holder of Registrable Securities, the Company will deliver to such Holder
a written statement as to whether it has complied with such requirements.
6.2. No Inconsistent Agreements. The Company has not entered
into and the Company will not after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
-22-
<PAGE>
way conflict with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
6.3. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
6.4. Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers; and (b) if to the Company,
initially at the Company's address set forth in the Purchase Agreement, and
thereafter at such other address of which notice is given in accordance with the
provisions of this Section 5.4.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee
under the Indenture, at the address specified in such Indenture.
6.5. Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
6.6. Third Party Beneficiaries. The Initial Purchasers (even
if the Initial Purchasers are not Holders of Registrable Securities) shall be
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company, on the one
hand and the Initial Purchasers on the other hand,
-23-
<PAGE>
and shall have the right to enforce such agreements directly to the extent it
deems such enforcement necessary or advisable to protect its rights hereunder.
6.7. Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section 2.1
through 2.4 hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
would not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Company's
obligations under Section 2.1 through 2.4 hereof.
6.8. Restriction on Resales. Until the expiration of two years
after the original issuance of the Securities, the Company will not, and will
cause their "affiliates" (as such term is defined in Rule 144(a)(1) under the
1993 Act) not to, resell any Securities which are "restricted securities" (as
such term is defined under Rule 144(a)(3) under the 1933 Act) that have been
reacquired by any of them and shall immediately upon any purchase of any such
Securities submit such Securities to the Trustee for cancellation.
6.9. Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
6.10. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
6.12. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FISHER SCIENTIFIC INTERNATIONAL INC.
By: /s/ Paul M. Meister
---------------------------
Name: Paul M. Meister
Title: Senior Vice President and
Chief Financial Officer
Confirmed and accepted
as of the date first above
written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Gregory Alan Margolies
--------------------------------------
Name: Gregory Alan Margolies
Title: Authorized Signatory
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Ephraim Fields
--------------------------------------
Name: Ephraim Fields
Title: Authorized Signatory
CHASE SECURITIES INC.
By: /s/ James C. Neary
---------------------------------------
Name: James C. Neary
Title: Vice President
Fisher Scientific International Inc.
Computation of Ratio of Earnings to Fixed Charges
(dollars in millions)
<TABLE>
<CAPTION>
Pro Forma Years Ended December 31,
------------- --------------------------------------------
Year Ended
December 31,
-------------
1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income (Loss) Before Income Taxes (70.8) $(5.1) $67.6 $4.3 $62.7 $57.8
Interest Expense 87.7 23.0 27.1 15.0 9.0 7.9
Interest Portion of Rental Expense 6.2 6.2 5.6 3.5 3.2 3.0
------ ----- ---- ---- ---- ----
Total Earnings 23.1 24.1 100.3 22.8 74.9 68.7
Restructuring and Other Charges 51.8 51.8 0.0 34.3 0.0 0.0
------ ----- ---- ---- ---- ----
Total Earnings Before Restructuring and Other
Charges $74.9 $75.9 $100.3 $57.1 $74.9 $68.7
====== ====== ====== ====== ====== ======
Fixed Charges:
Interest Expense 87.7 23.0 27.1 15.0 9.0 7.9
Interest Portion of Rental Expense 6.2 6.2 5.6 3.5 3.2 3.0
------ ------ ------ ------ ------ ------
Total Fixed Charges $93.9 $29.2 $32.7 $18.5 $12.2 $10.9
====== ====== ====== ====== ====== ======
Ratio of Earnings to Fixed Charges 0.2(a) 0.8(a) 3.1 1.2 6.1 6.3
Ratio of Earnings to Fixed Charges Before 0.8(b) 2.6 3.1 3.1 6.1 6.3
Restructuring and Other Charges
</TABLE>
- ---------------------------------
(a) Earnings are inadequate to cover fixed charges by $70.8 million and $5.1
million, respectively, for the Pro Forma and historical years ended
December 31, 1997.
(b) Earnings are inadequate to cover fixed charges before restructuring and
other charges by $19.0 million for the Pro Forma year ended December 31,
1997.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Fisher Scientific International Inc. on Form S-4 of our report dated February
18, 1998 (March 9, 1998 as to Note 2), appearing in the Annual Report on Form
10-K of Fisher Scientific International Inc. for the year ended December 31,
1997, and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
March 18, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
---------------------
Fisher Scientific International Inc.
(Exact name of obligor as specified in its charter)
DELAWARE (02-0451017)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Liberty Lane Hampton, New Hampshire 03842
(Address of principal executive offices) (Zip Code)
9% Senior Subordinated Notes due 2008
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 2nd day March 1998.
STATE STREET BANK AND TRUST COMPANY
By:/s/ Steven Cimalore
----------------------------------------
NAME: Steven Cimalore
TITLE: Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by {Fisher
Scientific International, Inc.}. of its {9% Senior Subordinated Notes}, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
-----------------------
NAME: Steven Cimalore
TITLE: Vice President
Dated: March 11, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........ 1,665,142
Interest-bearing balances.................................. 8,193,292
Securities.......................................................... 10,238,113
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ....................... 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income ........ 4,936,454
Allowance for loan and lease losses.............. 70,307
Allocated transfer risk reserve.................. 0
Loans and leases, net of unearned income and allowances.... 4,866,147
Assets held in trading accounts..................................... 957,478
Premises and fixed assets........................................... 380,117
Other real estate owned............................................. 884
Investments in unconsolidated subsidiaries.......................... 25,835
Customers= liability to this bank on acceptances outstanding ....... 45,548
Intangible assets................................................... 158,080
Other assets........................................................ 1,066,957
----------
Total assets........................................................ 33,450,737
==========
LIABILITIES
Deposits:
In domestic offices........................................ 8,270,845
Noninterest-bearing .................... 6,318,360
Interest-bearing ....................... 1,952,485
In foreign offices and Edge subsidiary .................... 12,760,086
Noninterest-bearing .................... 53,052
Interest-bearing .......................12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ....................... 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ... 926,821
Other borrowed money................................................ 671,164
Subordinated notes and debentures................................... 0
Bank=s liability on acceptances executed and outstanding ........... 46,137
Other liabilities................................................... 745,529
Total liabilities................................................... 31,637,223
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................... 0
Common stock........................................................ 29,931
Surplus............................................................. 360,717
Undivided profits and capital reserves/Net unrealized holding
gains (losses)................................................... 1,426,881
Cumulative foreign currency translation adjustments ................ (4,015)
Total equity capital................................................ 1,813,514
----------
Total liabilities and equity capital................................ 33,450,737
==========
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
LETTER OF TRANSMITTAL
FISHER SCIENTIFIC INTERNATIONAL INC.
Offer for all Outstanding
9% Senior Subordinated Notes due 2008
in Exchange for
9% Senior Subordinated Notes due 2008
which Have Been Registered Under
the Securities Act of 1933, As Amended,
Pursuant to the Prospectus, dated [ ],1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON [ ],
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
Delivery To: State Street Bank and Trust Company, Exchange Agent
By Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
tate Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway, 15th Floor Two International Place
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5314
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5314
Delivery of this instrument to an address other than as set forth above,
or transmission of instructions via facsimile other than as set forth above,
will not constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated [ ], 1998 (the "Prospectus"), of Fisher Scientific
International Inc., a Delaware corporation (the "Company"), and this Letter of
Transmittal (the "Letter"), which together constitute the Company's offer (the
"Exchange Offer") to exchange an aggregate principal amount of up to
$400,000,000 of the Company's 9% Senior Subordinated Notes due 2008 which have
been registered under the Securities Act of 1933, as amended (the "New Notes"),
for a like principal amount of the Company's issued and outstanding 9% Senior
Subordinated Notes due 2008 (the "Old Notes") from the registered holders
thereof (the "Holders").
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from January 21, 1998. Accordingly, registered Holders of New Notes
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from January 21, 1998. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of accrued interest on such Old Notes otherwise payable on
any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer.
<PAGE>
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange OfferCBook-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
OfferCGuaranteed Delivery Procedures" section of the Prospectus. See Instruction
1. Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------------- ------------------- -------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -------------------------------------------------------------- ------------------- ------------------- -------------------
Name(s) and Address(es) of Registered Holder(s) Certificate Aggregate Principal
(Please fill in, if blank) Number(s)* Principal Amount
Amount of Tendered**
Old Note(s)
<S> <C> <C> <C>
- -------------------------------------------------------------- ------------------- ------------------- -------------------
- -------------------------------------------------------------- ------------------- ------------------- -------------------
- -------------------------------------------------------------- ------------------- ------------------- -------------------
- -------------------------------------------------------------- ------------------- ------------------- -------------------
Total
- -------------------------------------------------------------- ------------------- ------------------- -------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the Old Notes indicated in
column 2. See Instruction 2. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple
thereof. See Instruction 1.
- --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________
Account Number ______________ Transaction Code Number _________________
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) _________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution Which Guaranteed Delivery ___________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number ______________ Transaction Code Number _________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF
ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: __________________________________________________________________________
2
<PAGE>
Address: _______________________________________________________________________
_______________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act of
1933, as amended, in connection with any resale of such New Notes; however, by
so acknowledging and by delivering such a prospectus the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended. If the undersigned is a broker-dealer that will receive
New Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired as a result of market-making activities or other trading
activities.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Notes, with full power of substitution, among other
things, to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned hereby represents and warrants that the undersigned has full power
and authority to tender, sell, assign and transfer the Old Notes, and to acquire
Exchange Notes issuable upon the exchange of such tendered Old Notes, and that,
when the same are accepted for exchange, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
by the Company. The undersigned hereby further represents that any New Notes
acquired in exchange for Old Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is the undersigned, that neither the Holder of such Old Notes
nor any such other person is participating in, intends to participate in or has
an arrangement or understanding with any person to participate in the
distribution of such New Notes and that neither the Holder of such Old Notes nor
any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred by
Holders thereof (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holders' business and such Holders have no arrangement with any person
to participate in the distribution of such New Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer as in other circumstances. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of the Company, is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could
not rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. If the undersigned is
a broker-dealer that will receive New Notes for its own account in exchange for
Old Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus meeting the
requirements of the Securities Act, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
3
<PAGE>
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange OfferCWithdrawal Rights" section
of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be issued in the name of and sent to someone other than the person
or persons whose signature(s) appear(s) on this Letter above, if Old Notes
delivered by book-entry transfer which are not accepted for exchange are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility
other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s) ........................................................................
(Please Type or Print)
................................................................................
(Please Type or Print)
Address ........................................................................
................................................................................
(Zip Code)
(Complete Substitute Form W-9)
[_] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account Address
set forth below.
- --------------------------------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above, or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Mail: New Notes and/or Old Notes to:
Name(s).........................................................................
(Please Type or Print)
................................................................................
(Please Type or Print)
Address ........................................................................
................................................................................
(Zip Code)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE
NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
4
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on reverse side)
x ............................................. ......................., 1998
x ............................................. ......................., 1998
Signature(s) of Owner Date
Area Code and Telephone Number......................................
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):............................................................
....................................................................
(Please Type or Print)
Capacity:...........................................................
Address:............................................................
....................................................................
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution: ...........................................
(Authorized Signature)
....................................................................
(Title)
....................................................................
(Name and Firm)
Dated: ............................................................., 1998
---------------------------------------------------------------------------
5
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer for the
9% Senior Subordinated Notes due 2008 of Fisher Scientific International Inc.
in Exchange for the 9% Senior Subordinated Notes due 2008 of Fisher Scientific
International Inc.,
which Have Been Registered Under the
Securities Act of 1933, As Amended
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
OfferCBook-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
OfferCGuaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the Expiration Date, the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) the certificates for all physically tendered Old Notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter, are received by the Exchange Agent within
three NYSE trading days after the Expiration Date.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be
registered mail, properly insured, with return receipt requested, made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to noteholders who tender by book-entry
transfer).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
NotesCPrincipal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
6
<PAGE>
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a firm which is a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchanges Medallion Program (each an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Old Notes) who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Noteholders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Old Notes not exchanged will be returned to the name and address of
the person signing this Letter.
5. Taxpayer Identification Number.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which in the case of a tendering holder who is an individual, is his or
her social security number. If the Company is not provided with the current TIN
or an adequate basis for an exemption from backup withholding, such tendering
holder may be subject to a $50 penalty imposed by the Internal Revenue Service.
In addition, the Exchange Agent may be required to withhold 31% of the amount of
any reportable payments made after the exchange to such tendering holder of New
Notes. If withholding results in an overpayment of taxes, a refund may be
obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying, under penalties of perjury, that the TIN provided is correct (or
that such holder is awaiting a TIN) and that (i) the holder is exempt from
backup withholding, or (ii) the holder has not been notified
7
<PAGE>
by the Internal Revenue Service that such holder is subject to backup
withholding as a result of a failure to report all interest or dividends or
(iii) the Internal Revenue Service has notified the holder that such holder is
no longer subject to backup withholding. If the tendering holder of Old Notes is
a nonresident alien or foreign entity not subject to backup withholding, such
holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign
Status. These forms may be obtained from the Exchange Agent. If the Old Notes
are in more than one name or are not in the name of the actual owner, such
holder should consult the W-9 Guidelines for information on which TIN to report.
If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If the box in Part 2 of the Substitute Form W-9 is checked, the
Exchange Agent will retain 31% of reportable payments made to a holder during
the sixty (60) day period following the date of the Substitute Form W-9. If the
holder furnishes the Exchange Agent with his or her TIN within sixty (60) days
of the Substitute Form W-9, the Exchange Agent will remit such amounts retained
during such sixty (60) day period to such holder and no further amounts will be
retained or withheld from payments made to the holder thereafter. If, however,
such holder does not provide its TIN to the Exchange Agent within such sixty
(60) day period, the Exchange Agent will remit such previously withheld amounts
to the Internal Revenue Service as backup withholding and will withhold 31% of
all reportable payments to the holder thereafter until such holder furnishes its
TIN to the Exchange Agent.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written notice
of withdrawal must be received by the Exchange Agent at the address set forth
above prior to 5:00 P.M., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having tendered the
Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including certificate number or numbers and the principal amount of
such Old Notes), (iii) contain a statement that such holder is withdrawing his
election to have such Old Notes exchanged, (iv) be signed by the
8
<PAGE>
holder in the same manner as the original signature on the Letter by which such
Old Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender and (v) specify the name in which such Old Notes are
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered for exchange but which are not
exchanged for any reason will be returned to the Holder thereof without cost to
such Holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures set forth in "The Exchange Offer--Book-Entry
Transfer" section of the Prospectus, such Old Notes will be credited to an
account maintained with the Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following the
procedures described above at any time on or prior to 5:00 P.M., New York City
time, on the Expiration Date.
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for Notices of
Guaranteed Delivery and other related documents may be directed to the Exchange
Agent, at the address and telephone number indicated above.
9
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN
IN THE BOX AT RIGHT AND CERTIFY TIN: ______________________________
BY SIGNING AND DATING BELOW. Social Security Number or
SUBSTITUTE Employer Identification Number
-----------------------------------------------------------------------
Form W-9 Part 2--TIN Applied For [ ]
-----------------------------------------------------------------------
Department of the Treasury CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Internal Revenue Service
(1) the number shown on this form is my correct Taxpayer Identification Number (or I am
Payor's Request for waiting for a number to be issued to me).
Taxpayer (2) I am not subject to backup withholding either because: (a) I am exempt from backup
Identification Number withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS")
("TIN") and that I am subject to backup withholding as a result of a failure to report all interest
Certification or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE ........................ DATE ..........................
You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup
withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS
that you are no longer subject to backup withholding.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
___________________________________________ ___________________________________
Signature Date
- --------------------------------------------------------------------------------
10
NOTICE OF GUARANTEED DELIVERY
FOR
FISHER SCIENTIFIC INTERNATIONAL INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Fisher Scientific International Inc. (the "Company") made
pursuant to the Prospectus, dated [ ], 1998 (the "Prospectus"), if certificates
for the outstanding 9% Senior Subordinated Notes due 2008 of the Company (the
"Old Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach State Street Bank and Trust Company, as exchange
agent (the "Exchange Agent") prior to 5:00 P.M., New York City time, on the
Expiration Date of the Exchange Offer. Such form may be delivered or transmitted
by facsimile transmission, mail or hand delivery to the Exchange Agent as set
forth below. In addition, in order to utilize the guaranteed delivery procedure
to tender Old Notes pursuant to the Exchange Offer, a completed, signed and
dated Letter of Transmittal (or facsimile thereof) must also be received by the
Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
Delivery To: State Street Bank and Trust Company, Exchange Agent
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway, 15th Floor Two International Place
Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
</TABLE>
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5314
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5314
Delivery of this instrument to an address other than as set forth
above, or transmission of instructions via facsimile other than as set forth
above, will not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange OfferCGuaranteed
Delivery Procedures" section of the Prospectus.
<PAGE>
Principal Amount of Old Notes
Tendered:*
$_______________________________________
Certificate Nos. (if available): If Old Notes will be delivered by
book-entry transfer to The
________________________________________ Depository Trust Company, provide
Total Principal Amount Represented by account number.
Old Notes Certificate(s):
$_______________________________________ Account Number ____________________
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X ______________________________________ ___________
X ______________________________________ ___________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number: __________________________________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s): __________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Capacity: __________________________________________________________________
Address(es): __________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the certificates representing the principal amount of Old Notes tendered
hereby in proper form for transfer, or timely confirmation of the book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company pursuant to the procedures set forth in "The Exchange
OfferCGuaranteed Delivery Procedures" section of the Prospectus, together with
any required signature guarantee and any other documents required by the Letter
of Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than three New York Stock Exchange trading days after the
Expiration Date.
- --------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
_____________________________________ ________________________________________
Name of Firm Authorized Signature
_____________________________________ ________________________________________
Address Title
_____________________________________ Name: __________________________________
Zip Code (Please Type or Print)
Area Code and Tel. No. ______________ Dated: __________________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
FISHER SCIENTIFIC INTERNATIONAL INC.
Offer for all Outstanding
9% Senior Subordinated Notes due 2008
in Exchange for
9% Senior Subordinated Notes due 2008,
which Have Been Registered Under
the Securities Act of 1933,
As Amended
To Our Clients:
Enclosed for your consideration is a Prospectus, dated [ ], 1998 (the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Fisher Scientific
International Inc. (the "Company") to exchange its 9% Senior Subordinated Notes
due 2008, which have been registered under the Securities Act of 1933, as
amended (the "New Notes"), for its outstanding 9% Senior Subordinated Notes due
2008 (the "Old Notes"), upon the terms and subject to the conditions described
in the Prospectus and the Letter of Transmittal. The Exchange Offer is being
made in order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated January 21, 1998, by and among the Company,
the subsidiary guarantors referred to therein and the initial purchasers
referred to therein.
This material is being forwarded to you as the beneficial owner of the
Old Notes held by us for your account but not registered in your name. A tender
of such Old Notes may only be made by us as the holder of record and pursuant to
your instructions.
Accordingly, we request instructions as to whether you wish us to
tender on your behalf the Old Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M.,
New York City time, on [ ], 1998, unless extended by the Company. Any Old Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time before the
Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange OfferCCertain Conditions to
the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise provided
in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 P.M., New York City time, on [ ],
1998, unless extended by the Company.
<PAGE>
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The Letter of Transmittal is furnished to you for information only
and may not be used directly by you to tender Old Notes.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Fisher
Scientific International Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated
below:
<TABLE>
<S> <C>
Aggregate Principal Amount of Old Notes
---------------------------------------
9% Senior Subordinated Notes due 2008.....................
[ ] Please do not tender any Old Notes held
by you for my account.
Dated: [ ], 1998
Signature(s)
Please print name(s) here
Address(es)
Area Code and Telephone Number
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Old Notes held by us for
your account.
FISHER SCIENTIFIC INTERNATIONAL INC.
Offer for all Outstanding
9% Senior Subordinated Notes due 2008
in Exchange for
9% Senior Subordinated Notes due 2008,
which Have Been Registered Under
the Securities Act of 1933,
As Amended
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Fisher Scientific International Inc. (the "Company") is offering, upon
and subject to the terms and conditions set forth in the Prospectus, dated [ ],
1998 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 9% Senior Subordinated
Notes due 2008, which have been registered under the Securities Act of 1933, as
amended, for its outstanding 9% Senior Subordinated Notes due 2008 (the "Old
Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
January 21, 1998, by and among the Company and the subsidiary guarantors
referred to therein and the initial purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Old Notes registered in your name or in the name
of your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [ ], 1998;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to State Street Bank and Trust Company, the
Exchange Agent for the Exchange Offer.
<PAGE>
Your prompt action is requested. The Exchange Offer will expire at 5:00
P.M., New York City time, on [ ] 1998, unless extended by the Company (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
If a registered holder of Old Notes desires to tender, but such Old Notes
are not immediately available, or time will not permit such holder's Old Notes
or other required documents to reach the Exchange Agent before the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange OfferCGuaranteed Delivery
Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed
State Street Bank and Trust Company, the Exchange Agent for the Exchange Offer,
at its address and telephone number set forth on the front of the Letter of
Transmittal.
Very truly yours,
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures 2
