<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10920.
FISHER SCIENTIFIC INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 02-0451017
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
LIBERTY LANE, HAMPTON, NH 03842
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(603) 926-5911
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, par value New York Stock Exchange
$.01 per share
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1999 was approximately $69,715,027.
The number of shares of Common Stock outstanding as of March 26, 1999 was
40,030,270.
Documents Incorporated by Reference: Portions of registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held May 11, 1999 are
incorporated by reference into Part III.
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<PAGE> 2
ITEM 1. BUSINESS
INTRODUCTION
Fisher Scientific International Inc. ("Fisher" or the "Company") is a world
leader in serving science, providing more than 260,000 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 also provides
procurement outsourcing services and supply chain management technology and
software through its ProcureNet, Inc., Strategic Procurement Services Inc. and
UniKix Technology businesses. Fisher was founded in 1991, although the business
conducted by its principal operating subsidiary, Fisher Scientific Company, 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.
During the fourth quarter of 1998, management decided to dispose of its
technology segment, which consists of its procurement outsourcing services and
supply chain management technology business (the "ProcureNet Business") and its
UniKix Technology software business. In December 1998, the Company's Board of
Directors approved a plan to (i) spinoff the ProcureNet Business to Fisher
stockholders (the "Spinoff") and (ii) sell the UniKix Technology software
business (the "UniKix Sale"). Following the Spinoff, the Company and ProcureNet
will operate as separate, stand-alone companies. As part of the Spinoff the
Company and ProcureNet will enter into a transition services agreement pursuant
to which Fisher will provide ProcureNet with certain management and other
administrative services and ProcureNet will continue to provide Fisher and its
customers third party procurement and electronic commerce support and services.
It is not expected that the Spinoff will have a material impact on Fisher's
business or operations. The Company currently anticipates that the consummation
of the Spinoff will occur in the second quarter of 1999. See Note 5 to Financial
Statements.
In December 1998, Fisher acquired 90% of Bioblock Scientific S.A.
("Bioblock"), a leading distributor of scientific and laboratory instrumentation
in France. Fisher acquired the remaining 10% of Bioblock in the first quarter of
1999.
Pursuant to the Second Amended and Restated Agreement and Plan of Merger
dated as of November 14, 1997, amending an Agreement and Plan of Merger dated
August 7, 1997 (as amended, the "Merger Agreement") between the Company and FSI
Merger Corp. ("FSI"), a Delaware corporation formed by Thomas H. Lee Company
("THL"), providing for the merger of FSI with and into Fisher and the
recapitalization of Fisher (collectively, "the Transaction"), which Transaction
was consummated on January 21, 1998, approximately 87% of the fully diluted
shares of common stock of Fisher were converted into the right to receive $9.65
per share in cash (approximately $955.0 million in the aggregate) pursuant to an
election process that provided stockholders the right to elect, subject to
proration, for each share of Fisher common stock held either $9.65 in cash or to
retain one share of common stock, $.01 par value ("Common Stock"), in the
recapitalized company. Pursuant to the Merger Agreement, vesting of all
outstanding options accelerated. See Note 2 to Financial Statements.
THE INDUSTRY
Fisher'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 maintenance, repair and operating ("MRO") materials and occupational health
and safety products in production and other activities.
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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 1998. 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 $200 billion in 1998, representing a compound annual
growth rate of approximately 8.8%. In addition to this growth,
non-defense-related R&D expenditures have typically not 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's 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 Curtin Matheson Scientific Inc. ("CMS"), VWR
Scientific Products Corporation with Baxter International Inc. and more
recently, Cardinal Health Inc. and Allegiance Corporation, are illustrative of
this trend. These same trends exist in most international markets.
PRODUCTS AND SERVICES
Fisher currently has over 260,000 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, Fisher offers research chemicals,
clinical consumables, instruments, diagnostics, and laboratory workstations of
its own manufacture.
Fisher Products. Fisher'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 1998. Consumable products, such as
laboratory supplies and specialty chemicals, represented approximately 80% of
the Company's total sales in fiscal 1998.
Sales and Customer Service Professionals. In order to reduce the
complexity of today's scientific research and clinical testing product
offerings, Fisher provides customer support through a worldwide sales and
customer service network. Fisher's direct sales force consists of over 1,000
account representatives and product/systems sales specialists worldwide. Most of
the members of Fisher'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
3
<PAGE> 4
may be manufactured by either Fisher or its suppliers. In addition, Fisher'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 Fisher's
customers with efficient order entry and order expediting.
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 seven different languages. In 1995, Fisher 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 260,000 products and over 22,000 images 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. Fisher customers now have the ability to place their
orders electronically through an intuitive, integrated and easy-to-use process.
Fisher 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 25 locations in the U.S.,
including a national distribution center in Somerville, New Jersey, four
regional centers (New Jersey, California, Illinois and Georgia) and 20 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 1998 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 and Conklin, New York; and Mountain Home,
Arkansas. Products manufactured include research, bulk and organic chemicals,
laboratory equipment, laboratory fume hoods, wood, plastic and metal laboratory
workstations and furniture, computer local area network ("LAN") furniture,
scientific glassware and plastic labware, and diagnostic instruments 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 its customers' 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 all
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 10% of 1998 sales.
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<PAGE> 5
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 Cardinal Health Inc./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
Fisher owns or licenses a number of patents and patent applications that
are important to its businesses. Fisher has more than 200 registered and
unregistered service marks and trademarks for its products and services. Some of
its more significant marks include Fisher Rims, 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
Fisher's sales are not materially dependent upon any single customer or any
few customers. No single customer of the Company represents 5% or more of the
total sales during the year. 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. Fisher'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 Fisher's business is
subject to renegotiation of profits or termination at the election of the United
States Government. Because Fisher's products are, in most cases, sold for
immediate shipment, there are no significant backlogs.
ENVIRONMENTAL MATTERS
Some of Fisher'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 Fisher, 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.
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<PAGE> 6
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
$34.2 million and $35.1 million at December 31, 1998 and 1997, 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 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 Fisher's operations, may give
rise to additional compliance costs which could have a material adverse effect
on the Company's financial statements.
Fisher spent approximately $1.0 million and $2.3 million during the years
ended December 31, 1998 and 1997, respectively, on remediation and related
environmental monitoring and compliance. Amounts expensed for environmental
matters, including compliance costs under the existing administrative consent
orders, installation and operation of groundwater treatment systems and other
planned expenses, are expected to average between $1 million and $2 million per
year. See "Cautionary Factors Regarding Forward-Looking Statements".
EMPLOYEES
As of December 31, 1998, Fisher had approximately 7,300 full-time
employees. Fisher considers relations with its employees to be satisfactory.
Fisher has several labor contracts, none of which are 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.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
For information regarding foreign and domestic operations and export sales,
see Note 21 to Financial Statements, which is incorporated herein by reference.
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EXECUTIVE OFFICERS OF FISHER
Set forth below is information with respect to each executive officer of
Fisher:
<TABLE>
<CAPTION>
NAME AND TITLE AGE BUSINESS EXPERIENCE
-------------- --- -------------------
<S> <C> <C>
Paul M. Montrone....................... 57 Mr. Montrone has been Chairman of the Board of Fisher
Chairman of the Board since March 1998, Chief Executive Officer of Fisher
and Chief Executive Officer since prior to 1994, and served as President from
prior to 1994 to 1998. Mr. Montrone was Vice Chairman
of Abex from prior to 1994 to June 1995. Since August
1994, he has been Chairman of the Board of The General
Chemical Group Inc. ("General Chemical")
(manufacturing) and was President from prior to 1994
to August 1994. Mr. Montrone is also a director of
Waste Management, Inc.
Paul M. Meister........................ 46 Mr. Meister has been Vice Chairman of the Board,
Vice Chairman of the Board Executive Vice President and Chief Financial Officer
Executive Vice President and Chief of Fisher since March 1998, and was Senior Vice
Financial Officer President and Chief Financial Officer of Fisher from
prior to 1994 to March 1998. Prior to that time, he
was Senior Vice President of Abex from prior to 1994
to 1995. Mr. Meister is a member of the Board of
Directors of M&F Worldwide Corp., General Chemical
(Vice Chairman) and Minerals Technologies Inc.
David T. Della Penta................... 51 Mr. Della Penta has been President and Chief Operating
President and Chief Officer of Fisher since April 1998. From prior to 1994
Operating Officer until April 1998, Mr. Della Penta served as President
of Nalge Nunc International, a subsidiary of Sybron
International Corporation (medical laboratory device
manufacturer).
Denis N. Maiorani...................... 50 Mr. Maiorani has been President of Fisher Scientific
President of Fisher Scientific Worldwide Inc., a subsidiary of Fisher, since 1996. He
Worldwide Inc. was President of Fisher Scientific Europe Limited from
January 1996 to July 1996, and a consultant to Fisher
from 1995 to 1996. From prior to 1994 to January 1995,
Mr. Maiorani was president of Robertson-Ceco
Corporation (building components manufacturing).
Kevin P. Clark......................... 36 Mr. Clark has been Vice President and Controller of
Vice President and Controller Fisher since May 1998. Mr. Clark served as Vice
President and Treasurer of Fisher from September 1997
to May 1998, and as Assistant Treasurer of Fisher from
1995 to 1997. Mr. Clark served as Treasurer of
Federal-Mogul Corporation (automotive components) from
1994 to 1995, and held various financial executive
positions at Chrysler Corporation from prior to 1994
to 1994, the most current being Manager of Corporate
Finance of Chrysler Financial Corp. (financial
services).
Todd M. DuChene........................ 35 Mr. DuChene has been Vice President, General Counsel
Vice President -- General and Secretary of Fisher since November 1996. He served
Counsel and Secretary 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 from January 1994 to March
1995. He was an Associate with Baker & Hostetler (law
firm) from prior to 1994 to January 1994.
Robert J. Gagalis...................... 44 Mr. Gagalis has been Vice President-Finance and
Vice President-Finance Treasurer of Fisher since May 1998. From 1997 to May
and Treasurer 1998, he was Vice President, Chief Financial Officer
and Treasurer of Wheelabrator Technologies Inc.
("WTI") (environmental services) and Vice President,
Corporate Development of WTI from prior to 1994 to
1996.
</TABLE>
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ITEM 2. PROPERTIES
Fisher's principal executive offices are located in Hampton, New Hampshire.
Fisher 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 Fisher's financial statements.
The following table identifies Fisher's principal facilities, which are
owned in fee unless otherwise indicated:
<TABLE>
<S> <C>
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(a)
Itasca, Illinois(a) Somerville, New Jersey
Hanover Park, Illinois
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
Loughborough, United Kingdom Offices, Logistics and Manufacturing Center
Zoetermeer, Netherlands Manufacturing and Logistics Center
Schwerte, Germany Manufacturing and Logistics Center
Strasbourg, France Offices and Logistics Center
OTHER PROPERTIES
Hampton, New Hampshire Corporate Offices
Fair Lawn, New Jersey Manufacturing
Pittsburgh, Pennsylvania(a) Offices, Data Center and Manufacturing
Two Rivers, Wisconsin Offices and Manufacturing Center
Indiana, Pennsylvania Manufacturing
Somerville, New Jersey Manufacturing
Mountain Home, Arkansas(a) Manufacturing
Conklin, New York Manufacturing
</TABLE>
- ---------------
(a) Leased
(b) One property owned, three leased
ITEM 3. LEGAL PROCEEDINGS
There are various lawsuits and claims pending against Fisher and certain of
its subsidiaries. In the opinion of Fisher's management, the Company's ultimate
liability with respect to these matters, if any, will not have a material
adverse effect on Fisher's results of operations and financial condition.
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
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<PAGE> 9
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 Results of Operations and Financial
Condition -- Environmental Matters". The Company's management believes that such
investigations and expenditures in connection therewith, individually and in the
aggregate, will not have a material adverse effect upon the Company's results of
operations and financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Fisher common stock ("Common Stock") is listed on the New York Stock
Exchange (the "NYSE") under the trading symbol FSH. The following table sets
forth the high and low closing sale prices of the Common Stock, as reported by
the NYSE for each of the quarterly periods listed:
<TABLE>
<CAPTION>
DIVIDENDS
PAID PER
HIGH LOW SHARE
---- ---- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter................................... 9 13/32 8 29/64 $0.004
Second Quarter.................................. 9 1/2 7 3/32 $0.004
Third Quarter................................... 10 11/64 9 1/16 $0.004
Fourth Quarter.................................. 9 19/32 8 7/8 --
YEAR ENDED DECEMBER 31, 1998
First Quarter................................... 16 1/64 9 35/64 --
Second Quarter.................................. 19 7/8 12 1/8 --
Third Quarter................................... 17 7/16 13 1/16 --
Fourth Quarter.................................. 20 3/16 14 5/16 --
YEAR ENDED DECEMBER 31, 1999
First Quarter (through March 26, 1999).......... 20 1/16 16 3/8 --
</TABLE>
HOLDERS
As of March 26, 1999, there were approximately 146 holders of record of the
Common Stock.
DIVIDENDS
On January 21, 1998, in connection with the Transaction, the Company and
certain of its subsidiaries entered into a Credit Agreement which restricts the
Company's ability to pay cash dividends. Accordingly, the Company does not
anticipate paying cash dividends on its Common Stock at any time in the
foreseeable future.
On March 9, 1998, Fisher's Board of Directors declared a five-for-one stock
split on the Company's Common Stock. As a result of the stock split, four
additional shares of Common Stock were issued for each share of Common Stock
held by the shareholders of record as of the close of business on March 19,
1998. The number of shares and per-share amounts have been restated as
appropriate to give effect to the stock split.
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<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
This summary of selected financial data for the five years in the period
ended December 31, 1998 should be read in conjunction with the Financial
Statements presented elsewhere herein. See Notes 1 and 3 to Financial Statements
for a further discussion of the basis of presentation, principles of
consolidation and defined terms.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995(I) 1994
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................................... $2,252.3 $2,175.3 $2,144.4 $1,435.8 $1,126.7
Gross profit(a)......................... 636.3 591.7 578.5 386.9 318.9
Selling, general and administrative
expense(b)............................ 503.8 518.8 483.9 334.4 255.0
Transaction-related costs(c)............ 71.0 -- -- -- --
Restructuring and other charges(d)...... 23.6 51.8 -- 34.3 --
Loss from operations to be disposed
of(e)................................. 15.1 -- -- -- --
Income from operations.................. 22.8 21.1 94.6 18.2 63.9
Interest expense........................ 90.3 23.0 27.1 15.0 9.0
Income tax (benefit) provision.......... (10.8) 25.4 30.8 1.1 27.0
Net (loss) income(f).................... (49.5) (30.5) 36.8 3.2 35.7
SHARE DATA:
Earnings (loss) per common share(g):
Basic.............................. $ (1.24) $ (0.30) $ 0.40 $ 0.04 $ 0.45
Diluted............................ (1.24) (0.30) 0.38 0.04 0.44
Weighted average shares outstanding:
Basic.............................. 40.0 101.5 91.5 81.0 80.0
Diluted............................ 40.0 101.5 102.5 81.0 82.0
Dividends declared per common share..... $ -- $ 0.012 $ 0.016 $ 0.016 $ 0.016
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital......................... $ 107.9 $ 237.5 $ 259.8 $ 284.0 $ 162.8
Total assets............................ 1,357.6 1,176.5 1,262.7 1,270.5 722.5
Long-term debt(h)....................... 1,022.0 267.8 281.5 446.3 128.4
Stockholders' (deficit) equity(h)....... (324.7) 347.1 386.2 226.0 218.6
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Gross profit in 1998 was negatively affected by $2.7 million
of costs related to adjustments of certain inventory
reserves due to the 1998 Restructuring Plan. Gross profit in
1997 was negatively affected by $6.7 million of costs
related to adjustments of certain inventory reserves due to
changes in estimates, costs attributable to the impact of
the strike by employees of United Parcel Service who are
members of the International Brotherhood of Teamsters (the
"UPS strike") and the integration of Curtin Matheson
Scientific ("CMS") into Fisher. Gross profit in 1996 and
1995 includes $1.2 million of costs in each year associated
with the revaluation of CMS and Fisons Scientific Equipment
("FSE") inventory acquired from Fisons plc ("Fisons").
(b) Selling, general and administrative expense in 1998, 1997,
1996 and 1995 included nonrecurring and redundant costs of
$8.5 million, $29.8 million, $18.2 million and $14.5
million, respectively, primarily associated with the
implementation of the 1995 Restructuring Plan (discussed
below), the integration of CMS into Fisher, and management
retention payments primarily related to the Transaction.
Additionally in 1997, actions were taken to improve
operating efficiencies, 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 primarily related to the Transaction.
</TABLE>
11
<PAGE> 12
<TABLE>
<C> <S>
(c) In connection with the Transaction, the Company recorded
$71.0 million of expenses consisting primarily of non-cash
compensation expense related to the conversion of employee
stock options, the implementation of certain executive
severance agreements and the grant of options to certain
executives in accordance with the terms of the Transactions.
(d) In the fourth quarter of 1998, the Company recorded $23.6
million ($17.0 million, net of tax) of restructuring and
other charges. The charges include asset impairment charges
in the United States and Asia and personnel reductions in
the United States and Europe.
During the fourth quarter of 1997, Fisher 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, Fisher 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 and international logistics and customer
service facilities and systems.
(e) The Company is implementing its plan relating to the Spinoff
and the UniKix Sale. The 1998 results from operations of
these businesses are reported as loss from operations to be
disposed of.
(f) Net (loss) income in 1998, 1997, 1996 and 1995 includes the
costs discussed in (a), (b), (c) and (d) above as well as
$5.0 million of other expense in 1997 related to the Board's
review of strategic alternatives and a loss on the sale of a
non-strategic business, $2.8 million of gains realized in
1997 related to the sale of non-core assets, and $1.5
million of realized gains in 1996 related primarily to the
restructuring and integration plans.
(g) In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings Per Share" (SFAS No.
128). SFAS No. 128 establishes new standards for computing
and presenting earnings per share. Earnings per share for
all years presented have been restated to comply with this
statement.
On March 9, 1998, Fisher's Board of Directors declared a
five-for-one stock split on the Company's Common Stock. As a
result of the stock split, four additional shares of Common
Stock were issued for each share of Common Stock held by the
shareholders of record as of the close of business on March
19, 1998. The number of shares and per-share amounts have
been restated as appropriate to give effect to the stock
split.
(h) In 1996, the Company issued a notice of redemption for its
$125 million step-up convertible subordinated notes due
2003. Approximately 97%, or $121.6 million, of the notes
were converted into 3,463,154 shares of the Company's Common
Stock and the remaining notes were redeemed by the Company.
The conversion of the debt and associated accrued interest
and subsequent redemption resulted in an increase in
stockholders' equity and a reduction in long-term debt of
approximately $125 million. In addition, the Transaction,
which was consummated on January 21, 1998, resulted in a
significant increase in long-term debt and a decrease in
stockholders' equity.
(i) On October 17, 1995, Fisher acquired CMS and FSE from Fisons
plc. The operations of CMS and FSE have been included in
Fisher's financial statements from the date of acquisition.
</TABLE>
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
Fisher Scientific International Inc. ("Fisher" or 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 is managed in four business segments: domestic distribution,
international distribution, laboratory workstations and technology. The domestic
and international distribution segments engage in the supply, marketing, service
and manufacture of scientific, clinical, educational, occupational health and
safety products. The laboratory workstations segment manufactures laboratory
workstations and computer (LAN) furniture. Fisher's technology segment provides
procurement outsourcing services and supply chain management technology and
software.
Pursuant to the Second Amended and Restated Agreement and Plan of Merger
dated as of November 14, 1997, amending an Agreement and Plan of Merger dated
August 7, 1997 (as amended, the "Merger Agreement") between the Company and FSI
Merger Corp. ("FSI"), a Delaware corporation formed by Thomas H. Lee Company
("THL"), providing for the merger of FSI with and into Fisher and the
recapitalization of Fisher (collectively, "the Transaction"), which Transaction
was consummated on January 21, 1998, approximately 87% of the fully diluted
shares of common stock of Fisher were converted into the right to receive $9.65
per share in cash (approximately $955.0 million in the aggregate) pursuant to an
election process that provided stockholders the right to elect, subject to
proration, for each share of Fisher common stock held either $9.65 in cash or to
retain one share of common stock, $.01 par value ("Common Stock"), in the
recapitalized company. Pursuant to the Merger Agreement, vesting of all
outstanding options accelerated. See Note 2 to Financial Statements.
In December 1998, Fisher acquired 90% of Bioblock Scientific S.A.
("Bioblock"), a leading distributor of scientific and laboratory instrumentation
in France in a transaction accounted for as a purchase. The remaining 10% of
Bioblock was acquired by Fisher in the first quarter of 1999. In October 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 and substantially all of the net assets of FSE. 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. During 1998, 1997 and 1996, 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.
During the fourth quarter of 1998, management decided to dispose of its
technology segment, which consists of its procurement outsourcing services and
supply chain management technology business (the "ProcureNet Business") and its
UniKix Technology software business. In December 1998, the Company's Board of
Directors approved the Spinoff and the UniKix Sale. Following the Spinoff, the
Company and ProcureNet will operate as separate, stand-alone companies. As part
of the Spinoff the Company and ProcureNet will enter into a transition services
agreement pursuant to which Fisher will provide ProcureNet with certain
management and other administrative services and ProcureNet will continue to
provide Fisher and its customers third party procurement and electronic commerce
support and services. It is not expected that the Spinoff will have a material
impact on Fisher's business or operations. The Company currently anticipates
that the consummation of the Spinoff will occur in the second quarter of 1999.
See Note 5 to Financial Statements.
13
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth the Company's sales and income (loss) from
operations by segment:
<TABLE>
<CAPTION>
INCOME (LOSS) FROM
SALES OPERATIONS
------------------------------ -----------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic distribution................ $1,830.8 $1,740.7 $1,727.4 $113.2 $85.3 $100.9
International distribution........... 417.3 403.8 383.8 (1.5) (12.5) (7.3)
Laboratory workstations.............. 145.6 122.4 108.0 21.0 16.1 8.7
Technology........................... -- 41.0 36.7 (15.1) (14.3) (7.4)
Transaction-related costs............ -- -- -- (71.0) -- --
Restructuring and other charges...... -- -- -- (23.6) (51.8) --
Eliminations......................... (141.4) (132.6) (111.5) (0.2) (1.7) (0.3)
-------- -------- -------- ------ ----- ------
Total........................... $2,252.3 $2,175.3 $2,144.4 $ 22.8 $21.1 $ 94.6
======== ======== ======== ====== ===== ======
</TABLE>
1998 AS COMPARED WITH 1997
Sales
Sales for the year ended December 31, 1998 increased 3.5% to $2,252.3
million from $2,175.3 million for the comparable period in 1997. Sales growth in
Fisher's domestic distribution, international distribution, and laboratory
workstations segments were partially offset by the exclusion of technology sales
in reported sales for 1998. Sales in the laboratory workstations segment
increased 18.9% due to internal growth and a strategic acquisition during 1998.
Overall sales volume and income from operations in 1997 was negatively effected
by the strike by employees of United Parcel Service ("UPS") who are members of
the International Brotherhood of Teamsters (the "UPS Strike"), which occurred in
August of 1997.
As a national distributor, Fisher utilizes the services of UPS for a
significant portion of its domestic shipments. Fisher believes it is one of
UPS's largest customers in terms of annual revenue to the shipper. The UPS
Strike negatively affected sales for the third and fourth quarters of 1997 and
increased operating costs.
Gross Profit
Fisher's gross profit for the year ended December 31, 1998 increased 7.5%
to $636.3 million from $591.7 million for the comparable period in 1997,
primarily as a result of higher volume. Gross profit as a percent of sales
increased to 28.3% for the year ended December 31, 1998 from 27.2% for the
comparable period in 1997. Gross profit in 1997 was negatively affected by $6.7
million of charges 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 Fisher. Gross profit in 1998 was negatively affected by
$2.7 million of charges for adjustments of certain domestic and international
inventory reserves related to the 1998 Restructuring Plan (discussed below). The
increase in gross profit percentage largely reflects improvements in gross
margins of Fisher's domestic operations and decreased inventory adjustments.
Selling, General and Administrative Expense
Selling, general and administrative expense for the year ended December 31,
1998 decreased 2.9% to $503.8 million from $518.8 million for the comparable
period in 1997. Selling, general and administrative expense in both periods
includes nonrecurring and redundant costs associated with the implementation of
the 1995 Restructuring Plan (discussed below), the integration of CMS into
Fisher, and management retention payments related to the Transaction. During
1997 selling, general and administrative expense included software write-offs
and other information system-related charges associated with the Company's
implementation of new global computer systems and direct costs resulting from
the UPS Strike. Additionally, 1998 includes nonrecurring costs associated with
the implementation of the 1997 Restructuring Plan. 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
14
<PAGE> 15
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, 1998, approximately $8.5 million of such nonrecurring costs were
included in selling, general and administrative expense compared with $29.8
million for the corresponding period in 1997.
Excluding such costs, selling, general and administrative expense as a
percentage of sales was 22.0% for 1998 compared with 22.5% for 1997. This
decrease is principally the result of increased sales volume and the impact of
excluding selling, general and administrative expense (and the related sales)
from the technology segment in 1998. See discussion below. The Company has taken
and is continuing to take actions to improve efficiencies and reduce this
expense as a percent of sales.
The international distribution segment continues to have significantly
higher selling, general and administrative expense as a percentage of sales as
compared with that of Fisher's domestic distribution segment. 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.
Transaction-Related Costs
In connection with the Transaction, the Company recorded $71.0 million of
expenses consisting primarily of non-cash compensation expense relating to the
conversion of employee stock options, the implementation of certain executive
severance agreements and the grant of options to certain executives in
accordance with the terms of the Transaction.
Restructuring and Other Charges
In the fourth quarter of 1998, the Company recorded $23.6 million of
restructuring and other charges which included $26.5 million of charges related
to the 1998 Restructuring Plan and $2.9 million of reversals for adjustments to
prior period restructuring charges due to revised estimates. The 1998
Restructuring was adopted in December 1998 and affects the Company's domestic
and international distribution segments. The charges include asset impairment
charges internationally attributable to the economic slow-down in the Far East
and write-offs of information systems as a result of the Company's global
information system strategy. The charges also include employee separation and
other exit costs due to a restructuring in Europe and a restructuring
domestically of the Company's management team and selected components of its
sales force. Implementation of the 1998 Restructuring Plan is expected to be
completed and the related accrual substantially expended by the end of 1999.
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 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. During 1998 the Company continued to close
additional logistics and customer-service centers in an orderly fashion, in
conjunction with the original plan. The 1997 Restructuring Plan is expected to
be substantially completed and the original accruals expended by the end of
2000.
Loss From Operations To Be Disposed Of
As discussed above, Management plans to dispose of its technology segment.
Accordingly, the 1998 results of operations of this segment are reported
separately in the statement of operations. The loss includes $1.3 million of
asset write-offs and $1.3 million of severance and other exit costs, all related
to a restructuring plan in contemplation of the disposal of the businesses.
15
<PAGE> 16
Income from Operations
Income from operations for the year ended December 31, 1998 increased to
$22.8 million from $21.1 million for the comparable period in 1997 primarily due
to the items discussed above. Income from operations as a percent of sales
remained the same at 1.0% for the year ended December 31, 1998 as compared with
the same period in 1997. Excluding Transaction-related, restructuring and other
charges and nonrecurring costs of $108.4 million and $88.3 million for 1998 and
1997, respectively, income from operations for the year ending December 31, 1998
increased to $131.2 million from $109.4 million in 1997.
Interest Expense
Interest expense for the year ended December 31, 1998 increased by $67.3 to
$90.3 million from $23.0 million for the comparable period in 1997. The increase
is the result of additional indebtedness resulting from the Transaction as well
as $6.5 million of charges related to the consummation of the Transaction,
including one-time bank commitment fees, the write-off of unamortized financing
costs related to long-term debt refinanced and the loss on the sale of accounts
receivable.
Other (Income) Expense, net
Other (income) expense, net for the year ended December 31, 1998 increased
to $7.2 million of income from $3.2 million of expense for the comparable period
in 1997. The increase in income is due to increased interest income resulting
from the timing of cash received from the Transaction and certain unusual
expenses in 1997 including $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.
Income Tax (Benefit) Provision
The income tax (benefit) provision was ($10.8) million for the year ended
December 31, 1998 compared with $25.4 million for the comparable period in 1997.
The effective tax rate was 18% for 1998, decreasing significantly compared with
that of 1997. The 1997 effective tax rate was unusually high due to foreign
losses for which no tax benefits were currently being provided, the write-off of
previously recognized foreign tax benefits, and non-deductible fees and expenses
incurred in connection with the Board's review of strategic alternatives. The
effective tax rate for 1998 is primarily the result of reductions in domestic
pretax income due to the additional interest expense incurred as a result of the
Transaction and foreign losses for which no tax benefit was recorded.
Net Income (Loss)
Net income (loss) for the year ended December 31, 1998 decreased to a loss
of $49.5 million from a loss of $30.5 million during the comparable period in
1997. These changes are due to the factors discussed above.
1997 AS COMPARED WITH 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 due to sales
growth in all segments and the inclusion of sales of operations acquired in the
fourth quarter of 1996 (UniKix Technologies and a laboratory products
distributor in Mexico). Sales growth in the domestic distribution segment slowed
due to decreased sales to the U.S. clinical laboratory market and the impact of
the strike by employees of United Parcel Service ("UPS") who are members of the
International Brotherhood of Teamsters (the "UPS Strike"), which occurred in
August 1997.
As a national distributor, Fisher utilizes the services of UPS for a
significant portion of its domestic shipments. In 1997, Fisher was 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.
16
<PAGE> 17
Gross Profit
Fisher'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 Fisher. Gross profit in 1996 includes $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,
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 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, and management retention payments
related primarily to the Transaction. 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
were 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 actions to improve
efficiencies and reduce this expense as a percent of sales.
The international distribution segment continued to have significantly
higher selling, general and administrative expense as a percentage of sales as
compared with that of Fisher's domestic distribution segment.
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 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. During 1998 the Company continued to close
additional logistics and customer-service centers in an orderly fashion, in
conjunction with the original plan. The 1997 restructuring plan is expected to
be substantially completed and the original accruals expended by the end of
2000.
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.
17
<PAGE> 18
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 Company's $125 million step-up convertible
notes.
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
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 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.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1998, the Company's operations generated
$149.9 million of cash compared with $46.1 million in 1997. This increase in
cash provided by operating activities primarily reflects an increase in net
income adjusted for noncash items, coupled with an increase in cash flows from
changes in working capital. The net increase in cash flows from changes in
working capital is due to changes in accounts payable and accrued and other
current liabilities partially offset by changes in inventories. The payables and
accruals change is primarily due to the timing of accounts payable payments,
reduced payments of accrued compensation and increased accrued interest as a
result of the Transaction. The decreased cash flow from changes in inventories
is due to efforts in 1997 to decrease inventory levels which had increased in
1996 due to the integration of CMS into Fisher.
The Company's operating working capital (defined as receivables plus
inventories less accounts payable and accrued liabilities) decreased to $(7.0)
million at December 31, 1998 from $185.7 million at December 31, 1997. This
decrease is primarily due to decreases in receivables and increases in payables
and accruals. The decrease in receivables is primarily the result of the sale of
receivables under the receivables securitization, discussed below. The increases
in accounts payable and accrued liabilities are principally attributable to the
timing of payments, accrued interest associated with the new debt resulting from
the Transaction and accruals recorded as part of the 1998 Restructuring Plan.
Excluding the effect, if any, of future acquisitions and anticipated temporarily
higher levels of inventory as the Company stocks up in anticipation of higher
demand related to Year 2000 (see below) and as it 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 1999.
During the year ended December 31, 1998, the Company used $231.8 million
for investing activities compared with $50.7 million for the same period in
1997. The increase in cash used for investing activities is primarily
attributable to acquisitions. During 1998 the Company completed five
acquisitions, the largest of
18
<PAGE> 19
which was Bioblock for approximately $138 million. The acquisitions were funded
with cash flow from operations and $187 million of net proceeds from new debt
issued in November 1998. During the years ended December 31, 1998 and 1997, the
Company made capital expenditures of $67.2 million and $59.2 million,
respectively. The increase is due to the Company's continued investments in
logistical facilities in North America and global computer systems. The decrease
in proceeds from the sale of property, plant and equipment is due to the receipt
of proceeds in 1997 from the sale of non-core fixed assets. Capital expenditures
in 1999 are expected to be at a similar level as 1998 as the Company continues
its consolidation and relocation of logistical facilities in North America. The
Company's capital expenditures were primarily funded by the Company's cash on
hand, cash provided by operating activities and financing activities.
Cash provided by financing activities was $129.3 million in 1998 compared
with cash used in financing activities of $1.9 million in 1997. This change is
primarily due to an increase of $861.0 million in net long-term debt proceeds,
including proceeds from a receivables securitization, attributable to the
Transaction and the November 1998 notes offering.
In January 1999, the Company spent $14 million to purchase the majority of
the remaining 10% of Bioblock stock outstanding. The Company also acquired
Columbia Diagnostics Inc., a Virginia-based provider of laboratory products and
supplies to the healthcare industry, and Structured Computer Systems, a
Connecticut-based provider of procurement and materials management solutions to
businesses, for total cash consideration of approximately $25 million. 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 acquisition.
Fisher expects that 1999 cash flows from operations, together with cash on
hand and funds available under the new debt financing arrangement entered into
as part of the Transaction, will be sufficient to meet ongoing operating and
capital expenditure requirements.
Restructuring and Other Charges
In the fourth quarter of 1998, the Company recorded $23.6 million of
restructuring and other charges which included $26.5 million of charges related
to the 1998 Restructuring Plan and $2.9 million of reversals for adjustments to
prior period restructuring charges due to revised estimates. The 1998
Restructuring was adopted in December 1998 and affects the Company's domestic
and international distribution segments. The charges include asset impairment
charges internationally attributable to the economic slow-down in the Far East
and write-offs of information systems as a result of the Company's global
information system strategy. The charges also include employee separation and
other exit costs due to a restructuring in Europe and a restructuring
domestically of the Company's management team and selected components of its
sales force. The 1998 charges consist of $13.6 million related to noncash asset
impairments, $12.0 million of accruals for employee separation arrangements and
$0.9 million of exit costs. Upon completion of the 1998 Restructuring Plan, the
Company expects an improvement in annual pre-tax profitability in excess of $6
million. The 1998 Restructuring Plan is expected to be completed and the related
accruals substantially expended by the end of 1999. See "Cautionary Factors
Regarding Forward-Looking Statements."
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
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. During 1998
the Company continued to close additional logistics and customer-service centers
in an orderly fashion, in conjunction with the original plan. The 1997
Restructuring Plan is expected to be substantially completed and the original
accruals expended by the end of 2000.
19
<PAGE> 20
As previously noted, in 1995 the Company recorded a pre-tax restructuring
charge of $34.3 million, of which approximately $18 million consisted of noncash
charges and approximately $16 million consisted of accrued cash charges related
to separation arrangements and exit costs related to consolidation efforts. The
1995 Restructuring Plan is expected to be completed in conjunction with the 1997
Restructuring Plan. Fisher expects cash expenditures in 1999 related to these
plans to approximate $4 million, which will be paid from available funds. Cash
expenditures in 1998 and 1997 were approximately $6 million and $2 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 plan is implemented, are not included in the
restructuring charge and were recognized in income from operations as incurred.
Upon completion of the 1995 and 1997 Restructuring Plans and the integration of
CMS into Fisher, the Company expects an improvement in annual pretax
profitability in excess of $25 million. See "Cautionary Factors Regarding
Forward-Looking Statements".
Environmental Matters
Some of Fisher'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 Fisher, 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
$34.2 million and $35.1 million at December 31, 1998 and 1997, 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 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 Fisher's
20
<PAGE> 21
operations, may give rise to additional compliance costs which could have a
material adverse effect on the Company's financial statements.
Dividends
On January 21, 1998, in connection with the Transaction, the Company and
certain of its subsidiaries entered into a Credit Agreement which restricts the
Company's ability to pay future dividends. Accordingly, the Company does not
anticipate paying cash dividends on its Common Stock at any time in the future.
Financial Condition
At December 31, 1998, current assets decreased $31.3 million from December
31, 1997, with reductions in accounts receivable of $91.5 million offset by
increases in cash and cash equivalents of $47.4 million. The decrease in
accounts receivable is primarily due to the sale of certain of the Company's
accounts receivables under a receivables securitization. Increased cash and cash
equivalents at December 31, 1998 was a result of excess proceeds from the $200
million 9% Notes issued in November 1998, $39 million of which was used for
acquisitions in January 1999.
Current liabilities increased by $98.3 million from December 31, 1997
primarily due to an increase of $46.5 million in accounts payable and an
increase of $51.8 million in accrued and other current liabilities related to
the timing of accounts payable payments, increased accrued interest relating to
the additional indebtedness associated with the Transaction and additional
accruals recorded as part of the 1998 Restructuring Plan. Long-term debt
increased by $754.2 million due to additional indebtedness as a result of the
Transaction and the 9% Notes issued in November 1998. Stockholders' equity at
December 31, 1998 is a deficit of $324.7 million as a result of the Transaction.
EUROPEAN ECONOMIC AND MONETARY UNION
The Company conducts business in many of the 11 countries which have agreed
to join the European Economic and Monetary Union (the "EMU") and, among other
things, adopt a single currency called the Euro. On January 1, 1999, a
three-year transition period for the Euro began and the conversion rates between
the Euro and the national currencies were fixed. Business enterprises have the
option of switching to the single currency at any time prior to January 1, 2002.
In connection with the upgrade of its management information systems, the
Company is incorporating the necessary changes to allow it to conduct business
in Euros and the national currencies during the transition period and entirely
in Euros thereafter. The Company is not able to estimate or segregate the costs
relating to the conversion to the Euro, but management does not believe that
such costs are material. The Company does not anticipate that the conversion to
the Euro will have a material impact on its future results of operations.
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). 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. The Company has adopted SFAS No. 130 during the first quarter of
1998 and SFAS No. 131 during the fourth quarter of 1998.
In February 1998, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 132, "Employers' Disclosures About Pensions and
Other Postretirement Benefits" (SFAS No. 132). SFAS No. 132 addresses
disclosures only and supersedes the disclosure requirements in SFAS No. 87
"Employers' Accounting for Pensions", SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits" and SFAS No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Company adopted SFAS No. 132 in the fourth
quarter of 1998.
21
<PAGE> 22
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activity," which will be effective for the fiscal year beginning
January 1, 2000. Management does not anticipate that the adoption of this
statement will have a material effect on the Company's financial statements.
During 1998, the Accounting Standards Executive Committee of the AICPA
(AcSEC) released Statement of Position 98-1 (SOP 98-1) "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use," and Statement of
Position 98-5 (SOP 98-5) "Reporting on the Cost of Start-Up Activities." SOP
98-1 requires the capitalization of certain costs related to the development of
software for internal use, and SOP 98-5 requires entities to expense, as
incurred, costs associated with start-up activities. Both standards will be
effective for the Company during fiscal year 1999. The Company is essentially
complying with these new standards and therefore does not expect their
implementation in 1999 to have a material effect on the Company's 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.
DEPENDENCE ON INFORMATION SYSTEMS; SYSTEMS CONVERSION; YEAR 2000 ISSUE
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of Year 2000 Information and Readiness Disclosure
Act.
The Company's business is dependent in large part on its information
systems. These systems play an integral role in: tracking product offerings
(including pricing and availability); processing and shipping more than 20,000
items per day; warehouse operations; purchasing from more than 3,000 vendors;
inventory management; financial reporting; and other operational functions.
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.
Based upon assessments of each of the Company's business units and the
information systems supporting those operations, the Company has begun
implementing a program having the following major elements and a target
completion date no later than December 31, 1999:
First, the applications and other software supporting each business unit
has been inventoried and analyzed and then planned for either: (a) confirmation
as Year 2000 compliant, (b) upgrade to a Year 2000 compliant version, (c)
remediation to become Year 2000 compliant or (d) replacement by other software
which provides Year 2000 compliance and other benefits. For example, certain of
the financial applications supporting the U.S. distribution business have been
replaced by Oracle software; most of the remaining software (including all
remaining essential core software applications) supporting the U.S. distribution
businesses have been remediated, tested by software professionals and end-users,
and implemented in regular business operations. A limited number of other
software applications are scheduled for upgrade or replacement prior to June 30,
1999.
The primary methods of assuring Year 2000 compliance for core business
systems are: (a) remediation for the U.S., Canadian and U.K. distribution
systems, (b) replacement by new Year 2000 and Euro compliant software for the
other European businesses, (c) upgrade to Year 2000 versions for certain
manufacturing businesses and (d) replacement by new Year 2000 software for the
remaining manufacturing businesses and overseas distribution businesses.
Second, the Company has initiated programs to assure Year 2000 compliance
for the equipment and software licenses that it currently markets to customers
and to obtain and transmit to customers information
22
<PAGE> 23
about the equipment and software licenses which customers may have purchased in
the past. Various units of the Company are also assisting customers in
developing plans to replace or upgrade any non-compliant equipment or software,
especially in laboratories, whether or not the products were acquired from the
Company.
Third, the Company has initiated programs to identify those suppliers whose
own systems could lead to delays or interruptions in supply, either because of
Year 2000 non-compliance or because of the necessity of extensive systems
upgrades or replacements to avoid Year 2000 issues. The Company is addressing
such system changes by suppliers, where appropriate, by adjusting inventory
levels and order lead times to ameliorate any delays or interruptions of product
supply to the Company's customers and is developing similar contingency plans,
on a supplier-specific basis to assure availability of products from suppliers
making future systems changes or not providing adequate assurances of readiness
to fill orders at the beginning of 2000 and in order to prevent or reduce any
adverse effect on fill rates to the Company's customers.
Fourth, with particular regard to Electronic Data Interchange ("EDI"), the
Company has developed plans to work with trading partners, including both
suppliers and customers, to either work around the requirement for six digit
date fields in the prior EDI standards or to migrate, with the trading partner,
to ANSI version 4010, which employs eight digit date fields. The Company has
begun exchanging ANSI Version 4010 transactions with customers and has
identified many of the customers who plan to migrate to Version 4010 and many of
the customers who plan to remain on earlier levels, windowing the transmitted
six digit date at both ends and recognizing the correct year. The Company is
scheduling test sessions with customers requesting either migration to Version
4010 or testing of Year 2000 compliance of such windowing. The Company will
schedule similar testings of suppliers during the second and third quarters.
Fifth, the Company is implementing a project involving testing, with
available test software, personal computers and associated software at various
Company locations, followed by upgrade or replacement where appropriate. In
addition, the Company is implementing projects which include inventory,
identification, assessment (through vendor contacts, testing or both), planning,
implementation (replacement, repair or upgrade) and testing of manufacturing
equipment, environmental control equipment, elevators, security systems,
telecommunications software, and equipment and similar purchased equipment,
software, and systems. While this portion of the overall program is targeted for
completion by June 30, 1999, it is currently anticipated that a limited amount
of this activity of certain of the Company's sites would remain incomplete until
a date no later than September 1999. Contingency plans may be developed to work
around these sites not fully compliant by June 30, 1999.
With regard to financial cost, implementation of the program has resulted
in and will continue to result in significant time expenditure by Company
personnel and outside software and equipment providers and some expenditures for
equipment and software upgrades and replacements. Because many of these efforts
have been designed to achieve other functional or systems improvements, in
addition to Year 2000 compliance, and are being carried out by operational
personnel within each business unit, it is difficult to allocate particular
funding levels solely to the Year 2000 compliance activities. In general,
however, the Company has spent $3.3 million in operating expenses and $27.6
million in capital expenditures on Year 2000 activities to date and estimates
incurring an additional $4.2 million in operating expenses and $10.2 million in
capital expenditures to complete its Year 2000 programs.
Although the Company believes that its present remediation and replacement
programs will adequately address the Year 2000 issues with respect to its
internal systems, there can be no assurance that the Company's belief is correct
or that its present assessment is in fact accurate. There can be no assurance
that the remediation and replacement programs will be completed prior to the
Year 2000 or that if completed prior to the Year 2000 that disruption will not
occur. In addition, there can be no assurance that the Company's vendors,
suppliers and the myriad of other financial, transportation, utility and other
service providers will successfully resolve their own Year 2000 issues in a
manner which avoids significant impact to the Company. The Company has received
written assurances from many of its suppliers and other providers acknowledging
the Year 2000 issues and stating their present intention to be compliant. The
Company has not received assurances from all of its suppliers and other
providers and there is no guarantee that one or more key suppliers and other
providers will not fail to become compliant in time to avoid a disruption to the
Company's business
23
<PAGE> 24
which, in spite of the Company's contingency plans, would have a significant
adverse impact on the Company. Because of the complexity of the Company's
systems, the number of transactions processed and the number of third parties
with whom the Company interacts, certain failures of the Company or its
suppliers, vendors and other service providers to completely overcome the Year
2000 issue could result in substantial and material impact on the Company's
business, operations and financial results.
The Company's forecasted costs and timing for completion of its Year 2000
programs are based on its best estimates, which in turn are based on numerous
assumptions of future events, including the continued availability and cost of
necessary personnel and other resources, third party modification plans, and
other factors. However, the Company cannot be certain that these estimates will
be achieved and actual results could differ materially from these estimates.
The preceding "Year 2000 Readiness Disclosure" contains various
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and the Section 27A Securities Act of 1933. These
forward-looking statements represent the Company's beliefs or expectations
regarding future events. When used in the "Year 2000 Readiness Disclosure", the
words "believes," "expects," "estimates" and similar expressions are intended to
identify forward-looking statements. Forward-looking statements include, without
limitation, the Company's expectations as to when it will complete the
modification and testing phases of its Year 2000 project plan as well as its
Year 2000 contingency plans; its estimated cost of achieving Year 2000
readiness; and the Company's belief that its internal systems will be Year 2000
compliant in a timely manner. All forward-looking statements involve a number of
risks and uncertainties that could cause the actual results to differ materially
from the projected results. Factors that may cause these differences include,
but are not limited to, the availability of qualified personnel and other
information technology resources; the ability to identify and remediate all date
sensitive lines of computer code or to replace embedded computer chips in
affected systems or equipment; and the actions of governmental agencies or other
third parties with respect to Year 2000 problems.
CONTROL OF THE COMPANY
As a result of the Transaction, certain affiliates of THL ("THL Entities"),
Chase Equity Associates, L.P. ("Chase Equity"), Merrill Lynch & Co. ("Merrill
Lynch") and DLJ Merchant Banking Partners II, L.P. and certain of its affiliates
("DLJMB" and, together with the THL Entities, Chase Equity and Merrill Lynch,
the "Equity Investors") own 78.4% of the issued and outstanding Fisher Common
Stock, with the THL Entities owning 55.8% 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 Transaction, the Equity Investors and certain members of
management entered into an Investor's Agreement dated January 21, 1998, as
amended March 29, 1999 (the "Investor's Agreement"). The Investor's Agreement
provides that the Board of Directors of the Company will comprise at least 9,
but not more than 10 directors, four of whom will be appointed by the THL
Entities, 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.
CAUTIONARY FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, in future filings by the Company with
the Securities and Exchange Commission (the "Commission"), in the Company's
press releases, and in oral statements made by or with the approval of an
authorized executive officer of the Company constitute "forward-looking
statements" as that term is defined under the Private Securities Litigation
Reform Act of 1995 (the "Act") and releases issued by the commission. These
statements concern the beliefs or current expectations of the Company or its
management with respect to the Company's operating and growth strategies,
financing, regulatory matters, industry trends, competition, risks associated
with foreign operations, reliance on suppliers, environmental
24
<PAGE> 25
matters and legal proceedings and other factors affecting the Company's
financial condition or results of operations. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that are beyond
the Company's control, and could cause the actual results, performance or
achievements of the Company to differ materially from those contemplated,
projected, estimated or budgeted in or expressed or implied by the
forward-looking statements. These factors include: 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 the 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operates manufacturing and logistical facilities as well as
offices around the world and utilizes fixed and floating rate debt to finance
its global operations. As a result, the Company is subject to business risks
inherent in non-U.S. activities, including political and economic uncertainty,
import and export limitations, and market risk related to changes in interest
rates and foreign currency exchange rates. The Company believes the political
and economic risks related to its foreign operations are mitigated due to the
stability of the countries in which its largest foreign operations are located.
In the normal course of business, the Company uses derivative financial
instruments including interest rate swaps and foreign currency forward exchange
contracts to manage its market risks. Additional information regarding the
Company's financial instruments is contained in Notes 6 and 12 to the financial
statements. The Company's objective in managing its exposure to changes in
interest rates is to limit the impact of such changes on earnings and cash flow
and to lower its overall borrowing costs. The Company's objective in managing
its exposure to changes in foreign currency exchange rates is to reduce
volatility on earnings and cash flow associated with such changes. The Company's
principal currency exposures are in the major European currencies and in
Canadian currency. The Company does not hold derivatives for trading purposes.
The Company measures its market risk, related to its holdings of financial
instruments based on changes in interest rates and foreign currency rates
utilizing a sensitivity analysis. The sensitivity analysis measures the
potential loss in fair values, cash flows and earnings based on a hypothetical
10% change (increase and decrease) in interest and currency exchange rates. The
Company used December 31, 1998 market rates on its financial instruments to
perform the sensitivity analysis. Certain items such as lease contracts,
insurance contracts, and obligations for pension and other post-retirement
benefits were not included in the analysis.
The Company's primary interest rate exposures relate to its cash, fixed and
variable rate debt and interest rate swaps. The potential loss in fair values is
based on an immediate change in the net present values of the Company's interest
rate sensitive exposures resulting from a 10% change in interest rates. The
potential loss in cash flows and earnings is based on the change in the net
interest income/expense over a one-year period due to an immediate 10% change in
rates. A hypothetical 10% change in interest rates does not have a material
impact on the fair values, cash flows or earnings of the Company.
The Company's primary currency rate exposures are to its foreign
denominated debt, intercompany debt, cash and foreign currency forward exchange
contracts. The potential loss in fair values is based on an immediate change in
the U.S. dollar equivalent balances of the Company's currency exposures due to a
10% shift in exchange rates. The potential loss in cash flows and earnings is
based on the change in cash flow and earnings over a one-year period resulting
from an immediate 10% change in currency exchange rates. A hypothetical 10%
change in the currency exchange rates does not have a material impact on the
fair values, cash flows or earnings of the Company.
25
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FISHER SCIENTIFIC INTERNATIONAL INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Independent Auditors' Report................................ 27
Statements of Operations for the years ended December 31,
1998, 1997 and 1996....................................... 28
Balance Sheets at December 31, 1998 and 1997................ 29
Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996....................................... 30
Statements of Changes in Stockholders' (Deficit) Equity and
Comprehensive Income for the years ended December 31,
1998, 1997 and 1996....................................... 31
Notes to Financial Statements............................... 32
</TABLE>
26
<PAGE> 27
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, 1998 and 1997, and the
related statements of operations, cash flows, and changes in stockholders'
(deficit) equity and comprehensive income for each of the three years in the
period ended December 31, 1998. 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, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 26, 1999
27
<PAGE> 28
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Sales....................................................... $2,252.3 $2,175.3 $2,144.4
Cost of sales............................................... 1,616.0 1,583.6 1,565.9
Selling, general and administrative expense................. 503.8 518.8 483.9
Transaction-related costs................................... 71.0 -- --
Restructuring and other charges............................. 23.6 51.8 --
Loss from operations to be disposed of...................... 15.1 -- --
-------- -------- --------
Income from operations...................................... 22.8 21.1 94.6
Interest expense............................................ 90.3 23.0 27.1
Other (income) expense, net................................. (7.2) 3.2 (0.1)
-------- -------- --------
(Loss) income before income taxes........................... (60.3) (5.1) 67.6
Income tax (benefit) provision.............................. (10.8) 25.4 30.8
-------- -------- --------
Net (loss) income........................................... $ (49.5) $ (30.5) $ 36.8
======== ======== ========
Net (loss) income per common share:
Basic.................................................. $ (1.24) $ (0.30) $ 0.40
======== ======== ========
Diluted................................................ $ (1.24) $ (0.30) $ 0.38
======== ======== ========
</TABLE>
See the accompanying notes to financial statements.
28
<PAGE> 29
FISHER SCIENTIFIC INTERNATIONAL INC.
BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
---- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 65.6 $ 18.2
Receivables, net....................................... 205.6 297.1
Inventories............................................ 220.9 223.8
Other current assets................................... 69.0 53.3
-------- --------
Total current assets.............................. 561.1 592.4
Property, plant and equipment, net.......................... 246.0 223.6
Goodwill.................................................... 385.9 251.4
Other assets................................................ 149.9 109.1
Net assets from operations to be disposed of................ 14.7 --
-------- --------
Total assets...................................... $1,357.6 $1,176.5
======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Short-term debt........................................ $ 19.7 $ 19.7
Accounts payable....................................... 246.3 199.8
Accrued and other current liabilities.................. 187.2 135.4
-------- --------
Total current liabilities......................... 453.2 354.9
Long-term debt.............................................. 1,022.0 267.8
Other liabilities........................................... 207.1 206.7
-------- --------
Total liabilities................................. 1,682.3 829.4
-------- --------
Commitments and contingencies (Note 14)
Stockholders' (deficit) equity:
Preferred stock ($.01 par value; 15,000,000 shares
authorized, none outstanding)......................... -- --
Common stock ($.01 par value; 100,000,000 shares
authorized; 40,034,150, and 101,783,820 shares issued
and outstanding at December 31, 1998 and 1997,
respectively)......................................... 0.4 0.2
Capital in excess of par value.............................. 313.3 278.9
Retained (deficit) earnings................................. (618.2) 96.7
Accumulated other comprehensive income...................... (19.7) (22.6)
Treasury stock, at cost, 39,785 shares at December 31,
1998...................................................... (0.5) --
Other....................................................... -- (6.1)
-------- --------
Total stockholders' (deficit) equity.............. (324.7) 347.1
-------- --------
Total liabilities and stockholders' (deficit)
equity........................................... $1,357.6 $1,176.5
======== ========
</TABLE>
See the accompanying notes to financial statements.
29
<PAGE> 30
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------ ------ -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income...................................... $(49.5) $(30.5) $36.8
Adjustments to reconcile net (loss) income to cash
provided by operating activities:
Transaction-related costs............................ 70.5 -- --
Restructuring and other charges, net of cash
expended.......................................... 23.6 51.6 --
Depreciation and amortization........................ 53.0 47.0 44.6
Loss (gain) on sale of property, plant and equipment,
and write-off of assets........................... (2.5) 0.9 (3.0)
Gain on sale of business and investments............. -- (0.7) --
Deferred income taxes................................ (17.8) (1.3) 12.3
Changes in working capital:
Receivables, net..................................... 2.3 22.0 (22.3)
Inventories.......................................... 10.8 32.0 (13.7)
Other current assets................................. (4.6) 4.1 9.4
Accounts payable..................................... 45.3 (41.7) 12.3
Accrued and other current liabilities................ 33.2 (14.8) (22.1)
Net cash flow from operations to be disposed of........ 0.4 -- --
Other assets and liabilities........................... (14.8) (22.5) (5.3)
------ ------ -----
Cash provided by operating activities............. 149.9 46.1 49.0
------ ------ -----
Cash flows from investing activities:
Acquisitions, net of cash acquired..................... (172.7) (11.6) (10.4)
Capital expenditures................................... (67.2) (59.2) (40.7)
Proceeds from sale of property, plant and equipment.... 8.1 19.1 6.9
Marketable securities proceeds and maturities.......... -- 7.8 3.0
Other.................................................. -- (6.8) (0.8)
------ ------ -----
Cash used in investing activities................. (231.8) (50.7) (42.0)
------ ------ -----
Cash flows from financing activities:
Common stock repurchased and conversion of stock to
cash................................................. (955.1) -- --
Proceeds from common stock sold to FSI................. 303.0 -- --
Financing-related fees and expenses.................... (72.2) -- --
Proceeds from accounts receivable securitization,
net.................................................. 105.2 -- --
Long-term debt proceeds................................ 958.8 107.3 29.8
Long-term debt payments................................ (210.4) (114.7) (82.2)
Proceeds from sale of common stock..................... 0.5 -- --
Acquisition of treasury stock.......................... (0.5) -- --
Proceeds from stock options exercised.................. -- 6.7 7.9
Dividends paid......................................... -- (1.2) (1.5)
------ ------ -----
Cash provided by (used in) financing activities... 129.3 (1.9) (46.0)
------ ------ -----
Net change in cash and cash equivalents..................... 47.4 (6.5) (39.0)
Cash and cash equivalents -- beginning of year.............. 18.2 24.7 63.7
------ ------ -----
Cash and cash equivalents -- end of year.................... $ 65.6 $ 18.2 $24.7
====== ====== =====
Supplemental Cash Flow Information:
Cash paid during the year for:
Income taxes......................................... $ 7.7 $ 19.6 $10.7
====== ====== =====
Interest............................................. $ 64.3 $ 23.0 $27.7
====== ====== =====
</TABLE>
See the accompanying notes to financial statements.
30
<PAGE> 31
FISHER SCIENTIFIC INTERNATIONAL INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
EQUITY AND COMPREHENSIVE INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
IN SHARES SHARES TO BE RETAINED OTHER
COMMON EXCESS OF DEPOSITED IN DISTRIBUTED EARNINGS COMPREHENSIVE TREASURY
STOCK PAR VALUE TRUST FROM TRUST (DEFICIT) INCOME STOCK TOTAL
------ --------- ------------ ------------ --------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995...... $ 0.2 $ 135.5 $ -- $ -- $ 93.1 $ (2.8) $ -- $ 226.0
Comprehensive income (loss):
Net income.................... -- -- -- -- 36.8 -- -- 36.8
Foreign currency translation
adjustment.................. -- -- -- -- -- (4.3) -- (4.3)
Subtotal-comprehensive
income...................... -- -- -- -- -- -- -- --
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 deposited in trust..... -- -- (6.0) -- -- -- -- (6.0)
----- ------- ------ ----- ------- ------- ----- -------
Balance, December 31, 1996...... 0.2 270.7 (6.0) -- 128.4 (7.1) -- 386.2
Comprehensive income (loss):
Net loss...................... -- -- -- -- (30.5) -- -- (30.5)
Foreign currency translation
adjustment.................. -- -- -- -- -- (14.5) -- (14.5)
Minimum pension liability..... -- -- -- -- -- (1.0) -- (1.0)
Subtotal-comprehensive
(loss)...................... -- -- -- -- -- -- -- --
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 deposited in trust..... -- -- (0.1) -- -- -- -- (0.1)
----- ------- ------ ----- ------- ------- ----- -------
Balance, December 31, 1997...... 0.2 278.9 (6.1) -- 96.7 (22.6) -- 347.1
Comprehensive income (loss):
Net loss...................... -- -- -- -- (49.5) -- -- (49.5)
Foreign currency translation
adjustment.................. -- -- -- -- -- 2.9 -- 2.9
Subtotal-comprehensive
(loss)...................... -- -- -- -- -- -- -- --
Five-for-one stock split...... 0.3 (0.3) -- -- -- -- -- --
Common stock issued........... -- 0.5 -- -- -- -- -- 0.5
Shares held in Treasury....... -- -- -- -- -- -- (0.5) (0.5)
Reversal of changes in market
value of common stock held
in trust.................... -- -- 4.3 -- -- -- -- 4.3
Reclass from other
liabilities................. -- -- -- 29.8 -- -- -- 29.8
Transaction-related activity:
Common stock repurchased and
conversion of options to
cash...................... (0.2) (268.7) -- -- (686.2) -- -- (955.1)
Shares deposited in trust..... -- -- (28.0) -- -- -- -- (28.0)
Equity contribution by FSI.... 0.1 302.9 -- -- -- -- -- 303.0
Proceeds from stock options... -- -- -- -- 55.7 -- -- 55.7
Recapitalization fees and
expenses.................... -- -- -- -- (34.9) -- -- (34.9)
----- ------- ------ ----- ------- ------- ----- -------
Balance, December 31, 1998...... $ 0.4 $ 313.3 $(29.8) $29.8 $(618.2) $ (19.7) $(0.5) $(324.7)
===== ======= ====== ===== ======= ======= ===== =======
<CAPTION>
SUBTOTAL
COMPREHENSIVE
INCOME
(LOSS)
-------------
<S> <C>
Balance, December 31, 1995......
Comprehensive income (loss):
Net income.................... $ 36.8
Foreign currency translation
adjustment.................. (4.3)
------
Subtotal-comprehensive
income...................... $ 32.5
======
Proceeds from stock options...
Tax benefit from exercise of
stock options...............
Dividends ($0.08 per share)...
Conversion of Convertible
Subordinated Notes..........
Shares deposited in trust.....
Balance, December 31, 1996......
Comprehensive income (loss):
Net loss...................... $(30.5)
Foreign currency translation
adjustment.................. (14.5)
Minimum pension liability..... (1.0)
------
Subtotal-comprehensive
(loss)...................... $(46.0)
======
Proceeds from stock options...
Tax benefit from exercise of
stock options...............
Dividends ($0.06 per share)...
Shares deposited in trust.....
Balance, December 31, 1997......
Comprehensive income (loss):
Net loss...................... $(49.5)
Foreign currency translation
adjustment.................. 2.9
------
Subtotal-comprehensive
(loss)...................... $(46.6)
======
Five-for-one stock split......
Common stock issued...........
Shares held in Treasury.......
Reversal of changes in market
value of common stock held
in trust....................
Reclass from other
liabilities.................
Transaction-related activity:
Common stock repurchased and
conversion of options to
cash......................
Shares deposited in trust.....
Equity contribution by FSI....
Proceeds from stock options...
Recapitalization fees and
expenses....................
Balance, December 31, 1998......
</TABLE>
See the accompanying notes to financial statements.
31
<PAGE> 32
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- FORMATION AND BACKGROUND
Fisher Scientific International Inc. ("Fisher" or 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 is managed in four business segments: domestic distribution,
international distribution, laboratory workstations and technology. The domestic
and international distribution segments engage in the supply, marketing, service
and manufacture of scientific, clinical, educational, occupational health and
safety products. The laboratory workstations segment manufactures laboratory
workstations and computer (LAN) furniture. Fisher's technology segment provides
procurement outsourcing services and supply chain management technology and
software.
Fisher provides more than 260,000 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's largest supplier represents
approximately 10% of 1998 sales.
NOTE 2 -- RECAPITALIZATION AND MERGER
Pursuant to the Second Amended and Restated Agreement and Plan of Merger
dated as of November 14, 1997, amending an Agreement and Plan of Merger dated
August 7, 1997 (as amended, the "Merger Agreement") between the Company and FSI
Merger Corp. ("FSI"), a Delaware corporation formed by Thomas H. Lee Company
("THL"), providing for the merger of FSI with and into Fisher and the
recapitalization of Fisher (collectively, "the Transaction"), which Transaction
was consummated on January 21, 1998, approximately 87% of the fully diluted
shares of common stock of Fisher were converted into the right to receive $9.65
per share in cash (approximately $955.0 million in the aggregate) pursuant to an
election process that provided stockholders the right to elect, subject to
proration, for each share of Fisher common stock held either $9.65 in cash or to
retain one share of common stock, $.01 par value ("Common Stock"), in the
recapitalized company. Pursuant to the Merger Agreement, vesting of all
outstanding options accelerated.
The Transaction has been accounted for as a recapitalization which had no
impact on the historical basis of assets and liabilities. In connection with the
Transaction, the Company recorded $71.0 million of expenses consisting primarily
of non-cash compensation expense relating to the conversion of employee stock
options, the implementation of certain executive employment agreements and the
grant of options to certain executives in accordance with the terms of the
Transaction. See Note 19.
On March 9, 1998, Fisher's Board of Directors declared a five-for-one stock
split on the Company's Common Stock. As a result of the stock split, four
additional shares of Common Stock were issued for each share of Common Stock
held by the shareholders of record as of the close of business on March 19,
1998. All references in this report to the number of shares and per-share
amounts have been restated as appropriate to give effect to the stock split.
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The financial statements contain the
accounts of the Company and all majority-owned subsidiaries. Intercompany
accounts and transactions are eliminated.
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
32
<PAGE> 33
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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 and Cash Equivalents -- Cash and 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.
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 $51.0 million and $43.7 million at December 31, 1998 and 1997,
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 15 to 40 years. The amounts presented are net of
accumulated amortization of $59.9 million and $50.5 million at December 31, 1998
and 1997, 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
$15.8 million and $12.1 million at December 31, 1998 and 1997, respectively.
During 1998, 1997, and 1996, the Company amortized $3.7 million, $3.5 million,
and $2.9 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 1998, the Company recorded an
impairment loss of $13.6 million. See Note 20.
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 $36.7 million and
$3.3 million at December 31, 1998 and 1997, respectively, relate to the
Company's 9% Notes, 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 1998, 1997, and
1996, the Company amortized $4.8 million, $0.7 million, and $0.7 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 14 for additional
information.
33
<PAGE> 34
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Other (income) expense, net represents interest income on cash and cash
equivalents and other non-operating income and expense items, including income
resulting from the Company's inactive insurance subsidiary.
Foreign Currency Translation -- Assets and liabilities of the Company'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 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, 1998 the outstanding forward currency contracts all had maturities
of less than 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.
Interest-Rate Swap Agreements -- The Company enters into interest-rate swap
agreements in order to manage its exposure to interest-rate fluctuations. The
Company does not hold or issue financial instruments for trading or speculative
purposes. Net-interest differentials to be paid or received are included in
interest expense. Any undesignated interest rate swap agreements are immediately
marked-to-market.
Accounting Pronouncements -- During 1997, the Financial Accounting
Standards Board ("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). 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. The Company
adopted SFAS No. 130 during the first quarter of 1998 and SFAS No. 131 during
the fourth quarter of 1998.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits" (SFAS No. 132). SFAS No. 132 addresses disclosures only
and supersedes the disclosure requirements in SFAS No. 87 "Employers' Accounting
for Pensions", SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits" and
SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The Company adopted SFAS No. 132 in the fourth quarter of 1998.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activity," which
will be effective for fiscal years beginning January 1, 2000. Management does
not anticipate that the adoption of this statement will have a material impact
on the Company's financial statements.
During 1998, the Accounting Standards Executive Committee of the AICPA
(AcSEC) released Statement of Position 98-1 (SOP 98-1) "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use," and Statement of
Position 98-5 (SOP 98-5) "Reporting on the Cost of Start-Up Activities." SOP
98-1 requires the capitalization of certain costs related to the development of
software for internal use, and SOP 98-5 requires entities to expense, as
incurred, costs associated with start-up activities. Both standards will be
effective for the Company during fiscal year 1999. The Company is essentially
complying with these new standards and therefore does not expect their
implementation to have a material effect on the Company's financial statements.
34
<PAGE> 35
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 4 -- ACQUISITIONS
In December 1998, Fisher purchased for approximately $138 million in cash
approximately 90% of Bioblock Scientific S.A. ("Bioblock"), a leading
distributor of scientific and laboratory instrumentation in France. At the time
of the acquisition, Bioblock had approximately $32 million of cash and cash
equivalents on hand. In addition, the Company acquired the remaining Bioblock
shares in January 1999 for an additional $14 million, bringing Fisher's the
total ownership position to 100%.
The following unaudited pro forma financial information presents the
consolidated results of operations as if the acquisition of Bioblock had
occurred at the beginning of the period presented (in millions, except per share
amounts).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Sales............................................... $2,325.8 $2,243.8
Net income (loss)................................... (57.3) (37.2)
Earnings (loss) per common share:
Basic.......................................... $ (1.43) $ (0.37)
Diluted........................................ (1.43) (0.37)
</TABLE>
The pro forma financial information includes the results of Bioblock
combined with the Company's historical results (including the 1998 and 1997
restructuring charges described in Note 20 and Transaction related costs
described in Note 2), the effects of the purchase accounting allocations, and
adjustments to interest expense to reflect borrowings to finance the
acquisitions described in Note 12. 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 Bioblock occurred on the assumed date, nor does it
project the Company's results of operations for any future period.
The Company's balance sheet at December 31, 1998 includes the estimated
fair value of assets and liabilities acquired in connection with the acquisition
of Bioblock based upon valuations and other studies which have not been
finalized. Estimates of acquisition liabilities relating to the integration of
Bioblock with Fisher's operations are not reflected as the integration plans
have not been finalized. Accordingly, the allocation of the purchase price is
preliminary. The preliminary goodwill related to the acquisition of Bioblock is
approximately $92 million and is being amortized over 25 years.
In August of 1998, the Company acquired the net assets of Systems
Manufacturing Corporation, a manufacturer of local area network ("LAN")
furniture and command bridges for $58 million in cash. The Company also made
three smaller acquisitions with an aggregate purchase price of approximately $11
million in cash during 1998. These acquisitions were accounted for as purchases.
During 1997 and 1996, the Company made several small acquisitions for an
aggregate purchase price of approximately $12 million and $10 million,
respectively. 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.
The excess of the purchase price over the fair value of all net assets
acquired in 1998 and 1997 was approximately $151 million and $10 million,
respectively, and is being amortized over 15 to 40 years.
NOTE 5 -- OPERATIONS TO BE DISPOSED OF
During the fourth quarter of 1998, management decided to dispose of its
technology segment, which consists of its procurement outsourcing services and
supply chain management technology business (the "ProcureNet Business") and its
UniKix Technology software business. In December 1998, the Company's
35
<PAGE> 36
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Board of Directors approved a plan to (i) spinoff the ProcureNet Business to
Fisher stockholders (the "Spinoff") and (ii) sell the UniKix Technology software
business (the "UniKix Sale"). Following the Spinoff, the Company and ProcureNet
will operate as separate, stand-alone companies. As part of the Spinoff, the
Company and ProcureNet will enter into a transition services agreement pursuant
to which Fisher will provide ProcureNet with certain management and other
administrative services and ProcureNet will continue to provide Fisher and its
customers third party procurement and electronic commerce support and services.
It is not expected that the Spinoff will have a material impact on Fisher's
business or operations. The Company currently anticipates that the consummation
of the Spinoff will occur in the second quarter of 1999.
Revenues, costs and expenses, assets and liabilities, and cash flows of the
new company have been excluded from their respective captions in the Statement
of Operations, Balance Sheet, and Statements of Cash Flows. These items have
been reported as "loss from operations to be disposed of", "net assets from
operations to be disposed of" and "net cash flows from operations to be disposed
of" at December 31, 1998.
Summarized financial information for the technology segment is set for
below (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Net sales......................................... $59.5 $41.0 $36.7
Operating loss.................................... 15.1 14.3 7.4
Net loss.......................................... 9.1 8.6 4.4
Diluted loss per share............................ 0.23 0.08 0.04
Current assets.................................... $12.2 $11.3
Current liabilities............................... 10.1 12.1
Total assets...................................... 24.6 28.8
Total liabilities................................. 9.9 12.1
----- -----
Net assets from operations to be disposed of...... $14.7 $16.7
===== =====
</TABLE>
The operating loss in 1998 includes $1.3 million of asset write-offs and
$1.3 million of severance and other exit costs. All balance sheet data presented
above excludes intercompany obligations.
NOTE 6 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash in banks,
receivables, debt and interest rate swaps. In addition, the Company has forward
foreign 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 carrying and fair values of long-term debt were $1,022.0
million and $1,011.6 million, respectively, at December 31, 1998 and $267.8
million and $257.6 million, respectively, at December 31, 1997. 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 $25.6 million with no
unrealized gain or loss at December 31, 1998.
During 1998, the Company executed two interest-rate swap agreements with a
counterparty exchanging its floating-rate obligation on $120 million notional
principal amount for a fixed-rate payment obligation of 5.6425% per annum
through January 23, 2001 and on $250 million notional principal amount for a
fixed- rate payment obligation of 5.7375% per annum through January 23, 2003. In
the unlikely event that the counterparty fails to meet the terms of the
interest-rate swap agreement, the Company's exposure is limited to the
interest-rate differential on the notional amount at each quarterly settlement
period over the life of the agreements. The Company does not anticipate
non-performance by the counterparty. The fair values of interest-rate swap
agreements are the estimated amounts that the Company would receive or (pay) to
terminate the agreements at the reporting date, taking into account current
interest rates, the market expectation for future interest rates and the current
creditworthiness of the counterparty. The fair value of
36
<PAGE> 37
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
these interest-rate swap agreements as of December 31, 1998, based upon quoted
market prices, was ($5.8) million of which approximately $1.0 million was
recorded at December 31, 1998 to accrue for the undesignated portion.
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 -- RECEIVABLES
The following is a summary of receivables at December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Trade and other receivables............................. $233.4 $320.9
Allowance for doubtful accounts......................... (27.8) (23.8)
------ ------
$205.6 $297.1
====== ======
</TABLE>
Provisions for doubtful accounts were $7.7 million, $5.5 million and $4.4
million and write-offs were $3.7 million, $3.6 million and $1.6 million for the
years ending December 31, 1998, 1997 and 1996, respectively. Allowances of
companies acquired at their acquisition date were $0.3 million and $1.1 million
in 1998 and 1997, respectively, and allowances of operations to be disposed were
$0.3 million at December 31, 1997.
NOTE 8 -- INVENTORIES
The following is a summary of inventories by major category at December 31
(in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Raw materials........................................... $ 19.5 $ 17.5
Work in process......................................... 3.7 3.2
Finished products....................................... 197.7 203.1
------ ------
$220.9 $223.8
====== ======
</TABLE>
Inventories valued using the LIFO method amounted to $153.4 million at
December 31, 1998 and $169.6 million at December 31, 1997, which were below
estimated replacement cost by approximately $26.4 million and $28.8 million for
the years ended December 31, 1998 and 1997, respectively.
NOTE 9 -- PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment by major class
of asset at December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Land, buildings and improvements....................... $176.0 $154.9
Machinery, equipment and other......................... 176.6 159.1
------ ------
352.6 314.0
Accumulated depreciation............................... (106.6) (90.4)
------ ------
$246.0 $223.6
====== ======
</TABLE>
37
<PAGE> 38
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- OTHER ASSETS
The following is a summary of other assets at December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Deferred income taxes.................................. $ 47.8 $ 37.1
Deferred financing fees................................ 37.0 3.3
Intangible assets...................................... 17.9 23.0
Other.................................................. 47.2 45.7
------ ------
$149.9 $109.1
====== ======
</TABLE>
NOTE 11 -- ACCRUED AND OTHER CURRENT LIABILITIES
The following is a summary of accrued and other current liabilities at
December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Wages and benefits..................................... $ 43.0 $ 29.3
Interest............................................... 22.0 0.8
Other.................................................. 122.2 105.3
------ ------
$187.2 $135.4
====== ======
</TABLE>
NOTE 12 -- DEBT
The following is a summary of debt and other obligations at December 31 (in
millions):
<TABLE>
<CAPTION>
1998 1997
-------- ------
<S> <C> <C>
9% Senior Subordinated Notes (net of discount of $7.0
million)............................................ $ 593.0 $ --
New Credit Facility................................... 253.7 --
Prior Credit Facility................................. -- 100.6
7 1/8% Notes (net of a discount of $0.9 and $1.0
million in 1998 and 1997, respectively)............. 149.1 149.0
Other................................................. 45.9 37.9
Less short-term debt.................................. (19.7) (19.7)
-------- ------
Total....................................... $1,022.0 $267.8
======== ======
</TABLE>
On January 21, 1998, in connection with the Transaction, Fisher entered
into new debt financing arrangements, providing for up to $469.2 million of
senior bank financing (the "New Credit Facility"), a $150 million receivables
securitization facility (the "Receivables Securitization") and $400 million of
9% Senior Subordinated Notes due 2008 (the "9% Notes"). The 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 common stock then outstanding
that were not retained by existing stockholders and employees, to refinance
$107.8 million of indebtedness outstanding on the date of the Transaction and to
pay related fees and expenses of the Transaction. In addition, the New Credit
Facility will be used to provide for the Company's working capital requirements
and future acquisitions, if any.
In March, the Company paid down $40.0 million of borrowings under the New
Credit Facility, funded by $20 million of proceeds from the sale of accounts
receivable under the Receivables Securitization, increasing that facility limit
to $170 million, and $20 million of cash generated by operations. As of December
31, 1998, the New Credit Facility consisted of (i) a $253.7 million term loan
facility (the "Term Facility") consisting of a (a) $107.5 million tranche A term
loan ("Tranche A"), (b) $86.4 million tranche B term loan ("Tranche B") and (c)
$59.8 million tranche C term loan ("Tranche C"); and (ii) a $175.0 million
revolving credit
38
<PAGE> 39
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
facility (the "Revolving Facility"). Of the $253.7 million outstanding under the
Term Facility, $205.0 million is denominated in U.S. dollars, $36.8 million is
denominated in British pounds and $11.9 million is denominated in Canadian
dollars. Borrowings under the Term Facility bear interest at a rate equal to, at
the Company's option, the following: Tranche A, LIBOR plus 2.25% or Prime Rate
plus 1.25%; Tranche B, LIBOR plus 2.50% or Prime Rate plus 1.50%; and Tranche C,
LIBOR plus 2.75% or Prime Rate plus 1.75%. Borrowings made under the Revolving
Facility bear interest at a rate equal to, at the Company'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 upon certain changes in the
leverage ratio. The Term Facilities 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 Facility expires six years from the date of
inception. The mandatory repayment schedule of the Term Facility over the next
five years and thereafter is as follows: $5.2 million in 1999, $14.6 million in
2000, $18.9 million in 2001, $31.8 million in 2002, $23.2 million in 2003, and
$160.0 million in years subsequent to 2003.
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 the Company 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) minority investments, (v) the payment of cash
dividends to shareholders, and (vi) 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. The Company is
in compliance with all covenants at December 31, 1998. 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 Receivables Securitization relates to the sale, on a revolving basis,
of certain of the accounts receivable of Fisher Scientific Company, L.L.C., a
Delaware limited liability corporation ("FSC"), to a bankruptcy remote
subsidiary of FSC that 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. As of December 31,
1998, the Company sold $105.2 million under the Receivables Securitization. The
facility has a maturity of five years, and the effective interest rate is
approximately LIBOR plus 50 basis points.
On January 21, and November 20, 1998, the Company issued $400 million and
$200 million, respectively, of 9% Senior Subordinated Notes ("9% Notes"). The 9%
Notes issued in January were issued at par while the 9% Notes issued in November
were issued net of a $7 million discount. 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 the Company 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, the Company may redeem up to 40% of the original principal
amount of the 9% Notes at a redemption price of 109% of the
39
<PAGE> 40
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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 remains 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), the Company 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, (iv) minority investments, and (v) other various covenants that are
customary for transactions of this type.
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, 1998, based on quotes from bond traders making a market in the
Notes, was approximately $142.5 million.
On November 20, 1998, the Company borrowed $8.8 million from LaSalle
National Bank, as lender, pursuant to the Illinois State Treasurer's Economic
Program ("STEP"). The Company was eligible for the STEP benefits based on its
creation of permanent jobs in the state of Illinois. The Company subsequently
pledged a first lien mortgage on the property at Hanover Park which was approved
by the lenders under the New Credit Facility. The Company will use the amounts
borrowed under the loan agreement to finance part of the consolidation of the
Midwestern distribution centers into one central location. The loan agreement
provides for an interest rate of 4.90% up until November 20, 2000, and an
interest rate thereafter of 0.25% plus the rate for U.S. Treasury Bonds maturing
over a three year period.
NOTE 13 -- OTHER LIABILITIES
The following is a summary of other liabilities at December 31 (in
millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Postretirement benefit costs other than pensions....... $ 71.5 $ 74.7
Environmental.......................................... 31.6 32.3
Other.................................................. 104.0 99.7
------ ------
$207.1 $206.7
====== ======
</TABLE>
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
The following is a summary of annual future minimum lease and rental
commitments under operating leases as of December 31, 1998 (in millions):
<TABLE>
<S> <C>
1999........................................................ $18.6
2000........................................................ 13.5
2001........................................................ 10.4
2002........................................................ 6.8
2003........................................................ 5.3
Thereafter.................................................. 24.8
-----
Net minimum lease payments.................................. $79.4
=====
</TABLE>
Total rental expense included in the accompanying income statements
amounted to $19.4 million in 1998, $18.7 million in 1997, and $16.9 million in
1996.
40
<PAGE> 41
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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 $34.2 million and $35.1 million at December 31, 1998
and 1997, 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 Fisher'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.
At December 31, 1998, the Company had letters of credit outstanding
totaling $25.6 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. In addition, the Company has $8.4 million of
insurance related letters of credit related to its inactive insurance subsidiary
each of which is collateralized by the cash of such subsidiary.
NOTE 15 -- STOCKHOLDERS' EQUITY
On May 12, 1998, the stockholders of the Company approved the Amendment to
the Restated Certificate of Incorporation of the Company increasing the
authorized number of shares of Common Stock that may be issued from 50,000,000
to 100,000,000. Fisher's authorized capital stock consists of Common Stock, par
value $.01 per share, of which 40,034,150 and 101,783,820 shares were
outstanding at December 31, 1998 and 1997, 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. At December 31, 1998, the
Company's capital stock consisted of 35,998,860 shares of Common Stock,
4,035,290 shares of non-voting Common Stock outstanding and 39,785 shares of
Treasury Stock. Of the total 40,034,150 shares of Common Stock outstanding,
3,702,655 represents shares owned by employees as a result of the conversion of
stock options and 1,206,350 represents shares retained by management pursuant to
the stock election process. In addition, warrants to purchase 2,583,315 shares
of Common Stock at $9.65 per share were issued as part of the Transaction.
41
<PAGE> 42
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The Fisher Preferred Stock and the 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.
NOTE 16 -- EARNINGS PER SHARE
The computation of basic and diluted earnings per share for 1998, 1997, and
1996 in accordance with Financial Accounting Standard No. 128 "Earnings Per
Share" is as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -----
<S> <C> <C> <C>
BASIC (LOSS) EARNINGS PER SHARE:
Net (Loss) Income................................... $(49.5) $(30.5) $36.8
Average Shares of Common Stock Outstanding.......... 40.0 101.5 91.5
------ ------ -----
Basic (Loss) Earnings Per Share..................... $(1.24) $(0.30) $0.40
====== ====== =====
DILUTED (LOSS) EARNINGS PER SHARE:
Net (Loss) Income................................... $(49.5) $(30.5) $36.8
Interest Expense of Convertible Subordinated Notes,
Net of Tax........................................ -- -- 2.1
------ ------ -----
(49.5) (30.5) 38.9
Average Shares of Common Stock Outstanding.......... 40.0 101.5 91.5
Effective of Dilutive Securities:
Convertible Subordinated Notes...................... -- -- 8.5
Common Stock Equivalents............................ -- -- 2.5
------ ------ -----
Total Shares Used in Diluted Earnings Per Share
Calculation....................................... 40.0 101.5 102.5
------ ------ -----
Diluted (Loss) Earnings Per Share................... $(1.24) $(0.30) $0.38
====== ====== =====
</TABLE>
At December 31, 1998, the Company had options and warrants outstanding to
purchase 7.3 million and 2.6 million shares, respectively, that could
potentially dilute basic earnings per share that were excluded from the diluted
earnings per share computation because to do so would have been anti-dilutive.
Additionally, options to purchase 250,000 and 325,000 shares of Common Stock
were outstanding at December 31, 1997 and 1996, respectively that were also not
included in the computation of diluted earnings per share as inclusion would
have been anti-dilutive.
Earnings (loss) per share and weighted average common shares outstanding at
December 31, 1998 are based on the Company's recapitalized structure and reflect
the five-for-one stock split declared on March 9, 1998. Earnings (loss) per
share at December 31, 1997 and 1996 are based on the Company's capital structure
at that time (prior to the recapitalization) and have been restated to reflect
the aforementioned stock split.
42
<PAGE> 43
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 17 -- INCOME TAXES
The domestic and foreign components of (loss) income before income taxes
are as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Domestic........................................ $(49.1) $44.4 $69.2
Foreign......................................... (11.2) (49.5) (1.6)
------ ----- -----
(Loss) income before income taxes............... $(60.3) $(5.1) $67.6
====== ===== =====
</TABLE>
The components of the income tax (benefit) provision are as follows (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Current income tax expense:
Federal......................................... $ 3.1 $16.8 $11.6
State........................................... 0.4 5.9 5.8
Foreign......................................... 3.5 4.0 1.1
------ ----- -----
Total current.............................. 7.0 26.7 18.5
------ ----- -----
Deferred income tax (benefit) expense:
Federal......................................... (13.8) (2.5) 11.8
State........................................... (4.0) (0.3) 1.1
Foreign......................................... -- 1.5 (0.6)
------ ----- -----
Total deferred............................. (17.8) (1.3) 12.3
------ ----- -----
Total income tax (benefit) provision................. $(10.8) $25.4 $30.8
====== ===== =====
</TABLE>
The principal items accounting for the differences in taxes on (loss)
income computed at the applicable U.S. statutory rate and as recorded are as
follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Taxes computed at statutory rate..................... $(21.1) $(1.8) $23.7
Foreign taxes over U.S. rate and foreign losses not
tax benefited...................................... 6.3 21.4 1.8
State income taxes (net of federal benefit).......... (2.4) 3.6 4.5
Increase in valuation allowance...................... -- 2.4 --
Nondeductible permanent items........................ 5.2 -- --
Other................................................ 1.2 (0.2) 0.8
------ ----- -----
Income tax (benefit) provision....................... $(10.8) $25.4 $30.8
====== ===== =====
</TABLE>
The tax effects of temporary items that gave rise to significant portions
of the deferred tax accounts are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
Deferred tax assets:
Postretirement benefit costs other than
pensions........................................ $ 30.6 $ 38.0
Environmental accruals............................ 13.2 13.6
Operating loss and tax credit carryforwards....... 33.2 28.5
Goodwill writeoff................................. 8.2 8.0
Accrued employee benefits......................... 24.6 5.8
Restructuring accruals............................ 13.4 9.4
Other items not deductible until paid............. 49.4 48.1
------ ------
Gross deferred tax assets......................... 172.6 151.4
</TABLE>
43
<PAGE> 44
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
Less valuation allowance.......................... (37.7) (31.4)
------ ------
$134.9 $120.0
====== ======
Deferred tax liabilities:
Goodwill.......................................... $ 16.6 $ 15.8
Property, plant and equipment..................... 6.8 11.5
Other............................................. 12.7 11.9
------ ------
$ 36.1 $ 39.2
====== ======
</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, 1998, the Company had
accumulated foreign net operating loss carryforwards for tax purposes of
approximately $87.6 million. These net operating losses expire as follows (in
millions):
<TABLE>
<S> <C>
1999........................................................ $ 2.4
2000........................................................ 1.2
2001........................................................ 1.1
2002........................................................ 3.6
2003........................................................ 5.5
No Expiration............................................... 73.8
-----
$87.6
=====
</TABLE>
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
valuation allowances at December 31, 1998, 1997 and 1996 predominantly represent
allowances against foreign net operating losses which are not anticipated to
result in future tax benefits. At December 31, 1998 and 1997, $1.5 million and
$2.3 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, 1998, the Company had not recognized a deferred tax
liability on approximately $23 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.
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.
NOTE 18 -- RETIREMENT BENEFITS
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
44
<PAGE> 45
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
reflect that of a cash balance plan. Under the cash balance plan, a
participating employee accumulates a cash balance account which is credited
monthly with a 3.5% of compensation allocation and interest. The Company's
funding policy is to contribute annually the statutorily required minimum amount
as actuarially determined.
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 . Fisher funds a portion of the costs of this
program on a self-insured and insured-premium basis and, for the years ended
December 31, 1998, 1997 and 1996, made premium payments totaling $1.7 million,
$1.5 million and $1.4 million, respectively.
The changes in benefit obligations and plan assets were as follows at
December 31 (in millions):
<TABLE>
<CAPTION>
OTHER
POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------- --------------
1998 1997 1998 1997
------ ------ ----- -----
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year................. $213.9 $164.9 $34.2 $31.7
Service costs...................................... 8.1 6.5 0.7 0.8
Interest costs..................................... 14.6 12.3 2.1 2.3
Plan amendment..................................... -- (11.1)
Special termination benefit........................ 0.7 -- -- --
Curtailment........................................ 1.3 -- -- --
Actuarial (gain) loss.............................. 10.1 20.0 (2.6) 0.9
Acquisition........................................ -- 30.2 -- --
Benefits paid...................................... (15.6) (8.9) (1.7) (1.5)
------ ------ ----- -----
Benefit obligation at end of year....................... $233.1 $213.9 $32.7 $34.2
====== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS
----------------
1998 1997
------ ------
<S> <C> <C> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year..... $246.7 $180.8
Actual return (loss) on plan assets................ 15.7 40.0
Acquisition........................................ -- 33.7
Employer contribution.............................. 1.3 --
Plan participants' contribution.................... 1.7 1.0
Benefits paid...................................... (13.5) (8.8)
------ ------
Fair value of plan assets at end of year................ $251.9 $246.7
====== ======
</TABLE>
45
<PAGE> 46
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The funded status of the Company's pensions and postretirement programs was
as follows at December 31 (in millions):
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------- --------------------
1998 1997 1998 1997
------ ------ -------- --------
<S> <C> <C> <C> <C>
FUNDED STATUS........................................... $ 18.8 $ 32.8 $(32.7) $(34.2)
Unrecognized net actuarial (gain) loss.................. (7.0) (16.8) (25.9) (25.4)
Unrecognized prior service costs........................ 3.4 (8.4) (13.9) (16.0)
Unrecognized net transition (asset)/obligation.......... 3.4 (4.0) -- --
Adjusted required to recognize minimum liability........ -- (3.8) -- --
------ ------ ------ ------
Prepaid (accrued) pension cost.......................... $ 18.6 $ (0.2) $(72.5) $(75.6)
====== ====== ====== ======
</TABLE>
The net periodic pension costs and postretirement health care benefit
obligation income includes the following components for the years ended December
31, (in millions):
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------ ------------------------
1998 1997 1996 1998 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
(INCOME)
Service cost................................. $ 8.1 $ 6.5 $ 6.2 $ 0.7 $ 0.8 $ 0.7
Interest cost................................ 14.6 12.3 11.5 2.1 2.3 2.2
Expected return on plan assets............... (20.3) (16.2) (16.8) -- -- --
Amortization of unrecognized net
(gain)/loss................................ -- 0.4 0.2 (2.3) (2.0) (2.0)
Amortization of unrecognized prior service
cost....................................... (0.6) (0.2) 0.6 (2.1) (2.1) (2.1)
Amortization of unrecognized net transition
(asset)/obligation......................... (1.1) (1.1) 1.0 -- -- --
Special termination benefit (gain)/loss...... 0.7 -- -- -- -- --
Settlement/Curtailment (gain)/loss........... 1.3 -- -- 0.2 -- --
------ ------ ------ ----- ----- -----
Net periodic benefit cost (income)........... $ 2.7 $ 1.7 $ 2.7 $(1.4) $(1.0) $(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 1998, 1997 and 1996.
The development of the net periodic pension cost and the projected benefit
obligation was based upon the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Discount rate....................................... 6.75% 7.25% 7.5%
Average rate of increase in employee compensation... 4.0% 4.5% 4.5%
Expected long-term rate of return on assets......... 9.75% 9.75% 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
46
<PAGE> 47
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
among all Fisher 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, 1998,
1997 and 1996 the Company's contributions to the Plan were $2.5 million, $3.2
million and $5.0 million, respectively.
The weighted average discount rate used in determining the accumulated
postretirement health care benefit obligation was 6.75% for December 31, 1998,
7.25% for December 31, 1997, and 7.5% for December 31, 1996. A 7.5% annual rate
of increase in per capita cost of covered health care benefits was assumed for
1998 which gradually decreases to an average ultimate rate of 6.5%. 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 1998
would change the accumulated postretirement benefit obligation as of December
31, 1998 by approximately $2.3 million and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for the
year ended December 31, 1998 by approximately $0.3 million.
NOTE 19 -- STOCK AND OTHER PLANS
Stock Plans
During 1998, the Company's Board of Directors approved the 1998 Equity
Incentive Plan ("1998 Plan"). Under the 1998 Plan, the Company may grant up to
an aggregate of 10,000,000 shares of stock. 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. At
December 31, 1998, the Company granted options to purchase 4,026,982 shares of
Common Stock having a ten-year term and vesting over three to five years, on a
pro rata basis. Outstanding options under the 1998 Plan were generally granted
at 100% of market price on the date of grant. The Company also granted options
to purchase 2,225,000 shares of 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 $19.30 per share. In addition, the Company granted to certain
executives, options to purchase 1,016,665 shares of Common Stock having a
ten-year term and vesting five to nine years from the date of grant, unless
sooner vested upon the achievement of certain performance targets or unless
"put" to the Company by the executive or "called" by the Company in accordance
with their terms. The total "put" and/or "call" rights are limited to $14.5
million plus interest.
Prior to the 1998 Plan, Fisher had 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 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 an
aggregate of 23,020,000 shares of stock under the 1991 Plan and the 1997 Plan
and 7,500,000 shares of stock under the OUSP to officers, employees and other
individuals who provide services to Fisher. Under these plans, the Company
granted options of 15,671,000 shares and 6,311,000 shares, respectively, through
January 21, 1998 at which point all outstanding options vested, pursuant to the
Merger Agreement. 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
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.
47
<PAGE> 48
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
A summary of the status of the Company's two stock option plans at December
31, 1998, 1997 and 1996 and changes during the years then ended is presented in
the table:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ----------------- -----------------
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...... 17,570 $ 6.45 18,150 $6.29 17,760 $5.79
Granted............................... 7,544 14.48 2,370 7.80 3,470 7.50
Exercised............................. -- -- (1,145) 5.80 (2,025) 3.86
Canceled/Expired/Forfeited............ (17,845) 6.57 (1,805) 8.99 (1,055) 6.49
------- ------ ------
Outstanding at end of year............ 7,269 $14.47 17,570 $6.45 18,150 $6.29
======= ====== ======
Exercisable at end of year............ -- 9,175 $5.98 6,185 $5.39
Weighted average fair value of options
granted............................. $ 3.95 $2.30 $1.97
</TABLE>
Pursuant to the Merger Agreement, the vesting of all options accelerated on
the date of the Transaction. Of the 17,570,000 options outstanding at December
31, 1997, approximately 6,720,000 were converted to cash and the remainder were
converted to common stock. When the options were converted, the Company recorded
compensation expense of approximately $56 million to reflect the "cashless"
conversion of the options into cash or common stock having a value on the date
of the Transaction equal to the product of (x) the excess of $9.65 over the
exercise price per share of Fisher Common Stock subject to such option, and (y)
the total number of shares of Fisher Common Stock subject to option, subject to
any required tax withholdings.
Restricted Unit Plan
Pursuant to the restricted unit plan of Fisher, each non-employee director
of the Company received a one-time grant of 25,000 units upon becoming a
director of the Company. The units represent the right to receive an equivalent
number of shares of 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, 25,000 and 100,000 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 1998,
1997 and 1996 net income (loss) would have been ($51.2) million, ($35.9)
million, and $31.7 million, respectively, with basic earnings (loss) per share
of ($1.28), ($0.35), and $0.35 and diluted earnings (loss) per share of ($1.28),
($0.35) and $0.33. In 1998, the Company's Board of Directors approved the 1998
Equity Incentive Plan, replacing all prior equity incentive plans. 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 1998: risk-free interest rates of approximately 5.2%, annual dividend
of $0; expected lives of 5 years and expected volatility of 50%. In order to
reflect the restrictive nature of the stock underlying the options granted,
discount factors of 33% and 25%, depending upon the specific type of option,
were applied in determining fair value.
48
<PAGE> 49
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Prior to 1998, the Company had 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"). Pursuant to the
Merger Agreement, the vesting of all options outstanding accelerated on the date
of the Transaction, and were replaced by the 1998 Equity Incentive Plan. The
following weighted average assumptions were used for grants in 1997 and 1996:
risk-free interest rates of approximately 6.5% and 6.5% for the 1991 Plan
options and 6.3% and 6.0% for the OUSP Plan; an annual dividend of $0.8 per
share; expected lives of 7 years for the 1991 Plan options and 3 years for the
OUSP options and expected volatility of 30% for grants in 1997 and 25% for
grants in 1996. 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 20 -- RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1998, the Company recorded $23.6 million of
restructuring and other charges which included $26.5 million of charges related
to the 1998 Restructuring Plan and $2.9 million of reversals for adjustments to
prior period restructuring charges due to revised estimates. The 1998
Restructuring was adopted in December 1998 and affects the Company's domestic
and international distribution segments. The charges include asset impairment
charges internationally attributable to the economic slow-down in the Far East
and write-offs of information systems due to a change in management's global
information system strategy. The charges also include employee separation and
other exit costs due to a restructuring in Europe and a restructuring
domestically of the Company's management team and selected components of its
sales force. The 1998 charges consists of $13.6 million related to noncash asset
impairments, $12.0 million of accruals for employee separation arrangements and
$0.9 million of exit costs.
Asset impairment charges in 1998 include $0.9 million of goodwill and other
intangibles and $12.7 million of property, plant and equipment. The property,
plant and equipment impairment charge includes $5.6 million related to land in
the Far East which the Company no longer plans to develop and warehouses in the
same region which are impaired due to reduced volume and projected operating
losses. The impairment amounts are based on independent appraisals. The carrying
value of this land held for sale is $1.4 million at December 31, 1998. The
remainder of the property, plant and equipment impairment charge is primarily
attributable to global information system software which the Company no longer
uses due to a change in system strategy. The charge for employee separation
arrangements relates to the termination and other severance costs associated
with approximately 139 salaried and hourly employees who will be severed as part
of the 1998 Restructuring Plan, none of whom were terminated as of December 31,
1998. The other exit costs primarily relate to the European restructuring.
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 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 impairment charges in 1997 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
United States restructuring plan and to system-related assets. The charge for
employee separation arrangements, relates to 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 270 employees were terminated as of December 31, 1998. The exit
costs consist principally of future rent, net of estimated sublease rentals, and
other costs related to leased facilities
49
<PAGE> 50
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
which as a result of the 1997 Restructuring Plan, will be closed and exited
prior to the contractual termination date of the leases.
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. 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. 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 impairment charges in 1995 were recorded primarily for certain owned
facilities which were closed and sold in 1996. The net book value of each
facility was adjusted to its estimated fair market value less costs to sell. The
charge for employee separation arrangements relates to 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 relate primarily to 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 and
exited prior to the contractual termination date of the leases.
The following table summarizes the recorded accruals and impairments
related to the 1998, 1997 and 1995 Restructuring Plan (in millions):
<TABLE>
<CAPTION>
EMPLOYEE
SEPARATIONS
ASSET AND OTHER
IMPAIRMENTS EXIT COSTS TOTAL
----------- ----------- -----
<S> <C> <C> <C>
1995 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
Cash payments................................. -- (1.4) (1.4)
Change in estimates........................... -- (1.5) (1.5)
----- ----- -----
Balance as of December 31, 1998............... $ -- $ 1.9 $ 1.9
===== ===== =====
1997 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
Cash payments................................. -- (4.6) (4.6)
Change in estimates........................... -- (0.7) (0.7)
----- ----- -----
Balance as of December 31, 1998............... $ -- $ 8.0 $ 8.0
===== ===== =====
</TABLE>
50
<PAGE> 51
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
EMPLOYEE
SEPARATIONS
ASSET AND OTHER
IMPAIRMENTS EXIT COSTS TOTAL
----------- ----------- -----
<S> <C> <C> <C>
1998 PLAN
Restructuring and other charges............... $13.6 $12.9 $26.5
Noncash items................................. (13.6) -- (13.6)
----- ----- -----
Balance as of December 31, 1998............... $ -- $12.9 $12.9
===== ===== =====
</TABLE>
The 1995 Restructuring Plan and the 1997 Restructuring Plan 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. Based upon current estimates, the Company reversed $0.7 million of
the 1991 Restructuring charge in 1998. This plan is substantially complete and
the remaining $1.0 million of accruals will be substantially expended by the end
of 1999.
NOTE 21 -- SEGMENT AND GEOGRAPHICAL FINANCIAL INFORMATION
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information". Selected business segment financial
information for the years ended December 31, 1998, 1997 and 1996 is shown below
(in millions):
<TABLE>
<CAPTION>
INCOME (LOSS) FROM
SALES OPERATIONS
------------------------------ -----------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
SALES AND INCOME (LOSS) FROM
OPERATIONS BY SEGMENT:
Domestic distribution................. $1,830.8 $1,740.7 $1,727.4 $113.2 $85.3 $100.9
International distribution............ 417.3 403.8 383.8 (1.5) (12.5) (7.3)
Laboratory workstations............... 145.6 122.4 108.0 21.0 16.1 8.7
Technology............................ -- 41.0 36.7 (15.1) (14.3) (7.4)
Transaction-related costs............. -- -- -- (71.0) -- --
Restructuring and other charges....... -- -- -- (23.6) (51.8) --
Eliminations.......................... (141.4) (132.6) (111.5) (0.2) (1.7) (0.3)
-------- -------- -------- ------ ----- ------
Total............................ $2,252.3 $2,175.3 $2,144.4 $ 22.8 $21.1 $ 94.6
======== ======== ======== ====== ===== ======
</TABLE>
Income (loss) from operations is revenue less related costs and direct and
allocated expenses. Intercompany sales and transfers between segments were not
material for the years ended December 31, 1998, 1997 or 1996.
51
<PAGE> 52
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The domestic and international distribution segments accounted for $15.3
million and $8.3 million, respectively, of the 1998 restructuring charge. The
1997 charge consisted of $7.7 million, $41.8 million, $1.0 million and $1.3
million at the domestic distribution, international distribution, laboratory
workstations and technology segments, respectively. See Note 20.
<TABLE>
<CAPTION>
CAPITAL DEPRECIATION AND
ASSETS EXPENDITURES AMORTIZATION
------------------- ------------- -----------------
1998 1997 1998 1997 1998 1997
-------- -------- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS, CAPITAL EXPENDITURES AND
DEPRECIATION AND AMORTIZATION BY SEGMENT:
Domestic distribution....................... $ 699.7 $ 763.3 $47.3 $41.8 $33.1 $26.9
International distribution.................. 475.6 277.6 14.4 14.0 13.0 12.6
Laboratory workstations..................... 167.6 110.7 3.8 2.0 6.9 6.2
Technology group............................ 14.7 24.9 1.7 1.4 -- 1.3
-------- -------- ----- ----- ----- -----
Total.................................. $1,357.6 $1,176.5 $67.2 $59.2 $53.0 $47.0
======== ======== ===== ===== ===== =====
</TABLE>
The Company operates in more than 145 countries outside the United States.
Sales outside the United States comprised 19% of consolidated sales in 1998 and
1997, and 17% of consolidated sales in 1996. No single foreign country accounted
for more than 10% of consolidated sales during the past three years.
<TABLE>
<CAPTION>
LONG-LIVED ASSETS
------------------
1998 1997
------- -------
<S> <C> <C>
LONG-LIVED ASSETS BY GEOGRAPHIC AREA:
Domestic............................................... $184.2 $171.3
International.......................................... 61.8 52.3
------ ------
Total........................................ $246.0 $223.6
====== ======
</TABLE>
Fisher's product portfolio is comprised of consumable products, such as
laboratory supplies and specialty chemicals, and durables. Approximately 80% of
1998 and 1997 sales were of consumable products and 20% of 1998 and 1997 sales
were of durable products.
NOTE 22 -- RELATED PARTIES
The Company paid a one-time transaction fee aggregating $20 million and
will pay an aggregate annual management fee of $1 million to certain affiliates
of THL. In exchange for the transaction fee, THL and its affiliates provided
equity commitments for the Transaction, arranged additional equity financing,
arranged the Transaction debt financing and structured and negotiated the
Transaction. In return for the annual management fee, THL, and certain of its
affiliates, will provide consulting and management advisory services.
Additionally, in connection with the Transaction and the related debt
financings, the Company paid its other equity investors (excluding management)
one-time fees aggregating approximately $35 million.
One of the Company's equity investors is a financial institution that
provides financing to the Company at terms that are considered to be at
arm's-length.
NOTE 23 -- SUBSEQUENT EVENTS
In January 1999, the Company acquired Columbia Diagnostics Inc., a
Virginia-based provider of laboratory products and supplies to the healthcare
industry, and Structured Computer Systems, a Connecticut-based provider of
procurement and materials management solutions to businesses, for total cash
consideration of approximately $25 million.
52
<PAGE> 53
FISHER SCIENTIFIC INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 24 -- UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of quarterly financial information for 1998 and
1997 (in millions, except per share amounts):
<TABLE>
<CAPTION>
1998
------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Sales........................................ $549.1 $549.1 $576.4 $577.7 $2,252.3
Gross profit................................. 151.1 153.7 164.3 167.2 636.3
Net (loss) income (a)........................ (41.9) 2.4 6.7 (16.7) (49.5)
Earnings (loss) per common share:
Basic................................... $(1.05) $ 0.06 $ 0.17 $(0.42) $ (1.24)
Diluted................................. (1.05) 0.06 0.16 (0.42) (1.24)
</TABLE>
<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) (b)........................ 11.0 9.6 3.9 (55.0) (30.5)
Earnings (loss) per common share:
Basic................................... $ 0.11 $ 0.09 $ 0.04 $(0.54) $ (0.30)
Diluted................................. 0.11 0.09 0.04 (0.54) (0.30)
</TABLE>
- ---------------
NOTE: Amounts may not add due to rounding.
(a) During the fourth quarter of 1998, Fisher recorded $23.6 million ($17.0
million, net of tax) of restructuring and other charges. See Note 20.
(b) During the fourth quarter of 1997, Fisher recorded $51.8 million ($47.0
million, net of tax) of restructuring and other charges. See Note 20.
53
<PAGE> 54
PART III
ITEM 10. -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors. The information appearing in Fisher's Proxy Statement for its
Annual Meeting of Stockholders to be held on May 11, 1999 (the "Proxy
Statement") under the caption "Nomination and Election of Directors," pages 5
and 6, is incorporated herein by reference.
Executive Officers. Information in answer to this Item appears under the
caption "Executive Officers of Fisher" in Item 1 of this Annual Report.
Compliance with Section 16(a) of the Exchange Act. The information
appearing in the Proxy Statement under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance," page 6, is incorporated herein by reference.
ITEM 11. -- EXECUTIVE COMPENSATION
The information appearing in the Proxy Statement under the caption
"Compensation of Directors and Executive Officers," pages 9 through 12, is
incorporated herein by reference.
ITEM 12. -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management", pages 3 and 4,
is incorporated herein by reference.
ITEM 13. -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Proxy Statement under the caption "Certain
Transactions and Other Matters," pages 14 through 16, is incorporated herein by
reference.
54
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS. The Index to Financial Statements of the
Company appears at page 26 of this Annual Report.
(2) SCHEDULES. Financial statement schedules are listed under Item
14(d) in this Annual Report.
(3) EXHIBITS. Exhibits 10.1 through 10.15 constitute all of the
management contracts and compensation plans and arrangements of the Company
required to be filed as exhibits to this Annual Report.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
2.1 -- Second Amended and Restated Agreement and Plan of Merger, as
amended, dated as of November 14, 1997 by and between the
Company and FSI Merger Corp. (1)
2.2 -- Stock Purchase Agreement, dated November 9, 1998, among
Fisher Scientific International Inc., Fisher Scientific
Holdings France S.A., as Buyer, and Capiac, Sapaca 97,
Sapcar 97, Sappi 97, Sappef 97, Pierre Block, Anne-Catherine
Block-Derriey, Pierre-Francois Block, Caroline Block and
Marthe Block, as Sellers. (2)
3.1 -- Amended and Restated Certificate of Incorporation of the
Company, as amended*
3.2 -- Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company, dated June 9, 1997 (1)
3.3 -- Certificate of Designation of Non-Voting Stock of the
Company*
3.4 -- Certificate of Designation of Series B Non-Voting Common
Stock*
3.5 -- Bylaws of the Company (3)
4.1 -- Specimen Certificate of Common Stock, $.01 par value per
share, of the Company*
4.2 -- Certificate of Designation of Series A Junior Participating
Preferred Stock, dated June 9, 1997 (see Exhibit 3.2)
4.3 -- Certificate of Designation of Non-Voting Stock (see Exhibit
3.3)
4.4 -- Certificate of Designation of Series B Non-Voting Common
Stock (See Exhibit 3.4)
4.5 -- Rights Agreement dated as of June 9, 1997, between the
Company and ChaseMellon Shareholder Services L.L.C., as
Rights Agent, which includes the form of Right Certificate
as Exhibit A and the Summary of Rights to Purchase Common
Stock as Exhibit B (4)
4.6 -- First Amendment to Rights Agreement dated as of August 7,
1997 between the Company and ChaseMellon Shareholder
Services L.L.C. (5)
4.7 -- Senior Debt Securities Indenture dated as of December 18,
1995 between the Company and Mellon Bank, N.A., as Trustee
(6)
4.8 -- Indenture dated as of January 21, 1998 between Fisher and
State Street Bank and Trust Company, as Trustee, relating to
the 9% Senior Subordinated Notes due 2008 (7)
4.9 -- Registration Rights Agreement dated as of January 21, 1998
among Fisher and Merrill Lynch, Pierce, Fenner and Smith
Incorporated, Chase Securities Inc. and Donaldson, Lufkin
and Jenrette Securities Corporation (8)
10.1 -- Amended and Restated Employment Agreement dated as of
January 21, 1998 between the Company and Paul M. Montrone
(9)
10.2 -- Amended and Restated Employment Agreement dated as of
January 21, 1998 between the Company and Paul M. Meister (9)
10.3 -- Employment Agreement dated as of March 31, 1998 between the
Company and David Della Penta (10)
</TABLE>
55
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10.4 -- Credit Agreement among Fisher, Certain Subsidiaries of
Fisher, Various Lending Institutions, The Chase Manhattan
Bank, as Administrative Agent, The Chase Manhattan Bank of
Canada, as 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, dated as of
January 21, 1998 (the "Credit Agreement")(7)
10.5 -- First Amendment and Waiver to the Credit Agreement dated as
of November 13, 1998*
10.6 -- Second Amendment and Waiver to the Credit Agreement dated as
of December 31, 1998*
10.7 -- Investors Agreement dated January 21, 1998 as amended March
29, 1999 among the Company and (i) Thomas H. Lee Equity Fund
III, L.P. ("THL"), certain individuals associated with THL,
THL-CCI Limited Partnership, THL Foreign Fund III, L.P., and
THL FSI Equity Investors, L.P., (ii) DLJ Merchant Banking
Partners 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
Millennium Partners-A, L.P., UK Investment Plan 1997
Partners, DLJ EAB Partners, L.P., DLJ ESC II, L.P. and DLJ
First ESC, L.P., (iii) Chase Equity Associates, L.P. ("Chase
Equity") and (iv) Merrill Lynch KECALP L.P. 1997, KECALP
Inc., and ML IBK Positions, Inc.*
10.8 -- Fisher Scientific International Inc. Retirement Plan (3)
10.9 -- Fisher Scientific International Inc. Savings and Profit
Sharing Plan (3)
10.10 -- Fisher Scientific International Inc. Incentive Compensation
Plan (12)
10.11 -- Restricted Unit Plan for Non-Employee Directors of Fisher
Scientific International Inc. (3)
10.12 -- Fisher Scientific International Inc. Deferred Compensation
Plan for Non-Employee
Directors (3)
10.13 -- Retirement Plan for Non-Employee Directors of Fisher
Scientific International Inc. (3)
10.14 -- Fisher Scientific International Inc. Long-Term Incentive
Plan (3)
10.15 -- Fisher Scientific International Inc. 1998 Equity and
Incentive Plan (11)
21.1 -- List of Subsidiaries of the Company*
23.1 -- Consent of DELOITTE & TOUCHE LLP*
27.1 -- Financial Date Schedule-Fiscal Year Ended 1998*
</TABLE>
- ---------------
* Filed herewith
(1) Included as an Annex or Exhibit to the Company's 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 incorporated herein by reference.
(2) Included as an exhibit to the Company's Current Report on Form 8-K/A filed
with the Securities and Exchange Commission on February 17, 1999 and
incorporated herein by reference.
(3) Included in an exhibit to the Company's Annual Report on 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 Registration Statement on Form 8-A
filed with the Securities and Exchange Commission on June 9, 1997 and
incorporated herein by reference.
(5) 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.
(6) Included as an exhibit to the Company's Registration Statement on Form S-3
(Registration No. 33-99884) filed with the Securities and Exchange
Commission on November 30, 1995 and incorporated herein by reference.
56
<PAGE> 57
(7) Included as an exhibit to the Company's Current Report on Form 8-K
(Registration No. 001-10920) dated January 21, 1998 filed with the
Securities and Exchange Commission on February 5, 1998 and incorporated
herein by reference.
(8) Included as an exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-48285) filed with the Securities and Exchange
Commission on March 19, 1998 and incorporated herein by reference.
(9) Included as an exhibit to the Company's Annual Report, as amended, on Form
10-K/A for the year ended December 31, 1997, filed with the Securities and
Exchange Commission on April 20, 1998 and incorporated herein by reference.
(10) Included as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, filed with the Securities and Exchange
Commission on August 14, 1998 and incorporated herein by reference.
(11) Included as an exhibit to Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form S-4 (Registration No. 333-42777) filed with
the Securities and Exchange Commission on February 2, 1998 and incorporated
herein by reference.
(12) Included in an exhibit to the Company's Annual Report on 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.
(b) Report on Form 8-K: During the last quarter of the period covered by this
report, the Company filed a Form 8-K (Registration No. 001-10920) with the
Securities and Exchange Commission on December 4, 1998.
(c) EXHIBITS. The following exhibits are filed with this annual report:
<TABLE>
<S> <C> <C>
21.1 -- List of Subsidiaries of the Company.
--
23.1 Consent of DELOITTE & TOUCHE LLP.
--
27.1 Financial Data Schedule.
</TABLE>
(d) FINANCIAL STATEMENT SCHEDULES.
All financial statement schedules have been omitted since the information
required to be submitted has been included in the financial statements and
related notes or because they are either not applicable or not required under
the rules of Regulation S-X.
57
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FISHER SCIENTIFIC INTERNATIONAL INC.
BY: /s/ TODD M. DUCHENE
------------------------------------
TODD M. DUCHENE
VICE PRESIDENT-GENERAL COUNSEL AND
SECRETARY
Date: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PAUL M. MONTRONE President, Chief Executive Officer March 31, 1999
- --------------------------------------------------- and Director (Principal Executive
PAUL M. MONTRONE Officer)
/s/ PAUL M. MEISTER Executive Vice President, Chief March 31, 1999
- --------------------------------------------------- Financial Officer and Director
PAUL M. MEISTER (Principal Financial and Accounting
Officer)
/s/ MITCHELL J. BLUTT, M.D. Director March 31, 1999
- ---------------------------------------------------
MITCHELL J. BLUTT, M.D.
/s/ ROBERT A. DAY Director March 31, 1999
- ---------------------------------------------------
ROBERT A. DAY
/s/ ANTHONY J. DINOVI Director March 31, 1999
- ---------------------------------------------------
ANTHONY J. DINOVI
/s/ MICHAEL D. DINGMAN Director March 31, 1999
- ---------------------------------------------------
MICHAEL D. DINGMAN
/s/ DAVID V. HARKINS Director March 31, 1999
- ---------------------------------------------------
DAVID V. HARKINS
/s/ SCOTT M. SPERLING Director March 31, 1999
- ---------------------------------------------------
SCOTT M. SPERLING
/s/ KENT R. WELDON Director March 31, 1999
- ---------------------------------------------------
KENT R. WELDON
</TABLE>
58
<PAGE> 59
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM 10-K
------------------------
FISHER SCIENTIFIC INTERNATIONAL INC.
================================================================================
<PAGE> 1
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FISHER SCIENTIFIC INTERNATIONAL INC.
FISHER SCIENTIFIC INTERNATIONAL, INC., a corporation organized and existing
by virtue of the General Corporation Law of the State of Delaware (the "Law"),
DOES HEREBY CERTIFY:
1. That the name of the Corporation is Fisher Scientific International
Inc. and its Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on September 19, 1991 and amended on October 28, 1991.
2. That this Restated Certificate of Incorporation restates and
integrates and also further amends the Certificate of Incorporation of the
Corporation.
3. That this Restated Certificate of Incorporation and the amendments to
the Certificate of Incorporation contained herein were declared advisable and
adopted on December 10, 1991 by the unanimous written consent of the Board of
Directors pursuant to Section 141(f) of the Law, filed with the minutes of the
proceedings of the Board, and were approved by the unanimous written consent of
the stockholders pursuant to Section 228 of the Law, filed with minutes of the
proceedings of the stockholders, and have thereby been duly adopted in
accordance with the provisions of Sections 242(b) and 245 of the Law.
4. The text of the Certificate of Incorporation of this Corporation is
hereby restated, integrated and amended to read in its entirety as follows:
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION OF
FISHER SCIENTIFIC INTERNATIONAL INC.
FIRST: The name of the corporation is Fisher Scientific International
Inc. (the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 32 Loockerman Square, Ste. L-100 in the City of Dover,
County of Kent. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of which the Corporation shall have
authority to issue is 65,000,000 shares, of which 50,000,000 shares shall be
Common Stock, par value $0.01 per share (the "Common Stock"), and 15,000,000
shares shall be Preferred Stock, par value $0.01 per share (the "Preferred
Stock").
FIFTH: (a) Subject to the provisions of Article Fifth (b) hereof, the
Corporation may issue Common Stock from time to time in one or more series of
classes as the Board of Directors may establish by the adoption of a resolution
or resolutions relating thereto, each series or class to have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issue of such series or class
adopted by the Board of Directors pursuant to authority to do so, which
authority is hereby granted to the Board of Directors.
(b) The Common Stock initially authorized for issuance by the Corporation
shall consist of 50,000,000 shares of Common Stock. The designations and the
powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, of such shares of Common Stock shall be governed by the
following provisions:
<PAGE> 3
(i) Identical Rights. Except as otherwise provided herein, all
shares of Common Stock shall be identical and shall entitle the holders thereof
to the same rights and privileges.
(ii) Voting Rights. Except as otherwise required by law or as
otherwise provided herein, on all matters submitted to the Corporation's
stockholders, the holders of Common Stock shall be entitled to one vote per
share.
(iii) Dividend Rights. When and as dividends or other distributions
are declared, whether payable in cash, in property or in securities of the
Corporation, the holders of shares of Common Stock shall be entitled to share
equally, share for share, in such dividends or other distributions, provided
that if dividends or other distributions are declared which are payable in
shares of Common Stock, such dividends or other distributions shall be declared
payable at the same rate for all holders of Common Stock, and the dividends
payable in shares of Common Stock will be payable to holders of Common Stock.
(iv) No Closing of Transfer Books. The Corporation shall not close
its books against the transfer of any share of Common Stock.
SIXTH: The Corporation may issue Preferred Stock from time to time in
one or more series as the Board of Directors may establish by the adoption of a
resolution or resolutions relating thereto, each series to have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
series adopted by the Board of Directors pursuant to authority to do so, which
authority is hereby granted to the Board of Directors.
SEVENTH: The duration of the Corporation is to be perpetual.
EIGHTH: (a) Except as may be provided pursuant to resolutions of the
Board of Directors, adopted pursuant to the provisions of this Certificate of
Incorporation, establishing any series or class of Common Stock or Preferred
Stock and granting to holders of shares of such series or class of Common Stock
or Preferred Stock rights to elect additional
<PAGE> 4
directors under specified circumstances, the number of directors of the
Corporation shall be determined from time to time in the manner described in the
By-laws. The directors, other than those who may be elected by the holders of
Common Stock or Preferred Stock pursuant to such resolutions, shall be
classified with respect to the time for which they severally hold office into
three classes, as nearly equal in number as possible, as shall be provided in
the manner specified in the By-laws, one class initially to be elected for a
term expiring at the annual meeting of stockholders to be held in 1992 another
class initially to be elected for a term expiring at the annual meeting of
stockholders to be held in 1993 and another class initially to be elected for a
term expiring at the annual meeting of stockholders to be held in 1994 with the
members of each class to hold office until their successors have been elected
and qualified. At each annual meeting of stockholders, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election. No director need be a
stockholder.
(b) Except as otherwise provided in a resolution of the Board of
Directors, adopted pursuant to the provisions of this Certificate of
Incorporation, establishing a series or class of Common Stock or Preferred Stock
and creating in the holders of shares of such series or class rights to elect
directors under specified circumstances, newly created directorships resulting
form any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even if less than a quorum of the Board of Directors,
or by a sole remaining director. Any director elected in accordance with the
preceding sentence shall hold office until the annual meeting of stockholders at
which the term of office of the class to which such director has been elected
expires, and until such director's successor shall have been duly elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(c) Subject to the rights of holders of Common Stock or Preferred Stock
to elect directors under circumstances specified in a resolution of the Board of
Directors, adopted pursuant to the provisions of this Certificate of
Incorporation establishing such series or class, any director
<PAGE> 5
may be removed from office only for cause by the affirmative vote of the holders
of at least 80% of the voting power of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class.
(d) Notwithstanding anything contained in this Certificate of Incorpo-
ration to the contrary, the affirmative vote of the holders of at least 80% of
the voting power of the Voting Stock, voting together as a single class, shall
be required to amend or repeal, or adopt any provision inconsistent with, any
provision of this Article EIGHTH.
NINTH: Except as required by law and subject to the rights of the
holders of any series of Preferred Stock established pursuant to the provisions
of this Certificate of Incorporation, special meetings of stockholders may be
called only by the Board of Directors [or by the Chief Executive Officer]
pursuant to a resolution approved by a majority of the entire Board of Directors
of the Corporation (as determined in accordance with the By-laws).
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of the holders of at least 80% of the voting
power of the Voting Stock, voting together as a single class, shall be required
to amend or repeal, or adopt any provision inconsistent with, any provision of
this Article NINTH.
TENTH: No stockholder action may be taken except as an annual or
special meeting of stockholders of the Corporation, and stockholders may not
take any action by written consent in lieu of a meeting. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the voting power of the
Voting Stock, voting together as a single class, shall be required to amend or
repeal, or adopt any provision inconsistent with, any provision of this Article
TENTH.
ELEVENTH: Unless and except to the extent that the By-laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
TWELFTH: No contract or other transaction of the Corporation shall be
void, voidable, fraudulent or otherwise invalidated, impaired or affected, in
any respect, by reason of the fact that any one or more of the officers,
directors or stockholders of the Corporation shall individually be party or
<PAGE> 6
parties thereto or otherwise interested therein, or shall be officers, directors
or stockholders of any other corporation or corporations which shall be party or
parties thereto or otherwise interested therein; provided that such contract or
other transaction be duly authorized or ratified by the Board of Directors, with
the assenting vote of a majority of the disinterested directors then present,
or, if only one such is present, with his assenting vote.
THIRTEENTH: The Board of Directors may from time to time make, amend,
supplement or repeal the By-laws; PROVIDED, HOWEVER, that the stockholders may
change or repeal any By-law adopted by the Board of Directors; and PROVIDED,
FURTHER, that no amendment or supplement to the By-laws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement adopted by the
stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, Section 3 ("Special Meetings") of
Article II ("Meetings of Stockholders") of the By-laws, Section 2 ("Number,
Election and Terms") or Section 10 ("Removal of Directors") of Article III
("Directors") of the By-laws, or the final sentence of Article XI ("Amendments")
of the By-laws shall not be amended or repealed, and no provision inconsistent
with any thereof shall be adopted, without the affirmative vote of the holders
of at least 80% of the voting power of the Voting stock, voting together as a
single class. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the voting power of the Voting Stock, voting together as a single class,
shall be required to amend or repeal, or adopt any provision inconsistent with,
any provision of this Article THIRTEENTH.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
FIFTEENTH: (a) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
<PAGE> 7
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
(b)(1) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or the
person of whom he or she is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action or inaction in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee, or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, fines, ERISA excise taxes
or penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his or her heirs, executors and
administrators; PROVIDED, HOWEVER, that, except as provided in this paragraph
(b), the Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this paragraph (b) shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer of the Corporation (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation,
<PAGE> 8
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(2) Right of Claimant to Bring Suit. If a claim under subparagraph (b)(1)
is not paid in full by the Corporation within 30 days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceedings in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification or
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard or
conduct.
(3) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this paragraph (b) shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of
<PAGE> 9
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
(4) Insurance. The Corporation may maintain insurance, at its expense, to
project itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SIXTEENTH: The Corporation expressly elects not to be governed by Section
203 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, FISHER SCIENTIFIC INTERNATIONAL INC. has caused this
Restated Certificate of Incorporation to be signed by Paul M. Meister, its
Senior Vice President - Chief Financial Officer, and attested to by Allison G.
Pellegrino, its Assistant Secretary, this 16th day of December, 1991.
FISHER SCIENTIFIC INTERNATIONAL INC.
By: /s/ Paul M. Meister
--------------------------------
Senior Vice President -
Chief Financial Officer
Attest:
/s/ Allison G. Pellegrino
- --------------------------
Allison G. Pellegrino
Assistant Secretary
<PAGE> 10
State of Delaware
Secretary of State
Division of Corporations
Filed 09:00 AM 05/19/1998
981191302 - 2273998
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
FISHER SCIENTIFIC INTERNATIONAL INC.
FISHER SCIENTIFIC INTERNATIONAL INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "DGCL"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation in accordance with
the provision of Section 242 of the DGCL, by the unanimous vote of its members
on March 16, 1998, filed with the minutes of the Board of Directors, duly
adopted resolutions setting forth a proposed amendment to the Certificate of
Incorporation of the Corporation declaring such amendment to be advisable and
directing that such amendment be submitted to and be considered by the
stockholders of the Corporation for approval at the 1998 Annual Meeting of
Stockholders. The resolution setting forth the proposed amendment is as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by changing the Fourth Article thereof so that, as amended, such
Article shall be and read as follows:
<PAGE> 11
"The total number of shares of stock which the Corporation shall have
authority to issue is 115,000,000 shares, of which 100,000,000 shall be
Common Stock, par value $0.01 per share (the "Common Stock"), and
15,000,000 shares shall be Preferred Stock, par value $0.01 per share (the
"Preferred Stock").
SECOND: That thereafter, the foregoing amendment to the Corporation's
Certificate of Incorporation was duly adopted by the holders of a majority of
the outstanding shares of Common Stock of the Corporation at the Annual Meeting
of Stockholders on May 12, 1998 in accordance with the provisions of Section 242
of the DGCL and the terms of the Certificate of Incorporation.
IN WITNESS WHEREOF, FISHER SCIENTIFIC INTERNATIONAL INC. has caused this
Certificate of Amendment to be signed by Paul M. Meister, its Executive Vice
President, and attested by Todd M. DuChene, its Vice President and Secretary,
this 18th day of May, 1998.
FISHER SCIENTIFIC INTERNATIONAL INC.
By: /s/ Paul M. Meister
--------------------------------
Paul M. Meister
Executive Vice President
ATTEST:
/s/ Todd M. DuChene
- --------------------------
Todd M. DuChene
Vice President and Secretary
<PAGE> 1
CERTIFICATE OF DESIGNATION
of
Non-Voting Common Stock
of
FISHER SCIENTIFIC INTERNATIONAL INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
FISHER SCIENTIFIC INTERNATIONAL INC., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in its
Restated Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors (the "Board of Directors") has adopted the
following resolution creating a series of its Common Stock, par value $.01 per
share ("Common Stock"), designated as Non-Voting Common Stock;
RESOLVED, that a series of the class of authorized Common Stock, par value
$.01 per share, of the Corporation be hereby created, and that the designation
and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
NON-VOTING COMMON STOCK
SECTION 1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as the Non-Voting Common
Stock" (the "Non-Voting Common Stock") and the number of shares initially
constituting such series shall be 4,182,375, which number may be decreased (but
not increased) by the Board of Directors without a vote of stockholders;
PROVIDED, HOWEVER, that such number may not be decreased below the number of
then currently outstanding shares of Non-Voting Common Stock.
<PAGE> 2
SECTION 2. VOTING RIGHTS.
NON-VOTING COMMON STOCK. Except as set forth herein or as otherwise
required by law, each outstanding share of Non-Voting Common Stock shall not be
entitled to vote on any matter on which the stockholders of the Corporation
shall be entitled to vote, and shares of Non-Voting Common Stock shall not be
included in determining the number of shares voting or entitled to vote on any
such matters; provided that the holders of Non-Voting Common Stock shall have
the right to vote as a separate class on any merger or consolidation of the
Corporation with or into another entity or entities, or any recapitalization or
reorganization, in which shares of Non-Voting Common Stock would receive or be
exchanged for consideration different on a per share basis from consideration
received with respect to or in exchange for the shares of the Common Stock, par
value $.01 per share, of the Corporation ("Common Stock") or would otherwise be
treated differently from shares of Common Stock in connection with such
transaction, except that shares of Non-Voting Common Stock may, without such a
separate class vote, receive or be exchanged for non-voting securities which are
otherwise identical on a per share basis in amount and form to the voting
securities received with respect to or exchanged for the Common Stock so long as
(i) such non-voting securities are convertible into such voting securities on
the same terms as the Non-Voting Common Stock is convertible into Common Stock
and (ii) all other consideration is equal on a per share basis. Notwithstanding
the foregoing, holders of shares of the Non-Voting Common Stock shall be
entitled to vote as a separate class on any amendment to this Section 2 and on
any amendment, repeal or modification of any provision of this Certificate of
Designation that adversely affects the powers, preferences or special rights of
holders of the Non-Voting Common Stock.
SECTION 3. DIVIDENDS.
Any dividend or distribution on the Common stock shall be payable on shares
of Non-Voting Common Stock, share and share alike; provided, that (i) in the
case of dividends payable in shares of Common Stock of the Corporation, or
options, warrants or rights to acquire shares of such Common Stock, or
securities convertible into or exchangeable for shares of such Common Stock, the
shares, options, warrants, rights or securities so payable shall be payable in
shares of, or options, warrants or rights to acquire, or securities convertible
into or exchangeable for, Common Stock of the same class upon which the dividend
or distribution is being paid and (ii) if the dividends consist of other voting
securities of the Corporation, the Corporation shall make available to each
holder of Non-Voting Common
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Stock, at such holder's request, dividends consisting of non-voting securities
of the Corporation which are otherwise identical to the voting securities and
which are convertible into or exchangeable for such voting securities on the
same terms as the Non-Voting Common Stock is convertible into the Common Stock.
SECTION 4. LIQUIDATION.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of shares of
Non-Voting Common Stock shall be entitled to share with the holders of Common
Stock in the remaining net assets of the Corporation.
SECTION 5. CONVERSION.
(a) CONVERSION OF NON-VOTING COMMON STOCK. Subject to and upon compliance with
the provisions of this Section 5, each record holder of Non-Voting Common
Stock shall be entitled at any time and from time to time in such holder's
sole discretion and at such holder's option, to convert any or all of the
shares of such holder's Non-Voting Common Stock into the same number of
shares of Common Stock; PROVIDED, HOWEVER, that Non-Voting Common Stock
constituting Restricted Stock (defined below) with respect to a particular
Regulated Stockholder may not be converted into Common Stock to the extent
that immediately prior thereto, or as a result of such conversion, the
number of shares of Common Stock which constitute such Restricted Stock
held by all holders thereof would exceed the number of shares of Common
Stock which such Regulated Stockholder reasonably determines it and its
Affiliates (defined below) may own, control or have the power to vote under
any law, regulation, rule or other requirement of any governmental
authority at the time applicable to such Regulated Stockholder or its
Affiliates, and, PROVIDED, FURTHER, that each holder of Non-Voting Common
Stock may convert such shares into Common Stock if such holder reasonably
believes that such converted shares will be transferred within fifteen (15)
days pursuant to a Conversion Event (defined below) and such holder agrees
not to vote any such shares of Common Stock prior to such Conversion Event
and undertakes to promptly offer to the Corporation in exchange of such
shares of Common Stock for the same number of shares of Non-Voting Common
Stock if such shares are not transferred pursuant to a Conversion Event.
Each Regulated Stockholder may provide for further restrictions upon the
conversion of any shares of Restricted Stock by providing the Corporation
with signed, written instructions specifying such additional restrictions
and legending such shares as to the existence of such restrictions.
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<PAGE> 4
(b) CONVERSION PROCEDURE. Each conversion of shares of Common Stock of the
Corporation into shares of another class of Common Stock of the Corporation
shall be effected by the surrender of the certificate or certificates
representing the shares to be converted (the "Converting Shares") at the
principal office of the Corporation (or such other office or agency of the
Corporation as the Corporation may designate by written notice to the
holders of Common Stock) at any time during its usual business hours,
together with written notice by the holder of such Converting Shares,
stating that such holder desires to convert the Converting Shares, or a
stated number of the shares represented by such certificate or
certificates, into an equal number of shares of the class into which such
shares may be converted (the "Converted Shares"). Such notice shall also
state the name or names (with addresses) and denominations in which the
certificate or certificates for Converted Shares are to be issued and shall
include instructions for the delivery thereof. The Corporation shall
promptly notify each Regulated Stockholder of its receipt of such notice.
Promptly after such surrender and the receipt of such written notice, the
Corporation will issue and deliver in accordance with the surrendering
holder's instructions the certificate or certificates evidencing the
Converted Shares issuable upon such conversion, and the Corporation will
deliver to the converting holder a certificate (which shall contain such
legends as were set forth on the surrendered certificate or certificates)
representing any shares which were represented by the certificate or
certificates that were delivered to the Corporation in connection with such
conversion, but which were not converted. Such conversion, to the extent
permitted by law, shall be deemed to have been effected as of the close of
business on the date on which such certificate or certificates shall have
been surrendered and such notice shall have been received by the
Corporation, and at such time the rights of the holder of the Converting
Shares as such holder shall cease and the person or persons in whose name
or names the certificate or certificates for the Converted Shares are to be
issued upon such conversion shall be deemed to have become the holder or
holders of record of the Converted Shares. Upon issuance of shares in
accordance with this Section 5, such Converted Shares shall be deemed to be
duly authorized, validly issued, fully paid and non-assessable. The
Corporation shall take all such actions as may be necessary to assure that
all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock may be
listed (except for official notice of issuance which will be immediately
transmitted by the Corporation upon issuance). The Corporation shall not
close its books against the transfer of shares of Common Stock in any
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<PAGE> 5
manner which would interfere with the timely conversion of any shares of
Common Stock.
Notwithstanding any provision of this Section 5 to the contrary, each
holder of Non-Voting Common Stock shall be entitled to convert shares of
Non-Voting Common Stock in connection with any Conversion Event if such
holder reasonably believes that such Conversion Event will be consummated,
and a written request for conversion from any holder of Non-Voting Common
Stock to the Corporation stating such holder's reasonable belief that a
Conversion Event shall occur, shall be conclusive and shall obligate the
Corporation to effect such conversion in a timely manner so as to enable
each such holder to participate in such Conversion Event. The Corporation
will not cancel the shares of Non-Voting Common Stock so converted before
the 15th day following such Conversion Event and will reserve such shares
until such 15th day for reissuance in compliance with the next sentence. If
any shares of Non-Voting Common Stock are converted into shares of Common
Stock in connection with a Conversion Event and such shares of Common Stock
are not actually distributed, disposed of or sold pursuant to such
Conversion Event, such shares of Common Stock shall be promptly offered to
the Corporation in exchange for such shares of Common Stock for the same
number of shares of Non-Voting Common Stock.
Section 6. STOCK SPLITS; ADJUSTMENTS.
If the Corporation shall in any manner subdivide (by stock split, stock
dividend or otherwise) or combine (by reverse stock split or otherwise) the
outstanding shares of Common Stock, then the outstanding shares of Non-Voting
Common Stock shall be subdivided or combined, as the case may be, to the same
extent, share and share alike, and effective provision shall be made for the
protection of the conversion rights hereunder.
In case of any reorganization, reclassification or change of shares of
Non-Voting Common Stock (other than a change in par value or from par to no par
value or as a result of subdivision or combination), or in case of any
consolidation of the Corporation with one or more corporations or a merger of
the Corporation with another corporation (other than a consolidation or merger
in which the Corporation is the resulting or surviving corporation and which
does not result in any reclassification or change of outstanding shares of
Non-Voting Common Stock), each holder of a share of Non-Voting Common Stock
shall have the right at any time thereafter, so long as the conversion right
hereunder with respect to such share would exist had such event not occurred, to
convert such share into the kind and amount of shares of stock and other
securities and properties (including cash) receivable upon such
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<PAGE> 6
reorganization, reclassification, change, consolidation or merger by a holder of
the number of shares of Non-Voting Common Stock into which such shares of
Non-Voting Common Stock might have been converted immediately prior to such
reorganization, reclassification, change, consolidation or merger. In the event
of such reorganization, reclassification, change, consolidation or merger,
effective provision shall be made in the certificate or incorporation of the
resulting or surviving corporation or otherwise for the protection of the
conversion rights of the shares of Non-Voting Common Stock that shall be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of such shares of
Non-Voting Common Stock into which such Non-Voting Common Stock might have been
converted immediately prior to such event.
Section 7. RESERVATION OF SHARES.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock or its treasury shares, solely
for the purpose of issuance upon the conversion of shares of Non-Voting Common
Stock, such number of shares of such class as are then issuable upon the
conversion of all outstanding shares of Non-Voting Common Stock which may be
converted.
Section 8. NO CHARGE.
The issuance of certificates for shares of any class of Common Stock (upon
conversion of shares of any other class of Common Stock or otherwise) shall be
made without charge to the holders of such shares for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and/or the issuance of shares of Common Stock; PROVIDED,
HOWEVER, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Common Stock
converted.
Section 9. DEFINITIONS. As used herein, the following terms shall have
the meanings shown below:
(a) "AFFILIATE" shall mean with respect to any Person, any other person,
directly or indirectly controlling, controlled by or under common control
with such Person. For the purpose of the above definition, the term
"control" (including with correlative meaning, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the
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<PAGE> 7
management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise.
(b) "CONVERSION EVENT" shall mean (a) any public offering or public sale of
securities of the Corporation (including a public offering registered under
the Securities Act of 1933 and a public sale pursuant to Rule 144 of the
Securities and Exchange Commission or any similar rule then in force), (b)
any sale of securities of the Corporation to a person or group of persons
(within the meaning of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) if, after such sale, such person or group of persons in the
aggregate would own or control securities which possess in the aggregate
the ordinary voting power to elect a majority of the Corporation's
directors (provided that such sale has been approved by the Corporation's
Board of Directors or a committee thereof), (c) any sale of securities of
the Corporation to a person or group of persons (within the meaning of the
1934 Act) if, after such sale, such person or group of persons in the
aggregate would own or control securities of the Corporation (excluding any
Non-Voting Common Stock being converted and disposed of in connection with
such Conversion Event) which possess in the aggregate the ordinary voting
power to elect a majority of the Corporation's directors, (d) any sale of
securities of the Corporation to a person or group of persons (within the
meaning of the 1934 Act) if, after such sale, such person or group of
persons would not, in the aggregate, own, control or have the right to
acquire more than two percent (2%) of the outstanding securities of any
class of voting securities of the Corporation, and (e) a merger,
consolidation or similar transaction involving the Corporation if, after
such transaction, a person or group of persons (within the meaning of the
1934 Act) in the aggregate would own or control securities which possess in
the aggregate the ordinary voting power to elect a majority of the
surviving corporation's directors (provided that the transaction has been
approved by the Corporation's Board of Directors or a committee thereof).
(c) "PERSON" or "PERSON" shall be construed broadly and shall include an
individual, a partnership, a limited liability company, a corporation, a
trust, a joint venture, an unincorporated organization or a government or
any department or agency thereof.
(d) "REGULATED STOCKHOLDER" shall mean any stockholder (i) that is subject to
the provisions of Regulation Y of the Board of Governors of the Federal
Reserve System, 12 C.F.R. Par 225 (or any successor to such Regulation)
("Regulation Y") and (ii) that holds shares of Non-Voting Common Stock of
the Corporation and (iii) that has provided written notice to the
Corporation of its status as a "Regulated Stockholder" hereunder.
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<PAGE> 8
(e) "RESTRICTED STOCK" means, with respect to any Regulated Stockholder, any
outstanding shares of Non-Voting Common Stock ever held of record by such
Regulated Stockholder or its Affiliates, excluding treasury shares;
PROVIDED, HOWEVER, that any such shares shall cease to be Restricted Stock
with respect to such Regulated Stockholder when such shares are transferred
in a transaction which is a Conversion Event or are acquired by the
Corporation or any subsidiary of the Corporation; and PROVIDED, FURTHER,
that the Corporation shall have no responsibility for determining whether
any outstanding shares of Non-Voting Common Stock constitute Restricted
Stock with respect to any particular Regulated Stockholder, but shall
instead by entitled to receive, and rely exclusively upon, a written notice
provided by such Regulated Stockholder designating such shares as
Restricted Stock.
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<PAGE> 9
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Non-Voting Stock to be duly executed by its Vice President,
Secretary and General Counsel this 20th day of January, 1998.
FISHER SCIENTIFIC INTERNATIONAL, INC.
By: /s/ Todd Duchene
---------------------------------
Name: Todd Duchene
Title: Vice President, Secretary
and General Counsel
<PAGE> 1
CERTIFICATE OF DESIGNATION
OF
SERIES B NON-VOTING COMMON STOCK
OF
FISHER SCIENTIFIC INTERNATIONAL INC.
-----------------------------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-----------------------------------------
FISHER SCIENTIFIC INTERNATIONAL INC., a Delaware corporation
(the "Corporation"), certifies that pursuant to the authority contained in its
Restated Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors (the "Board of Directors") has adopted the
following resolution creating a new series of its Common Stock, par value $.01
per share (the "Common Stock"), designated as Series B Non-Voting Common Stock;
RESOLVED, that a new series of the class of authorized Common Stock,
par value $.01 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
SERIES B NON-VOTING COMMON STOCK:
Section I. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series B Non-Voting Common Stock" and the
number of shares constituting such series shall be 9,000,000. Such
number of shares may be increased or decreased by resolution of the
Board of Directors; PROVIDED THAT no decrease shall reduce the number
of shares of Series B Non-
<PAGE> 2
Voting Common Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the
conversion of any outstanding securities issued by the Corporation
convertible into Series B Non-Voting Common Stock.
Section II. VOTING RIGHTS; NON-VOTING COMMON STOCK. Except as
set forth herein or as otherwise required by law, each outstanding
share of Series B Non-Voting Common Stock shall not be entitled to vote
on any matter on which the stockholders of the Corporation shall be
entitled to vote, and shares of Series B Non-Voting Common Stock shall
not be included in determining the number of shares voting or entitled
to vote on any such matters; PROVIDED THAT the holders of Series B
Non-Voting Common Stock shall have the right to vote as a separate
class on any merger or consolidation with or into another entity or
entities, any recapitalization or reorganization, or any amendment,
repeal or modification of any provision of the Certificate of
Incorporation or this Certificate of Designation that adversely affects
the powers, preferences or special rights of holders of the Series B
Non-Voting Common Stock.
Section III. DIVIDENDS AND DISTRIBUTIONS. Any dividend or
distribution on the Voting Common Stock, par value $.01 per share, of
the Corporation (the "Voting Common Stock") also shall be payable on
shares of the Series B Non-Voting Common Stock, share and share alike;
PROVIDED THAT (i) in the case of dividends payable in shares of Voting
Common Stock, or options, warrants or other rights to acquire shares of
Voting Common Stock, holders of Series B Non-Voting Common Stock may
elect to receive all or a portion of the securities so payable in
shares of, or options, warrants or other rights to acquire, Voting
Common Stock or Series B Non-Voting Common Stock or a combination
thereof and (ii) if the dividends consist of other voting securities,
the Corporation shall make available to each holder of Series B
Non-Voting Common Stock, at such holder's request, dividends consisting
of non-voting securities which are otherwise identical to the voting
securities, and holders of Series B Non-Voting Common Stock may elect
to receive all or a portion of the dividend in non-voting securities,
voting securities or a combination thereof.
Section IV. LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, after payment or provision of the debts
and other liabilities of the Corporation, the holders of shares of
Series B Non-Voting Common
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Stock shall be entitled to share pari passu with the holders of Voting
Common Stock in the remaining net assets of the Corporation.
Section V. CONVERSION. Shares of Series B Non-Voting Common
Stock may not be converted into shares of Voting Common Stock;
PROVIDED, HOWEVER, that, (i) if at any time any holder of Series B
Non-Voting Common Stock determines in good faith that in connection
with the requirements applicable to "pooling of interest" accounting
treatment, there is a material change in any applicable law or
government rule, regulation, order, guideline or directive, or any
material change in interpretation or administration thereof by any
applicable authority, then shares of Series B Non-Voting Common Stock
may be converted on a share-for-share basis into shares of Voting
Common Stock at the sole discretion of the holders of Series B
Non-Voting Common Stock, (ii) if at any time any holder of Series B
Non-Voting Common Stock desires to transfer all or a portion of the
shares of Series B Non-Voting Common Stock held by such holder, then
such shares of Series B Non-Voting Common Stock may be converted on a
share-for-share basis upon such transfer into shares of Voting Common
Stock at the sole discretion of such holder, (iii) if the Corporation
sells or issues Common Stock and by virtue of that sale or issuance,
the percentage of Voting Common Stock held by a shareholder of Series B
Non-Voting Common Stock is decreased, such holder of Series B
Non-Voting Common Stock may then convert a portion of its Series B
Non-Voting Common Stock on a share-for-share basis into Voting Common
Stock such that the percentage of Voting Common Stock held by such
holder after such conversion is equal to the greater of the percentage
of Voting Common Stock held by such holder immediately after the
effectiveness of the THL Exchange (defined below) and the date of the
sale or issuance of Common Stock by the Corporation, (iv) if a holder
of Series B Non-Voting Common Stock reasonably believes that a
Conversion Event (defined below) will occur, such holder may, within 15
days of the Conversion Event, convert its Series B Non-Voting Common
Stock on a share-for-share basis into Voting Common Stock, and provided
that if such conversion immediately precedes the Conversion Event, such
holder may be entitled to vote the recently converted shares on any
matter pertaining to the Conversion Event and (v) if a transaction
specified in either part (b) or part (c) of the definition of
Conversion Event shall occur, a holder of Series B Non-Voting Common
Stock may, upon such Conversion Event, convert its Series B Non-Voting
Common Stock into Voting Common Stock on a share-for-share basis and
cause the newly converted Voting Common Stock to be delivered to the
acquiring person in such transaction.
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<PAGE> 4
"THL Exchange" shall mean the exchange by Thomas H. Lee Equity
Fund III, L.P. ("THL") and certain individuals and entities associated
with THL of 9,000,000 shares of Voting Common Stock on a
share-for-share basis for shares of Series B Non-Voting Stock as
contemplated by an Exchange Agreement, dated as of March 29, 1999,
among the Corporation, THL and certain individuals and entities
associated with THL.
"Conversion Event" shall mean (a) any public offering or
public sale of securities of the Corporation (including a public
offering registered under the Securities Act of 1933 and a public sale
pursuant to Rule 144 of the Regulations of the Securities and Exchange
Commission), (b) any sale of securities of the Corporation to a person
or group of persons, if, after such date, such person or group would
own or control securities which possess in the aggregate the ordinary
voting power to elect a majority of the Corporation's Board of
Directors or (c) a merger, consolidation or similar transaction
involving the Corporation if, after such transaction, a person or group
of persons would own or control securities which possess in the
aggregate the ordinary voting power to elect a majority of the
surviving Corporation's Board of Directors.
Section VI. CONVERSION PROCEDURE. Each conversion of shares of
Common Stock of the Corporation into shares of another class of Common
Stock of the Corporation shall be effected by the surrender of the
certificate or certificates representing the shares to be converted
(the "Converting Shares") at the principal office of the Corporation
(or such other office or agency of the Corporation as the Corporation
may designate by written notice to the holders of Common Stock) at any
time during its usual business hours, together with written notice by
the holder of such Converting Shares, stating that such holder desires
to convert the Converting Shares, or a stated number of the shares
represented by such certificate or certificates, into an equal number
of shares of the class into which such shares may be converted (the
"Converted Shares"). Such notice shall also state the name or names
(with addresses) and denominations in which the certificate or
certificates for Converted Shares are to be issued and shall include
instructions for the delivery thereof. The Corporation shall promptly
notify each holder of Converting Shares of its receipt of such notice.
Promptly after such surrender and the receipt of such written notice,
the Corporation will issue and deliver in accordance with the
surrendering holder's instructions the certificate or certificates
evidencing the Converted Shares issuable upon such conversion, and the
Corporation will deliver to the converting holder a certificate (which
shall contain such legends as were set forth on the surrendered
certificate or
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<PAGE> 5
certificates) representing any shares which were represented by the
certificate or certificates that were delivered to the Corporation in
connection with such conversion, but which were not converted. Such
conversion, to the extent permitted by law, shall be deemed to have
been effected as of the close of business on the date on which such
certificate or certificates shall have been surrendered and such notice
shall have been received by the Corporation, and at such time the
rights of the holder of the Converting Shares as such holder shall
cease and the person or persons in whose name or names the certificate
or certificates for the Converted Shares are to be issued upon such
conversion shall be deemed to have become the holder or holders of
record of the Converted Shares. Upon issuance of shares in accordance
with this Section VI, such Converted Shares shall be deemed to be duly
authorized, validly issued, fully paid and non-assessable. The
Corporation shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of
any domestic securities exchange upon which shares of Common Stock may
be listed (except for official notice of issuance which will be
immediately transmitted by the Corporation upon issuance). The
Corporation shall not close its books against the transfer of shares of
Common Stock in any manner which would interfere with the timely
conversion of any shares of Common Stock.
Notwithstanding any provision of this Section VI to the
contrary, each holder of Series B Non-Voting Common Stock shall be
entitled to convert shares of Series B Non-Voting Common Stock in
connection with any Conversion Event if such holder reasonably believes
that such Conversion Event will be consummated, and a written request
for conversion from any holder of Series B Non-Voting Common Stock to
the Corporation stating such holder's reasonable belief that a
Conversion Event shall occur, shall be conclusive and shall obligate
the Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in such Conversion Event. The
Corporation will not cancel the shares of Series B Non-Voting Common
Stock so converted before the 15th day following such Conversion Event
and will reserve such shares until such 15th day for reissuance in
compliance with the next sentence. If any shares of Series B Non-Voting
Common Stock are converted into shares of Voting Common Stock in
connection with a Conversion Event and such shares of Voting Common
Stock are not actually distributed, disposed of or sold pursuant to
such Conversion Event, such shares of Voting Common Stock shall be
promptly offered to the Corporation in exchange for the same number of
shares of Series B Non-Voting Common Stock.
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<PAGE> 6
Section VII. STOCK SPLITS; ADJUSTMENTS. If the Corporation
shall in any manner subdivide (by stock split, stock dividend or
otherwise) or combine (by reverse stock split or otherwise) the
outstanding shares of Voting Common Stock, then the outstanding shares
of Series B Non-Voting Common Stock shall be subdivided or combined, as
the case may be, to the same extent, share and share alike.
In the case of any reorganization, reclassification or change
of shares of Voting Common Stock (other than a change in par value or
from par to no par value), or in the case of any consolidation of the
Corporation with one or more corporations or a merger of the
Corporation with another corporation (other than a consolidation or
merger in which the Corporation is the resulting or surviving
corporation and which does not result in any reclassification or change
of outstanding shares of Voting Common Stock), each holder of a share
of Series B Non-Voting Common Stock shall have the right to convert
such share into the kind and amount of shares of stock (or other
securities) receivable upon such reorganization, reclassification,
change, consolidation or merger by a holder of the number of shares of
Voting Common Stock into which such shares of Series B Non-Voting
Common Stock might have been converted immediately prior to such
reorganization, reclassification, change, consolidation or merger. A
holder subject to this provision may elect to receive non-voting
securities in lieu of voting securities upon conversion of its Series B
Non-Voting Common Stock into the consideration receivable in any such
transaction.
Section VIII. NO CHARGE. The issuance of certificates for
shares of Series B Non-Voting Common Stock shall be made without charge
to holders of such shares for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with the issuance
of such shares.
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<PAGE> 7
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation of Series B Non-Voting Common Stock to be duly
executed by its Vice President, Secretary and General Counsel this 29th day of
March, 1999.
FISHER SCIENTIFIC INTERNATIONAL INC.
By: /s/ Todd M. DuChene
----------------------------------------
Name: Todd M. DuChene
Title: Vice President, Secretary and
General Counsel
<PAGE> 8
SCHEDULE I
CERTAIN NAMED INDIVIDUAL SHAREHOLDERS OF THL
David V. Harkins
The 1995 Harkins Gift Trust
Thomas. R. Shepherd Money Purchase Pension Plan (Keogh)
Scott A. Schoen
C. Hunter Boll
Scott M. Sperling
Sperling Family Limited Partnership
Anthony J. DiNovi
Thomas M. Hagerty
Warren C. Smith, Jr.
Seth W. Lawry
Joseph J. Incandela
Kent R. Weldon
Terrence M. Mullen
Todd M. Abbrecht
Wendy L. Masler
Andrew D. Flaster
First Trust Co. FBO Kristina A. Watts
Charles W. Robins
James Westra
Charles A. Brizius
<PAGE> 9
SCHEDULE II
THL INDIVIDUALS
Thomas H. Lee
Barbara F. Lee
George R. Taylor
Andrew T. Mulderry
Anj an Mukherjee
Jeffrey B. Kovach
Charles S. Woo
Paxman & Co. for Robert Schiff Lee 1988 Irrevocable Trust
Paxman & Co. for Stephen Zachary Lee 1988 Irrevocable Trust
THL Investment Management Corp.
<PAGE> 10
SCHEDULE III
INITIAL CLASSIFIED BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
CLASS I CLASS II CLASS III
TERM EXPIRING 1999 TERM EXPIRING 2000 TERM EXPIRING 2001
- ------------------ ------------------ ------------------
Mitchell Blutt [DLJ Nominee] Robert Day
David Harkins Anthony J. DiNovi Michael Dingman
Paul Meister Paul Montrone Kent Weldon
Scott Sperling
- --------------------------------------------------------------------------------
<PAGE> 1
<TABLE>
<S> <C> <C> <C>
EXHIBIT 4.1
__________________ COMMON STOCK _________________________ COMMON STOCK
| | $.01 PAR VALUE | | $.01 PAR VALUE
| | | |
| | | | ___________________________________
| NUMBER | INCORPORATED UNDER THE LAWS OF | | | SHARES |
| | THE STATE OF STATE DELAWARE | PICTURE | | |
| | | | | |
| | | | |___________________________________|
| | | |
| | | | See reverse for certain definitions
| | | | ___________________________________
| | | | | |
| | THIS CERTIFICATE IS TRANSFERABLE | | |___________________________________|
| | IN THE CITIES OF |_________________________| CUSIP 338032 20 4
| | RIDGEFIELD PARK, NJ OR NEW YORK, NY
| |
| | FISHER SCIENTIFIC INTERNATIONAL INC.
| |
| | ___ ______________________________________________________________________________________________________
| | | | | |
| | |___| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |______________________________________________________________________________________________________|
| |
| | FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
| |
|Fisher Scientific | Fisher Scientific International Inc. transferable on the books of the Corporation by the holder hereof
|International Inc.| in person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This
| Corporate Seal | Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
| Delaware | Witness the facsimile seals of the Corporation and the facsimile signatures of its duly authorized
| 1991 | officers.
| | Dated:
| |
| | COUNTERSIGNED AND REGISTERED:
| American Bank | CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
| Note Company | TRANSFER AGENT AND REGISTRAR
| |
| | BY
| |
|__________________| AUTHORIZED SIGNATURE SECRETARY PRESIDENT
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
The Corporation will furnish without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or rights. Such requests shall be made to the
Corporation's Secretary at the principal office of the Corporation.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED THE CORPORATION WILL REQUIRE A BOND OF
INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT -............Custodian...........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants in Act ............................
common (State)
UNIF TRF MIN ACT -.........Custodian (until age )
(Cust)
under Uniform Transfers
(Minor)
to Minors Act ..................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________
| |
________________________________
________________________________________________________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________ Shares
of common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
________________________________________________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated _____________________________________
X ____________________________________________________
X ____________________________________________________
NOTICE:
THE SIGNATURES TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By ________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE> 1
CONFORMED COPY
FIRST AMENDMENT AND WAIVER (this "Amendment") dated as
of November 13, 1998 under the Credit Agreement dated as of
January 21, 1998 (the "Credit Agreement"), among FISHER
SCIENTIFIC INTERNATIONAL INC. (the "Company"), certain
Subsidiaries of the Company, the lenders from time to time
party thereto, 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.
A. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Banks have extended credit
to the Borrowers, and have agreed to extend credit to the Borrowers, in each
case pursuant to the terms and subject to the conditions set forth therein.
C. The Company intends to issue new Senior Subordinated Notes in an
aggregate principal amount not in excess of $200,000,000. The proceeds of such
issuance of Senior Subordinated Notes will be used to repay all Revolving Loans
outstanding on the Amendment Effective Date and to fund working capital needs
which would historically have been funded through Permitted Receivables
Financings. It is anticipated that the Company will use its increased
availability under the Revolving Credit Facility and the Permitted Receivables
Financings to finance the Acquisition described below as well as to acquire
corporations which will become Wholly-Owned Subsidiaries.
<PAGE> 2
2
D. The Company intends to acquire on or prior to December 31, 1998,
either directly or through Wholly-Owned Subsidiaries, a majority of the common
stock of a certain European corporation (the "European Target") from the
European Target's current majority owners. Following such acquisition, the
Company intends to acquire the remaining outstanding shares of common stock in
the European Target through a tender offer and a squeeze out merger. The
transactions described in this paragraph D are collectively referred to herein
as the "Acquisition".
E. The Company has requested that the Banks amend the Credit
Agreement and waive certain provisions of the Credit Agreement, in each case as
set forth below.
F. The Required Banks are willing to agree to such amendments and
grant such waivers, in each case subject to the terms and conditions set forth
herein.
Accordingly, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
(a) Clause (a) of Section 3.02 is hereby amended by deleting the last
sentence thereof and substituting therefor the following sentence:
"If, on any date, the Total Revolving Credit Commitment (as it may be
reduced under this Section 3.02) is less than the Local Currency Sublimit,
the Local Currency Sublimit for such date shall be deemed to be equal to
the Total Revolving Credit Commitment as of such date."
(b) Clause (e) of Section 4.02(A) is hereby amended by:
(i) inserting, after the words "PROVIDED, HOWEVER," in the fifteenth
line thereof, "(i)"; and
(ii) inserting immediately following "$5,000,000" in the fourth line
from the bottom thereof the following:
"and (ii) so long as no Default or Event of Default then exists, such
net proceeds shall not
<PAGE> 3
3
be required to be so applied on such Business Day to the extent that
the Company has delivered a certificate to the Administrative Agent on
or prior to such Business Day stating that such net proceeds shall be
used to finance a Permitted Acquisition or Permitted Acquisitions
within 360 days of the date of such issuance or sale of equity
securities, and PROVIDED FURTHER, that (1) if all or any portion of
such net proceeds not required to be applied to the repayment of Term
Loans pursuant to the preceding proviso are not used (or contractually
committed to be used) to finance a Permitted Acquisition or Permitted
Acquisitions within 360 days, 50% of such remaining portion shall be
applied on the last day of such period as a mandatory repayment of
principal of outstanding Term Loans as provided above in this Section
4.02(A)(e) and (2) if all or any portion of such proceeds are not
required to be applied on the 360th day referred to in clause (1) above
because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without
such portion being so used, 50% of such remaining portion shall be
applied on the date of such termination or expiration as a mandatory
repayment of principal of outstanding Term Loans as provided in this
Section 4.02(A)(e)"
(c) Section 7 is hereby amended by inserting at the end thereof, the
following new Section 7.13:
"7.13 EUROPEAN TARGET. Within 90 days of the European Target becoming a
Wholly-Owned Subsidiary of the Company, the Company shall cause the
European Target or any successor entity to become a direct Wholly-Owned
Subsidiary of the Company or of a Wholly-Owned Domestic Subsidiary of the
Company."
(d) clause (o) of Section 8.02 of the Credit Agreement is hereby
amended by inserting immediately following the words "prior to the date of this
Agreement" in the tenth line thereof, ", those assets and properties owned by
SourceSys on October 31, 1998."
<PAGE> 4
4
(e) Clause (c) of Section 8.04 of the Credit Agreement is hereby
amended by deleting "$400,000,000" in the third line from the bottom thereof and
substituting therefor "$600,000,000".
(f) Section 8.06 of the Credit Agreement is hereby amended by:
(i) inserting the words "and investments permitted by clause (p)
below" immediately following the words "Initial Borrowing Date" and
within the parenthetical in the fifth line of clause (l) thereof;
(ii) deleting at the end of clause (n) thereof the word "and";
(iii) deleting the period at the end of clause (o) thereof and
substituting therefor "(determined for each such investment as of the
date of such investment);"; and
(iv) inserting at the end thereof the following new clauses (p),
(q) and (r):
"(p) the Company and/or its Wholly-Owned Subsidiaries may
acquire and own the capital stock of the European Target,
PROVIDED that the aggregate amount of investments in the capital
stock of the European Target (as determined for each such
investment as of the date of such investment) under this clause
(p) shall not exceed $160,000,000, PROVIDED, FURTHER that (i) the
European Target was, immediately prior to such acquisition,
engaged primarily in the business permitted pursuant to Section
8.01, (ii) any Liens or Indebtedness assumed or issued in
connection with such acquisition are otherwise permitted under
Section 8.03 or 8.04, as the case may be, and (iii) the Company
and its Subsidiaries are in compliance, on a pro forma basis
after giving effect to such acquisition, with the covenants
contained in Sections 8.09, 8.10, 8.11 and 8.12;
<PAGE> 5
5
(q) the Company may make intercompany loans and advances to
any Subsidiary of the Company, PROVIDED that (w) at no time shall
the aggregate outstanding principal amount of all intercompany
loans and advances made pursuant to this clause (q) exceed
$160,000,000 (determined without regard to any write-downs or
write-offs of such loans and advances), (x) the proceeds of all
such intercompany loans and advances shall be used solely to
purchase capital stock of the European Target pursuant to the
requirements of clause (p) above, (y) each such intercompany loan
shall be evidenced by an Intercompany Note and (z) each such
Intercompany Note shall be pledged to the Collateral Agent
pursuant to the Pledge Agreement to the extent provided in
Section 7.12; and
(r) the Company or any Subsidiary may acquire and hold a
note of Fisher Technology Group (or any successor thereto) in a
principal amount not in excess of $10,000,000 and may hold any
equity interest in the Fisher Technology Group (or any successor
thereto) arising from such note (provided no additional
consideration is paid by the Company and its Subsidiaries in
exchange for such equity interest)."
(g) Section 8.07 of the Credit Agreement is hereby amended by:
(i) deleting at the end of clause (e) thereof the word "and";
(ii) deleting the period at the end of clause (f) thereof and
substituting therefor "; and"; and
(iii) inserting immediately following clause (f) thereof the
following new clause (g):
<PAGE> 6
6
"(g) the Company and its Subsidiaries will be permitted to
make payments in respect of the purchase or redemption of
publicly held shares of the European Target in an aggregate
amount not in excess of $60,000,000."
(h) Section 10(A) is hereby amended by:
(i) deleting the definition of "Local Currency Sublimit" in its
entirety and substituting therefor the following new definition:
"'Local Currency Sublimit' shall mean, as of any date, the
sum (a) of $80,000,000 and (b) the aggregate principal amount,
not in excess of $95,000,000, of all Local Currency Loans
outstanding or made on such date the proceeds of which were, or
will be on such date, used to finance the purchase of the capital
stock of the European Target or to refinance such Local Currency
Loans."
(ii) inserting ", SourceSys" after the words "a Wholly-Owned
Subsidiary" in the penultimate line of the definition of "Fisher
Technology Group"; and
(iii) inserting in the appropriate alphabetical order the
following definitions:
"'European Target' shall mean a certain corporation
organized under the laws of a member country of the European
Economic Community and previously identified to the
Administrative Agent."
"'SourceSys' means SourceSys, Inc., a Delaware corporation."
SECTION 2. WAIVERS. (a) The Required Banks hereby waive the provisions of
Section 8.02 and 8.15 to the extent and only to the extent necessary to permit
the Company and its Wholly-Owned Subsidiaries to acquire capital
<PAGE> 7
7
stock of the European Target pursuant to the Acquisition; and
(b) The Required Banks hereby waive the provisions of Section 8.06 to
the extent and only to the extent necessary to permit the European Target to
hold from the date the European Target becomes a Subsidiary of the Company to a
date one week thereafter, investments in marketable securities which the
European Target holds on the date on which it becomes a Subsidiary of the
Company (the "Target Investments"); PROVIDED THAT if (i) the aggregate market
value of the Target Investments, determined as of the date that is one week
after the European Target becomes a Subsidiary, is less than (ii) 90% of the
aggregate market value for the Target Investments, determined as of November 10,
1998, the European Target may hold the Target Investments through the date that
is one year after it becomes a Subsidiary of the Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
hereby represents and warrants to each Bank, on and as of the date hereof, that:
(a) This Amendment has been duly authorized, executed and delivered
by each Borrower, and each of this Amendment and the Credit Agreement as amended
by this Amendment constitutes a legal, valid and binding obligation of each
Borrower, enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
(b) The representations and warranties of the Borrowers contained in
the Credit Agreement are true and correct in all material respects on and as of
the date hereof.
(c) After giving effect to this Amendment, no Default has occurred
and is continuing.
<PAGE> 8
8
SECTION 4. EFFECTIVENESS. This Amendment shall become effective on
the date (the "Amendment Effective Date") that each of the following conditions
is met:
(a) The Administrative Agent shall have received counterparts hereof
signed by each of the Borrower and the Required Banks.
(b) The Company shall have received at least $150,000,000 in gross
cash proceeds (other than the gross cash proceeds received by the Company on the
Initial Borrowing Date) from the issuance of Senior Subordinated Notes pursuant
to a Senior Subordinated Note Indenture conforming to the requirements of
Section 8.04(c) of the Credit Agreement as amended hereby.
(c) There shall be no Revolving Loans outstanding.
(d) The Administrative Agent shall have received interest, fees and
other amounts due and payable under this Amendment and the Credit Agreement on
or prior to the Amendment Effective Date including, to the extent invoiced, all
reasonable out of pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees of Cravath, Swaine & Moore,
counsel for the Administrative Agent).
SECTION 5. EXPENSES. The Company acknowledges that Section 12.01 of
the Credit Agreement applies to this Amendment and hereby agrees to pay all
out-of-pocket expenses reasonably incurred by the Administrative Agent,
including the reasonable fees, charges and disbursements of Cravath, Swaine &
Moore, counsel for the Administrative Agent, in connection with the preparation,
execution and delivery of this Amendment.
SECTION 6. MISCELLANEOUS. (a) This Amendment constitutes the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
(b) Section headings used herein are for convenience of reference
only and are not to affect the
<PAGE> 9
9
construction of, or to be taken into consideration in interpreting, this
Amendment.
(c) THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
(d) Each reference to a party hereto shall be deemed to include its
successors and assigns, all of whom shall be bound by this Amendment and to
whose benefit the provisions of this Amendment shall inure.
(e) This Amendment may be executed in any number of counterparts,
each of which shall be an original but all of which, when taken together, shall
constitute but one instrument.
(f) Except as specifically amended or modified hereby, the Credit
Agreement shall continue in full force and effect in accordance with the
provisions thereof.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the date first above
written.
FISHER SCIENTIFIC INTERNATIONAL INC.,
By: /s/ Todd M. Duchene
---------------------------------------
Name: Todd M. Duchene
Title: Vice President, General Counsel,
Secretary
FISHER SCIENTIFIC U.K., LIMITED,
By: /s/ Denis N. Maiorani
---------------------------------------
Name: Denis N. Maiorani
Title: Administrateur
FISHER SCIENTIFIC LIMITED,
By: /s/ Todd M. Duchene
---------------------------------------
Name: Todd M. Duchene
Title: Vice President, General Counsel,
Secretary
ACROS ORGANICS N.V.,
By: /s/ Denis N. Maiorani
---------------------------------------
Name: Denis N. Maiorani
Title: Administrateur
FISHER SCIENTIFIC S.A.,
By: /s/ Denis N. Maiorani
---------------------------------------
Name: Denis N. Maiorani
Title: Administrateur
<PAGE> 11
FISHER SCIENTIFIC GmbH,
By: /s/ Paul M. Meister
---------------------------------------
Name: Paul M. Meister
Title: Senior Vice President
FISHER SCIENTIFIC KOREA LTD.,
By: /s/ Richard A. Lukianuk
---------------------------------------
Name: Richard A. Lukianuk
Title: Attorney-in-Fact
FISHER SCIENTIFIC B.V.,
By: /s/ Richard A. Lukianuk
---------------------------------------
Name: Richard A. Lukianuk
Title: Attorney-in-Fact
CASA ROCAS S.A. DE C.V.,
By: /s/ Denis N. Maiorani
---------------------------------------
Name: Denis N. Maiorani
Title: Administrateur
FISHER GENERAL SCIENTIFIC(S) Pte Ltd.,
By: /s/ Richard A. Lukianuk
---------------------------------------
Name: Richard A. Lukianuk
Title: Attorney-in-Fact
STRATEGIC SOURCING AND PROCUREMENT
SERVICES Pte Ltd.,
By: /s/ Richard A. Lukianuk
---------------------------------------
Name: Richard A. Lukianuk
Title: Attorney-in-Fact
<PAGE> 12
FISHER SCIENTIFIC ASIAWIDE Pte Ltd.,
By: /s/ Denis N. Maiorani
---------------------------------------
Name: Denis N. Maiorani
Title: Administrateur
GENERAL SCIENTIFIC COMPANY (S) Sdn Bhd,
By: /s/ Richard A. Lukianuk
---------------------------------------
Name: Richard A. Lukianuk
Title: Attorney-in-Fact
WINIGER AG,
By: /s/ Denis N. Maiorani
---------------------------------------
Name: Denis N. Maiorani
Title: Administrateur
<PAGE> 1
EXECUTION COPY
SECOND AMENDMENT AND CONSENT (this
"Amendment") dated as of December 31, 1998 to the
Credit Agreement dated as of January 21, 1998 (as
previously amended, the "Credit Agreement"), among
FISHER SCIENTIFIC INTERNATIONAL INC. (the "Company"),
certain Subsidiaries of the Company, the lenders from
time to time party thereto, 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.
A. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Banks have
extended credit to the Borrowers, and have agreed to extend credit to the
Borrowers, in each case pursuant to the terms and subject to the conditions set
forth therein.
C. The Company intends to distribute to its stockholders
the stock of ProcureNet, Inc. (formerly named Strategic Procurement Services
Holdings Inc.), a Delaware corporation and one of the entities comprising the
Fisher Technology Group. Prior to such distribution, ProcureNet, Inc. will hold
the stock of one or more entities comprising the Fisher Technology Group.
D. The Company has requested that the Banks amend the
Credit Agreement and grant a consent under the Credit Agreement, in each case as
set forth below.
E. The Required Banks are willing to agree to such
amendment and grant such consent, in each case subject to the terms and
conditions set forth herein.
Accordingly, the parties hereto agree as follows:
<PAGE> 2
SECTION 1. AMENDMENT. (a) Clause (o) of Section 8.02 of the
Credit Agreement is hereby amended by inserting immediately following the words
"those assets and properties owned by SourceSys on October 31, 1998," the words
"those assets and properties owned by Structured Computer Systems at the time of
its acquisition by the Fisher Technology Group,".
(b) Clause (o) of Section 8.02 of the Credit Agreement is
hereby amended by adding "other than (in the case of a dividend permitted by
Section 8.07(h)) the Fisher Technology Group Indebtedness" at the end thereof.
(c) Section 8.03 of the Credit Agreement is hereby
amended by:
(i) deleting at the end of clause (q) thereof the word
"and";
(ii) deleting the period at the end of clause (r) thereof
and substituting therefor "and"; and
(iii) inserting at the end thereof the following new
clause (s):
"(s) Liens on the property and assets of the
Fisher Technology Group in favor of the Company or
any of its Subsidiaries."
(d) Section 8.06 of the Credit Agreement is hereby
amended by:
(i) inserting in clause (h) following "collectively," the
following: "so long as the relevant party to such loan or advance
continues to be a Subsidiary,"; and
(ii) deleting clause (r) and substituting therefor the
following:
"(r) after the payment of the dividend or
dividends contemplated by Section 8.07(h), the
Company or any Subsidiary may hold an equity interest
in ProcureNet, Inc. so long as such equity interest
is received by the Company without the payment of any
consideration therefor (other than a de minimis
consideration)."
<PAGE> 3
3
(e) Section 8.07 of the Credit Agreement is hereby
amended by:
(i) deleting the word "and" at the end of clause (f)
thereof;
(ii) deleting the period at the end of clause (g) thereof
and substituting therefor "; and"; and
(iii) inserting at the end thereof the following new
clause (h):
"(h) the Company may make a dividend or dividends to
its shareholders comprised solely of stock in one or more of
the entities comprising the Fisher Technology Group; PROVIDED
that the following conditions shall be satisfied in connection
with each such dividend: (i) at the time thereof and after
giving effect thereto the assets and properties comprising the
Fisher Technology Group or applicable portion thereof
(including the assets and properties of each Person included
therein) shall include only those assets and properties
comprising the Fisher Technology Group prior to the date of
this Agreement, those assets owned by SourceSys on October 31,
1998, those assets and properties owned by Structured Computer
Systems at the time of its acquisition by the Fisher
Technology Group and any assets and properties acquired by the
Fisher Technology Group in the ordinary course of its business
subsequent to the date of this Agreement; (ii) at the time
thereof and after giving effect thereto no Person included in
the Fisher Technology Group or applicable portion thereof
shall be a party to or otherwise bound by any contract or
other transaction involving the Company or any other
Subsidiary that would not be permitted under Section 8.08 if
entered into at such time (determined on the basis that such
Person is an Affiliate); and (iii) after giving effect thereto
neither the Company nor any Subsidiary thereof shall be
obligated upon any Indebtedness to or of any Person included
in the Fisher Technology Group or applicable portion
<PAGE> 4
4
thereof other than the Fisher Technology Group Indebtedness."
(f) Section 8.08 is hereby amended by (i) deleting the
word "and" immediately preceding "(v)" and (ii) deleting the period at the end
of clause (v), and substituting therefor,"; (vi) the Fisher Technology Group
Indebtedness; and (vii) certain other transitional agreements between the
Company or any Subsidiary and the Fisher Technology Group in connection with the
payment of the dividend or dividends contemplated by Section 8.07(h), PROVIDED
that the Company's Board of Directors shall determine that such agreements are
fair and reasonable to, and in the best interests of, the Company."
(g) Section 10(A) is hereby amended by:
(i) in the definition of "Fisher Technology Group" (A)
inserting ", Structured Computer Systems" after the words "SourceSys",
(B) deleting "and a Wholly-Owned Subsidiary" following "Fisher
Technology Group Inc., a Delaware corporation" and following "Strategic
Procurement Services Inc., a Delaware corporation", (C) deleting
"Strategic Procurement Services Holdings Inc., a Delaware corporation
and a Wholly-Owned Subsidiary" and replacing it with "ProcureNet, Inc.,
a Delaware corporation (formerly known as Strategic Procurement
Services Holdings Inc.)" and (D) deleting ", a division of Fisher
Scientific Company" following "Electronic Commerce Division"; and
(ii) inserting in the appropriate alphabetical order the
following definitions:
"Fisher Technology Group Indebtedness" means
Indebtedness, in an aggregate principal amount not to exceed
$22 million (not including any interest payable in kind, which
may be paid until December 31, 2001), owed to the Company or
any of its Subsidiaries by one or more entities comprising the
Fisher Technology Group, which Indebtedness shall consist of
an $8 million revolving credit facility and up to $14 million
of term notes (with equity conversion rights)."
<PAGE> 5
5
"Structured Computer Systems" means Structured
Computer Systems, Inc., a Connecticut corporation."
SECTION 2. CONSENT. (a) The Required Banks hereby waive the
provisions of Sections 8.02, 8.06 and 8.15 to the extent necessary to permit the
acquisition by the Company or any Subsidiary of Structured Computer Systems for
an aggregate purchase price not to exceed $10 million; PROVIDED, that Structured
Computer Systems will be included in the entities comprising the dividend or
dividends contemplated by Section 8.07(h) and such dividend or dividends are
declared and paid within six months after the closing of the acquisition of
Structured Computer Systems.
(b) The undersigned Banks hereby consent to (i) the
release of each of the entities comprising the Fisher Technology Group from its
obligations under the Security Documents, the release of the security interest
in all collateral owned by such entity and the release of any security interests
in the securities issued by such entity, in each case upon the dividend of all
of the shares of the stock of such entity (or of any entity which owns all of
the shares of stock of such entity) to the Company's shareholders in accordance
with Section 8.07(h) of the Credit Agreement as added by this Amendment and (ii)
the execution and delivery by the Collateral Agent of any and all documents and
agreements which the Collateral Agent determines to be necessary or appropriate
to effect such release.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the
Borrowers hereby represents and warrants to each Bank, on and as of the date
hereof, that:
(a) This Amendment has been duly authorized, executed and
delivered by each Borrower, and each of this Amendment and the Credit Agreement
as amended by this Amendment constitutes a legal, valid and binding obligation
of each Borrower, enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles
<PAGE> 6
6
(regardless of whether enforcement is sought in equity or at law).
(b) The representations and warranties of the Borrowers
contained in the Credit Agreement are true and correct in all material respects
on and as of the date hereof.
(c) After giving effect to this Amendment, no Default has
occurred and is continuing.
SECTION 4. EFFECTIVENESS. This Amendment shall become
effective on the date (the "Amendment Effective Date") that each of the
following conditions is met:
(a) The Administrative Agent shall have received
counterparts hereof signed by each of the Borrower and the Required Banks and
any consents required under the receivables financing entered into by Fisher
Scientific Company L.L.C. on January 21, 1998.
(b) The Administrative Agent shall have received
interest, fees and other amounts due and payable under this Amendment and the
Credit Agreement on or prior to the Amendment Effective Date including, to the
extent invoiced, all reasonable out of pocket costs and expenses of the
Administrative Agent (including, without limitation, the reasonable fees of
Cravath, Swaine & Moore, counsel for the Administrative Agent).
SECTION 5. EXPENSES. The Company acknowledges that Section
12.01 of the Credit Agreement applies to this Amendment and hereby agrees to pay
all out-of-pocket expenses reasonably incurred by the Administrative Agent,
including the reasonable fees, charges and disbursements of Cravath, Swaine &
Moore, counsel for the Administrative Agent, in connection with the preparation,
execution and delivery of this Amendment.
SECTION 6. MISCELLANEOUS. (a) This Amendment constitutes the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
<PAGE> 7
7
(b) Section headings used herein are for convenience of
reference only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Amendment.
(c) THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
(d) Each reference to a party hereto shall be deemed to
include its successors and assigns, all of whom shall be bound by this Amendment
and to whose benefit the provisions of this Amendment shall inure.
(e) This Amendment may be executed in any number of
counterparts, each of which shall be an original but all of which, when taken
together, shall constitute but one instrument.
(f) Except as specifically amended or modified hereby, the
Credit Agreement shall continue in full force and effect in accordance with the
provisions thereof.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
date first above written.
FISHER SCIENTIFIC INTERNATIONAL INC.,
By: /s/ Todd M. DuChene
------------------------------------------
Name:
Title:
FISHER SCIENTIFIC U.K., LIMITED,
By: /s/ Richard A. Lukianuk
------------------------------------------
Name: Richard A. Lukianuk
Title:
FISHER SCIENTIFIC LIMITED,
By: /s/ Todd M. DuChene
------------------------------------------
Name: Todd M. DuChene
Title:
ACROS ORGANICS N.V.,
By: /s/ Richard A. Lukianuk
------------------------------------------
Name: Richard A. Lukianuk
Title:
FISHER SCIENTIFIC S.A.,
By: /s/ Denis N. Maiorani
------------------------------------------
Name: Denis N. Maiorani
Title:
<PAGE> 9
FISHER SCIENTIFIC GmbH,
By: /s/ Richard A. Lukianuk
------------------------------------------
Name: Richard A. Lukianuk
Title:
FISHER SCIENTIFIC KOREA LTD.,
By: /s/ Richard A. Lukianuk
-------------------------------------------
Name:
Title:
FISHER SCIENTIFIC B.V.,
By: /s/ Richard A. Lukianuk
-------------------------------------------
Name: Richard A. Lukianuk
Title:
CASA ROCAS S.A. DE C.V.,
By: /s/ Richard A. Lukianuk
-------------------------------------------
Name: Richard A. Lukianuk
Title:
FISHER GENETICS ASIA Pte Ltd.,
By: /s/ Richard A. Lukianuk
-------------------------------------------
Name: Richard A. Lukianuk
Title:
FISHER SCIENTIFIC Pte Ltd.,
By: /s/ Richard A. Lukianuk
-------------------------------------------
Name: Richard A. Lukianuk
Title:
WINIGER AG,
By: /s/ Denis N. Maiorani
-------------------------------------------
Name: Denis N. Maiorani
Title:
<PAGE> 10
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Bank,
By: /s/ Mary Elisabeth Swerz
-------------------------------------------
Name: Mary Elisabeth Swerz
Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION, as
Syndication Agent and as a Bank,
By: /s/ Carol J. Feeley
------------------------------------------
Name: Carol J. Feeley
Title: Director
DLJ CAPITAL FUNDING, INC., as
Documentation Agent and as a Bank,
By:
------------------------------------------
Name:
Title:
ABN AMRO BANK N.V.,
By: /s/ James A. Adelsheim
------------------------------------------
Name: James A. Adelsheim
Title: Group Vice President
By: /s/ Ildiko E. Juhasz
------------------------------------------
Name: Ildiko E. Juhasz
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA,
By: /s/ T.M. Pirher
------------------------------------------
Name: T.M. Pirher
Title: Authorized Signatory
<PAGE> 11
BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION,
By: /s/ John W. Pacalyko
------------------------------------------
Name: John W. Pacalyko
Title: Managing Director
BANKBOSTON, N.A.,
By:
------------------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS,
as Co-Agent,
By: /s/ Stephanie Rogers
------------------------------------------
Name: Stephanie Rogers
Title: Vice President
By:
------------------------------------------
Name:
Title:
PARIBAS,
By: /s/ John J. McCormick, III
------------------------------------------
Name: John J. McCormick, III
Title: Vice President
By: /s/ Tracie Elliot
------------------------------------------
Name: Tracie Elliot
Title: Assistant Vice President
<PAGE> 12
BHF- BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH,
By: /s/ Dan Dobijanskyj
------------------------------------------
Name: Dan Dobijanskyj
Title: Assistant Vice President
By: /s/ Michael T. Pellerito
------------------------------------------
Name: Michael T. Pellerito
Title: Assistant Treasurer
BALANCED HIGH YIELD FUND I LTD,
By: BHF-Bank
Aktiengesellschaft,
acting through its
New York Branch,
as attorney-in-fact,
By: /s/ Dan Dobijanskyj
------------------------------------------
Name: Dan Dobijanskyj
Title: Assistant Vice President
By: /s/ Michael T. Pellerito
------------------------------------------
Name: Michael T. Pellerito
Title: Assistant Treasurer
BALANCED HIGH YIELD FUND II LTD,
By: BHF-Bank
Aktiengesellschaft,
acting through its
New York Branch,
as attorney-in-fact,
By: /s/ Dan Dobijanskyj
------------------------------------------
Name: Dan Dobijanskyj
Title: Assistant Vice President
By: /s/ Michael T. Pellerito
------------------------------------------
Name: Michael T. Pellerito
Title: Assistant Treasurer
<PAGE> 13
CIBC INC.,
CIBC Oppenheimer Corp,
as Agent,
By: /s/ Ihor Zaluckyj
------------------------------------------
Name: Ihor Zaluckyj
Title: Executive Director
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE,
By: /s/ Anthony Rock
------------------------------------------
Name: Anthony Rock
Title: Vice President
By:
------------------------------------------
Name:
Title:
THE DAI-ICHI KANGYO BANK, LIMITED,
By:
------------------------------------------
Name:
Title:
ELC (CAYMAN) LTD.,
By: /s/ Thomas M. Finke
------------------------------------------
Name: Thomas M. Finke
Title: Managing Director
DEEPROCK & COMPANY,
By: Eaton Vance Management
as Investment Advisor,
By: /s/ Payson F. Swaffield
------------------------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE> 14
ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG,
By: /s/ David Manheim
------------------------------------------
Name: David Manheim
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
By: /s/ Robert McMillan
------------------------------------------
Name: Robert McMillan
Title: Corporate Banking Officer
FLEET NATIONAL BANK,
By: /s/ Stephen Curran
------------------------------------------
Name: Stephen Curran
Title: Vice President
FRANKLIN FLOATING RATE TRUST,
By:
------------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN LIMITED,
By: /s/ Takuya Hunjo
------------------------------------------
Name: Takuya Hunjo
Title: Senior Vice President
KZH CNC LLC,
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE> 15
KZH CRESCENT-2 LLC,
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH CYPRESSTREE-1 LLC,
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH LANGDALE LLC,
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH SOLEIL LLC,
By:
------------------------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
NEW YORK BRANCH,
By:
------------------------------------------
Name:
Title:
MARINE MIDLAND BANK,
By:
------------------------------------------
Name:
Title:
<PAGE> 16
MELLON BANK, N.A.,
By: /s/ R. Jane Westrich
------------------------------------------
Name: R. Jane Westrich
Title: Vice President
KZH ING-2 LLC,
By:
------------------------------------------
Name:
Title:
ML CLO XV PILGRIM AMERICA (CAYMAN) LTD.
By: Pilgrim Investments, Inc.
as its Investment Manager,
By: /s/ Jason T. Groom
------------------------------------------
Name: Jason T. Groom
Title: Assistant Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
By: /s/ V. S. Soo
------------------------------------------
Name: V. S. Soo
Title: Banking Officer
NATEXIS BANQUE BFCE,
By: /s/ Frank H. Madden, Jr.
------------------------------------------
Name: Frank H. Madden, Jr.
Title: Vice President
By: /s/ Kevin McOwen
------------------------------------------
Name: Kevin McOwen
Title: Assistant Treasurer
<PAGE> 17
NATIONSBANK, N.A.,
By: /s/ John W. Pocalyko
------------------------------------------
Name: John W. Pocalyko
Title: Managing Director
NEW YORK LIFE INSURANCE COMPANY,
By: /s/ Steven M. Benevento
------------------------------------------
Name: Steven M. Benevento
Title: Director
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION,
By: New York Life Insurance Company,
By: /s/ Steven M. Benevento
------------------------------------------
Name: Steven M. Benevento
Title: Director
PPM AMERICA, INC. as attorney in fact,
on behalf of Jackson National Life Insurance Company,
By:
------------------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, Limited
by IncoSuez Capital as Portfolio Advisor
By: /s/ Melissa Moran
------------------------------------------
Name: Melissa Moran
Title: Vice President
<PAGE> 18
INDOSUEZ CAPITAL FUNDING IV,
By: /s/ Melissa Moran
------------------------------------------
Name: Melissa Moran
Title: Vice President
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST,
By:
------------------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH,
By:
------------------------------------------
Name:
Title:
TORONTO-DOMINION (TEXAS) INC.,
By:
------------------------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY,
By:
------------------------------------------
Name:
Title:
<PAGE> 19
CONTINENTAL ASSURANCE COMPANY SEPARATE ACCOUNT (E),
By: TCW Asset Management Company as
Attorney-in-Fact
By: /s/ Mark L. Gold
------------------------------------------
Name: Mark L. Gold
Title: Managing Director
By: /s/ Justin L. Driscoll
------------------------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
SPS SWAPS,
By: /s/ Anna Maria Beissel
------------------------------------------
Name: Anna Maria Beissel
Title: Vice President
ALLIANCE INVESTMENTS LIMITED
By: /s/ Joel Berebransky
------------------------------------------
Name: Joel Berebransky
Title: Vice President
CITY NATIONAL BANK,
By:
------------------------------------------
Name:
Title:
FIRSTRUST BANK,
Boston Management and Research as
Investment Advisor
By: /s/ Payson F. Swaffield
------------------------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE> 20
SENIOR DEBT PORTFOLIO,
By:
------------------------------------------
Name:
Title:
VAN KAMPEN PRIME RATE INCOME TRUST,
By: /s/ Jeffrey W. Marlet
------------------------------------------
Name: Jeffrey W. Marlet
Title: Senior Vice President & Director
BANK OF TOKYO-MITSUBISHI TRUST,
By:
------------------------------------------
Name:
Title:
ARCHIMEDES FUNDING II, LTD.,
By:
------------------------------------------
Name:
Title:
CAPTIVA III FINANCE, LTD.,
By: /s/ John H. Cullinane
------------------------------------------
Name: John H. Cullinane
Title: Director
VAN KAMPEN CLO I, LIMITED,
By: Van Kampen Management, Inc. as Collateral Manager
By: /s/ Jeffrey W. Marlet
------------------------------------------
Name: Jeffrey W. Marlet
Title: Senior Vice President & Director
<PAGE> 21
PILGRIM HIGH INCOME INVESTMENTS, LTD
By: Pilgrim Investments, Inc.
as its Investment Manager,
By:
------------------------------------------
Name:
Title:
MITSUBISHI TRUST AND BANKING CORPORATION,
By:
------------------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: /s/ Carol J.E. Feeney
------------------------------------------
Name: Carol J.E. Feeney
Title: Director
<PAGE> 1
AMENDED AND RESTATED
INVESTORS' AGREEMENT
dated
as of
March 29, 1999
among
FISHER SCIENTIFIC INTERNATIONAL, INC.,
THOMAS H. LEE EQUITY FUND III, L.P.,
THL-CCI LIMITED PARTNERSHIP,
THL FOREIGN FUND III, L.P.,
THL FSI EQUITY INVESTORS, L.P.,
DLJ MERCHANT BANKING PARTNERS II, L.P.,
DLJ MERCHANT BANKING PARTNERS II - A, L.P.,
DLJ OFFSHORE PARTNERS II, C.V.,
DLJ DIVERSIFIED PARTNERS, L.P.,
DLJ DIVERSIFIED PARTNERS - A, L.P.,
DLJ MILLENNIUM PARTNERS, L.P.
DLJ MILLENNIUM PARTNERS - A, L.P.,
DLJMB FUNDING II, INC.,
UK INVESTMENT PLAN 1997 PARTNERS,
DLJ EAB PARTNERS, L.P.,
DLJ ESC II, L.P.,
DLJ FIRST ESC, L.P.,
CHASE EQUITY ASSOCIATES, L.P.,
MERRILL LYNCH KECALP L.P. 1997,
KECALP INC.,
ML IBK POSITIONS, INC.
AND
CERTAIN OTHER PERSONS NAMED HEREIN
<PAGE> 2
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I DEFINITIONS
Section 1.1 Definitions............................................. 2
ARTICLE II CORPORATE GOVERNANCE AND MANAGEMENT
Section 2.1 Composition of the Board................................13
Section 2.2 Removal.................................................13
Section 2.3 Vacancies...............................................14
Section 2.4 Action by the Board.....................................14
Section 2.5 Conflicting Charter or Bylaw
Provision...............................................15
ARTICLE III RESTRICTIONS ON TRANSFER
Section 3.1 General.................................................15
Section 3.2 Legends.................................................16
Section 3.3 Permitted Transferees; Transfers
by THL Entities; Exchanges by THL
Entities................................................16
Section 3.4 Restrictions on Transfers by
Institutional Shareholders..............................17
Section 3.5 Restrictions on Transfers by
Management Shareholders.................................18
Section 3.6 Company Right of First Refusal..........................19
Section 3.7 Notifications Regarding Transfers.......................20
ARTICLE IV TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS;
PREEMPTIVE RIGHTS
Section 4.1 Rights to Participate in Transfer.......................20
Section 4.2 Right to Compel Participation
in Certain Transfers....................................23
Section 4.3 Preemptive Rights.......................................26
Section 4.4. Certain Other Purchases of Equity
Securities..............................................30
i
<PAGE> 3
ARTICLE V REGISTRATION RIGHTS
Section 5.1 Demand Registration.....................................31
Section 5.2 Piggyback Registration..................................34
Section 5.3 Holdback Agreements.....................................36
Section 5.4 Registration Procedures.................................36
Section 5.5 Indemnification by the Company..........................41
Section 5.6 Indemnification by Participating
Shareholders............................................42
Section 5.7 Conduct of Indemnification
Proceedings.............................................43
Section 5.8 Contribution............................................44
Section 5.9 Participation in Public Offering........................46
Section 5.10 Cooperation by the Company..............................46
Section 5.11 No Transfer of Registration
Rights..................................................47
ARTICLE VI CERTAIN COVENANTS AND AGREEMENTS
Section 6.1 Confidentiality.........................................47
Section 6.2 Reports.................................................49
Section 6.3 Limitations on Subsequent
Registration............................................49
Section 6.4 Limitation on Purchase of Equity
Securities..............................................49
Section 6.5 Regulated Stockholders..................................50
ARTICLE VII MISCELLANEOUS
Section 7.1 Entire Agreement........................................51
Section 7.2 Binding Effect; Benefit.................................51
Section 7.3 Assignability...........................................52
Section 7.4 Amendment; Waiver; Termination..........................52
Section 7.5 Notices.................................................53
Section 7.6 Headings................................................55
Section 7.7 Counterparts............................................56
Section 7.8 Applicable Law..........................................56
Section 7.9 Specific Performance....................................56
Section 7.10 Consent to Jurisdiction; Expenses.......................56
Section 7.11 Representative..........................................57
Section 7.12 Severability............................................59
ii
<PAGE> 4
PAGE
iii
<PAGE> 5
iv
<PAGE> 6
AMENDED AND RESTATED
INVESTORS' AGREEMENT
AMENDED AND RESTATED AGREEMENT (this "Agreement") dated as of
March 29, 1999 among (i) Fisher Scientific International, Inc. (the "Company"),
(ii) Thomas H. Lee Equity Fund III, L.P. ("THL"), certain individuals associated
with THL listed on Schedule I attached hereto, THL-CCI Limited Partnership
("THL-CCI"), THL Foreign Fund III, L.P. and THL FSI Equity Investors, L.P.
("THL/FSI" and collectively with THL, the individuals listed on Schedule I,
THL-CCI, and THL Foreign Fund III, L.P., the "THL Entities"), (iii) DLJ Merchant
Banking Partners II, L.P. ("DLJMB"), 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 Millennium
Partners, L.P., DLJ Millennium Partners - A, L.P., UK Investment Plan 1997
Partners, DLJ EAB Partners, L.P., DLJ ESC II, L.P., and DLJ First ESC, L.P.
(collectively the "DLJ Entities"), (iv) Chase Equity Associates, L.P. ("Chase
Equity"), (v) Merrill Lynch KECALP L.P. 1997, KECALP INC., and ML IBK Positions,
Inc., (collectively, the "Merrill Lynch Entities" and, together with each other
entity listed in clauses (iii) and (iv), the "Institutional Shareholders" and,
collectively with (ii), the "Equity Investors") and (vi) certain other Persons
listed on the signature pages hereof (including the trust pursuant to the Trust
Agreement, dated of even date herewith, between the Company and Mellon Bank,
N.A., as trustee (the "Rabbi Trust")) (the "Management Shareholders" and
individually, along with the THL Entities, DLJ Entities, Chase Equity, and
Merrill Lynch Entities, each a "Shareholder") and such other parties who may
become parties of this Agreement pursuant to the terms hereof.
W I T N E S S E T H :
WHEREAS, the parties hereto entered into an investors'
agreement, dated as of January 21, 1998 (the "Original Agreement"), to govern
certain of their rights, duties and obligations after consummation of the Merger
(as defined below); and
<PAGE> 7
WHEREAS, the parties hereto desire to amend and restate the
Original Agreement in its entirety as set forth below; and
WHEREAS, pursuant to the Subscription Agreement (as defined
below) the Equity Investors acquired securities of FSI Merger Corp. ("FSI"); and
WHEREAS, pursuant to the terms of the Merger Agreement (as
defined below), FSI was merged with and into the Company, with the Company as
the surviving corporation (the "Merger"); and
WHEREAS, pursuant to the Merger, the stock of FSI held by the
Equity Investors was converted into stock of the Company; and
WHEREAS, pursuant to the Merger, the Management Shareholders
retained shares of stock of the Company; and
WHEREAS, upon the Merger and pursuant to the Equity Investors'
commitment to purchase cumulative preferred stock of the Company, warrants to
purchase common stock of the Company were issued to the Equity Investors; and
WHEREAS, pursuant to the Rabbi Trust and any stock or option
plan, Management Shareholders hold shares of stock of the Company; and
WHEREAS, the parties hereto may obtain additional shares of
stock of the Company in the future;
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section I.1 DEFINITIONS. (a) The following terms, as used
herein, have the following meanings:
<PAGE> 8
"Adverse Person" means any Person whom the Board reasonably
determines is a competitor or a potential competitor of the Company or its
Subsidiaries.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person, provided that no securityholder of the Company shall
be deemed an Affiliate of any other securityholder solely by reason of any
investment in the Company. For the purpose of this definition, the term
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Applicable Law," with respect to any Person, means all
provisions of all laws, statutes, ordinances, rules, regulations, permits,
certificates or orders of any Governmental Authority applicable to such Person
or any of its assets or property or to which such Person or any of its assets or
property is subject, and all judgments, injunctions, orders and decrees of all
courts and arbitrators in proceedings or actions in which such Person is a party
or by which it or any of its assets of properties is or may be bound or subject.
"beneficially own" shall have the meaning set forth in Rule
13d-3 of the Exchange Act.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Closing Date" means January 21, 1998.
3
<PAGE> 9
"Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, non-voting common stock, par value $.01 per share, of the
Company and any stock into which such common stock and non-voting common stock
may thereafter be converted or changed.
"Demand Registration" means collectively, a THL Demand
Registration, an Institutional Shareholder Demand Registration, or a Management
Shareholder Demand Registration.
"Derivatives" shall mean options, warrants (including the
Equity Warrants) or other rights to acquire any Equity Securities of the
Company.
"Equity Investors" means the Institutional Shareholders and
the THL Entities.
"Equity Securities" means the Common Stock and preferred
stock, securities convertible into or exchangeable for Common Stock or preferred
stock, Derivatives, and any other equity security issued by the Company. In
connection with any reference to a class of Equity Securities which does not
specify whether such class is voting or non-voting, voting Common Stock and
non-voting Common Stock shall be treated as the same class of Equity Securities
to the extent that such voting and non-voting Common Stock have identical terms
other than with respect to voting rights.
"Equity Warrants" means warrants to purchase Common Stock
pursuant to the Equity Warrant Acquisition Agreement.
"Equity Warrant Acquisition Agreement" means the Common Stock
Warrant Acquisition Agreement, of even date herewith, among the Company, the
Institutional Shareholders and the THL Entities.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
4
<PAGE> 10
"Federal Reserve Board" means The Board of Governors of the
United States Federal Reserve System.
"Fully Diluted" means, with respect to any class of Equity
Securities, all outstanding shares of such class and all shares issuable in
respect of securities convertible into or exchangeable for such class, stock
appreciation rights or options, warrants and other irrevocable rights to
purchase or subscribe for such class or securities convertible into or
exchangeable for such class; provided, that no Person shall be deemed to own
such number of Fully Diluted shares of such class as such Person has the right
to acquire from any Person other than the Company.
"Initial Ownership" means, with respect to any class of Equity
Securities, the number of shares of such class of Equity Securities beneficially
owned and (without duplication) which such Persons had the right to acquire from
any Person as of January 21, 1998, or in the case of any Person that shall
become a party to this Agreement on a later date, as of such date, taking into
account any stock split, stock dividend, reverse stock split or similar event.
"Initial Public Offering" means the first sale after January
21, 1998 of Common Stock pursuant to an effective registration statement under
the Securities Act (other than a registration statement on Form S-8 or any
successor form).
"Merger Agreement" means the Second Amended and Restated
Agreement and Plan of Merger, as amended, dated as of November 14, 1997, by and
between the Company and FSI.
"New Common Securities" means the Common Stock, whether now
authorized or not, any rights, options or warrants to purchase Common Stock and
any indebtedness or stock of the Company which is convertible into Common Stock
(or which is convertible into a security which is, in turn, convertible into
Common Stock) issued after January 21, 1998; provided, that the term "New Common
5
<PAGE> 11
Securities" does not include (i) such Equity Securities issued as a stock
dividend to all holders of Common Stock pro rata or upon any subdivision or
combination of shares of Common Stock; (ii) shares of Common Stock issued upon
exercise of Derivatives outstanding on January 21, 1998; (iii) shares of Common
Stock issued to Michael D. Dingman (or entities designated by Mr. Dingman who
become upon such issuance a party to this Agreement in accordance with Section
7.3(a) and (b)) in exchange for up to $7,500,000 in cash; and (iv) Equity
Securities issued in connection with a THL Exchange.
"New Preferred Securities" means any preferred stock, whether
now authorized or not, any rights, options or warrants to purchase preferred
stock and any indebtedness or stock of the Company which is convertible into
preferred stock (or which is convertible into a security which is, in turn,
convertible into preferred stock) issued after January 21, 1998; provided, that
the term "New Preferred Securities" does not include such Equity Securities
issued as a stock dividend to all holders of preferred stock pro rata or upon
any subdivision or combination of shares of preferred stock and (ii) shares of
preferred stock issued upon exercise of Derivatives outstanding on January 21,
1998.
"Non-THL Shareholders" means all Shareholders other than the
THL Entities.
"Percentage Ownership" means, with respect to any Shareholder
at any time, (i) the number of Fully Diluted shares of Common Stock that such
Shareholder beneficially owns (and, without duplication, has the right to
acquire from any Person) at such time, divided by (ii) the total number of Fully
Diluted shares of Common Stock at such time.
"Permitted Transferee" means (i) in the case of Institutional
Shareholders (A) the Company, (B) any THL Entity, (C) any general or limited
partner or shareholder of such Shareholder, and any corporation, partnership or
other entity that is an Affiliate of such Shareholder (collectively,
"Shareholder Affiliates"), (D) any general
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partner, limited partner, employee, officer or director of such Shareholder or a
Shareholder Affiliate, or any spouse, lineal descendant (whether natural or
adopted), sibling, parent, heir, executor, administrator, testamentary trustee,
lifetime trustee, legatee or beneficiary of any of the foregoing persons
described in this clause (d) (collectively, "Shareholder Associates"), and (E)
any trust, the beneficiaries of which, or any corporation, limited liability
company or partnership, stockholders, members or general or limited partners of
which include only such Shareholder, such Shareholder Affiliates or Shareholder
Associates; provided, however, that in order for any of the parties identified
in clauses (C), (D) or (E) to be a Permitted Transferee in connection with a
Transfer (or series of related Transfers) in excess of 2.5% of such
Institutional Shareholder's Initial Ownership of the class of Equity Securities
to be transferred, such party must be acceptable to THL, which acceptance may
not be unreasonably withheld and which acceptance shall not be required for the
Transfer by KECALP Inc. of all of its Equity Securities to Merrill Lynch KECALP
International L.P. 1997, a Cayman Islands limited partnership; PROVIDED,
FURTHER, HOWEVER, that the foregoing proviso shall not be applicable if the
number of Shares of a class of Equity Securities to be Transferred by an
Institutional Shareholder pursuant to clause (C), (D) or (E), together with all
other Transfers of such class of Equity Securities by such Institutional
Shareholder and its Permitted Transferees pursuant to any of such clauses, is
less than (I) the aggregate number of Shares of such class of Equity Securities
Transferred by the THL Entities and their THL Designated Transferees in
accordance with clause (A) or (B) of the definition of "THL Designated
Transferees" MULTIPLIED BY (II) such Institutional Shareholders' Initial
Proportionate Equity Interest of such class, treating for purposes of this
proviso the Equity Warrants as part of the class of Common Stock, or
(ii) in the case of a Management Shareholder (A) the Company,
(B) any THL Entity, (C) a spouse or lineal descendant (whether natural or
adopted), sibling, parent, heir, executor, administrator, testamentary
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<PAGE> 13
trustee, lifetime trustee, legatee or beneficiary of any of such Management
Shareholder, (D) any trust, the beneficiaries of which, or any corporation,
limited liability company or partnership, stockholders, members or general or
limited partners of which include only the Persons named in clause (B) or (C),
(E) bona fide financial institutions, to the extent that such transfer is in
connection with a pledge in connection with a borrowing arrangement unrelated to
a constructive or synthetic sale, such as any hedge, sale or purchase of any
derivative security or other action (other than Transfers expressly permitted by
the terms hereof) having the effect of reducing a Management Shareholder's
economic interest in Equity Securities or reducing a Management Shareholder's
exposure to a decrease in fair market value of Equity Securities, or other
similar transaction involving such Management Shareholder's Equity Securities,
or (F) a charitable institution as defined in Section 501(c) of the Internal
Revenue Code of 1986, as amended, which receives a bona fide gift of Shares,
which when aggregated with all other Transfers of Shares of such class of Equity
Securities by such Management Shareholder and its Permitted Transferees pursuant
to this clause (F) does not exceed 10% of such Management Shareholders' Initial
Ownership of such class of Equity Securities.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Primary Executives" means the following Management
Shareholders: Paul M. Montrone and Paul M. Meister.
"Public Offering" means any primary or secondary public
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act other than pursuant to a registration
statement filed in connection with a transaction of the type described in Rule
145 of the Securities Act or for
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<PAGE> 14
the purpose of issuing securities pursuant to an employee benefit plan.
"Qualifying Public Offering" means a Public Offering yielding
aggregate gross proceeds of at least $50,000,000.
"Registrable Securities" means at any time, with respect to
any Shareholder or its Permitted Transferees, any shares of Common Stock then
owned by such Shareholder or its Permitted Transferees until (i) a registration
statement covering such securities has been declared effective by the SEC and
such securities have been disposed of pursuant to such effective registration
statement, (ii) such securities are sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met or (iii) such securities are otherwise
Transferred, the Company has delivered a new certificate or other evidence of
ownership for such securities not bearing the legend required pursuant to this
Agreement and such securities may be resold without subsequent registration
under the Securities Act.
"Registration Expenses" means (i) all registration and filing
fees, (ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the securities registered), (iii) printing expenses, (iv)
internal expenses of the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), (v) reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including expenses relating to any comfort letters or
costs associated with the delivery by independent certified public accountants
of a comfort letter or comfort letters requested pursuant to Section 5.4(h)
hereof), (vi) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration, (vii) reasonable fees and
expenses of up to one
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<PAGE> 15
counsel for the Shareholders participating in the offering, (viii) fees and
expenses in connection with any review of underwriting arrangements by the
National Association of Securities Dealers, Inc. (the "NASD") including fees and
expenses of any "qualified independent underwriter" and (ix) fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but shall not include any underwriting fees, discounts, commissions
or transfer taxes attributable to the sale of Registrable Securities, or any
out-of-pocket expenses (except as set forth in clause (vii) above) of the
Shareholders or any fees and expenses of underwriter's counsel.
"Regulated Stockholder" shall mean Chase Equity Associates,
L.P. and any other Stockholder (i) that is subject to the provisions of
Regulation Y or Regulation K of the Federal Reserve Board, 12 C.F.R. Part 225
(or any successor to such Regulations) and (ii) that holds Equity Securities of
the Company and (iii) that has provided written notice to the Company of its
status as a "Regulated Stockholder" hereunder.
"Regulatory Problem" means any set of facts or circumstance
wherein it has been asserted by any governmental regulatory agency (or a
Regulated Stockholder reasonably believes that there is a risk of such
assertion) that such Regulated Stockholder is not entitled to acquire, own, hold
or control, or exercise any significant right (including the right to vote) with
respect to, any Equity Securities of the Company or any subsidiary of the
Company.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder" means each Person (other than the Company but
including the Equity Investors and the Management Shareholders) who is or shall
become a party to this Agreement, whether in connection with the execution and
delivery of the Original Agreement or this
10
<PAGE> 16
Agreement, pursuant to Section 7.3 or otherwise, so long as such Person shall
beneficially own any Equity Securities.
"Shares" means shares of Common Stock and other Equity
Securities held by the Shareholders on January 21, 1998 or acquired thereafter,
but excluding any Derivatives.
"Subscription Agreement" means each Subscription Agreement
dated as of January 21, 1998 between FSI and each of the Equity Investors.
"Subsidiary" means, with respect to any Person, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"THL Designated Transferee" means (A) any general or limited
partner of the THL Entities (a "THL Partner"), and any corporation, partnership,
or other entity which is an Affiliate of the THL Entities or any THL Partner
(collectively, the "THL Affiliates"), (B) any managing director, general
partner, director, limited partner, officer or employee of the THL Entities or a
THL Affiliate, or the heirs, executors, administrators, testamentary trustees,
lifetime trustees, legatees or beneficiaries of any of the foregoing Persons
referred to in this clause (B) (collectively, "THL Associates"), (C) a
charitable institution as defined in Section 501(c) of the Internal Revenue Code
of 1986, as amended, which receives a bona fide gift by a THL Individual of
Shares (D) a bank, financial institution or other lender which receives a bona
fide pledge by a THL Individual of Shares, and (E) any trust, the beneficiaries
of which, or any corporation, limited liability company or partnership, the
stockholders, members or general or limited partners of which include only the
THL Entities, THL Affiliates, THL Associates, their spouses or their lineal
descendants. The term "THL Entities," to the extent the THL Entities shall have
Transferred any of its Shares to
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<PAGE> 17
"THL Designated Transferees," shall mean the THL Entities and the THL Designated
Transferees of the THL Entities, taken together, and any right or action that
may be exercised or taken at the election of the THL Entities may be exercised
or taken at the election of the THL Entities and such THL Designated
Transferees, unless otherwise restricted by the THL Entity engaging in such a
transfer.
"THL Individuals" means the Persons listed on Schedule I and
Schedule II.
"Underwritten Public Offering" means a firmly underwritten
public offering of Registrable Securities of the Company pursuant to an
effective registration statement under the Securities Act.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
TERM SECTION
Cause 2.2
Confidential Information 6.1(b)
DLJ Entities Representative 7.11(b)
Drag-Along Notice 4.2(b)
Drag-Along Notice Period 4.2(b)
Drag-Along Portion 4.2(a)
Drag-Along Rights 4.2(a)
Drag-Along Sale 4.2(a)
Drag-Along Sale Price(s) 4.2(b)
ethical wall 6.1(a)
Holders 5.1(b)
Indemnified Party 5.7
Indemnifying Party 5.7
Initial Proportionate
Equity Interest 3.4
Inspectors 5.4(g)
Institutional Shareholder
Demand Registration 5.1(g)
Management Representative 7.11(d)
Management Transfer 3.5(a)
Maximum Offering Size 5.1(e)
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Merrill Lynch Entities
Representative 7.11(c)
New Securities 4.3(a)
Nominee 2.3(a)
Offer Price 3.6(a)
Offered Shares 3.6(a)
Offeror 3.6(a)
Option Period 3.6(a)
Piggyback Registration 5.2(a)
Preemptive Rights Notice 4.3(a)
Preemptive Rights Portion 4.3(a)
Primary Executive Demand
Registration 5.1(h)
Records 5.4(g)
Representatives 6.1(b)
Shareholder 7.3(a)
Tag-Along Notice 4.1(b)
Tag-Along Notice Period 4.1(b)
Tag-Along Offer 4.1(b)
Tag-Along Person 4.1(a)
Tag-Along Portion 4.1(b)
Tag-Along Response Notice 4.1(b)
Tag-Along Right 4.1(b)
Tag-Along Sale 4.1(a)
Tag-Along Shareholder 4.1(a)
Third Party Purchase Notice 4.4
Third Party Purchase Portion 4.4
THL Demand Registration 5.1(a)
THL Entities Representative 7.11(a)
THL Entity Shareholder 7.3(d)
THL Exchange 3.3
Threshold Percentage 4.1(a)
Transfer 3.1(a)
Transfer Notice 3.6(a)
Trigger Date 6.4
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<PAGE> 19
ARTICLE II
CORPORATE GOVERNANCE AND MANAGEMENT
Section II.1 COMPOSITION OF THE BOARD. The Board shall consist
of at least nine, but no more than ten, members (two of which shall be
individuals which are not "Affiliates" or "Associates" (as those terms are used
within the meaning of Rule 12b-2 of the General Rules and Regulations under the
Exchange Act) of any Shareholder or its Affiliates), of whom four shall be
nominated by THL, one shall be nominated by DLJMB, one shall be Paul M. Montrone
and one shall be Paul M. Meister. Each Shareholder entitled to vote for the
election of directors to the Board agrees that it will vote its shares of Common
Stock or execute consents, as the case may be, and take all other necessary
action (including causing the Company to call a special meeting of shareholders)
in order to ensure that the composition of the Board is as set forth in this
Section 2.1; provided that, no Shareholder shall be required to vote for another
Shareholder's nominee or Mr. Montrone or Mr. Meister if the number of shares of
Common Stock held by (i) Mr. Montrone and Mr. Meister collectively, or (ii) such
other Shareholder making the nomination collectively with its Affiliates, as
applicable, is, at the close of business on the day preceding such vote or
execution of consents, less than 10% of such party's or parties' Initial
Ownership of shares of Common Stock on a Fully Diluted basis; and, provided
further, that for so long as Messrs. Montrone and Meister collectively own 10%
or more of their collective Initial Ownership of shares of Common Stock on a
Fully Diluted basis, designees nominated by THL and the Equity Investors shall
be selected in good faith after consultation with Messrs. Montrone and Meister,
which consultation shall involve a consideration of Messrs. Montrone and
Meister's views relating to the Company. The initial Board after the execution
of this Agreement shall consist of the individuals listed on Schedule III
hereto.
Section II.2 REMOVAL. Each Shareholder agrees that if, at any
time, it is then entitled to vote for the removal of directors of the Company,
it will not vote any
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of its shares of Common Stock in favor of the removal of any director who shall
have been designated or nominated pursuant to Section 2.1 unless such removal
shall be for Cause or such director or the Person(s) entitled to designate or
nominate such director shall have consented to such removal in writing, provided
that if the Persons entitled to designate or nominate any director pursuant to
Section 2.1 shall request the removal, with or without Cause, of such director
in writing, such Shareholder shall vote its shares of Common Stock in favor of
such removal. Removal for "Cause" shall mean removal of a director because of
such director's (a) willful and continued failure substantially to perform his
duties with the Company in his established position, (b) willful conduct which
is injurious to the Company or any of its Subsidiaries, monetarily or otherwise,
or (c) conviction for, or guilty plea to, a felony or a crime involving moral
turpitude.
Section II.3 VACANCIES. If, as a result of death, disability,
retirement, resignation, removal (with or without Cause) or otherwise, there
shall exist or occur any vacancy on the Board:
(a) the Shareholder(s) entitled under Section 2.1 to nominate
such director whose death, disability, retirement, resignation or
removal resulted in such vacancy, may, subject to the provisions of
Section 2.1, nominate another individual (the "Nominee") to fill such
vacancy and serve as a director of the Company;
(b) subject to Section 2.1, each Shareholder then entitled to
vote for the election of the Nominee as a director of the Company
agrees that it will vote its shares of Common Stock, or execute a
written consent, as the case may be, in order to ensure that the
Nominee be elected to the Board; and
(c) in the case of removal of either of the Primary Executives
from the Board, the other Primary Executive, if he is still a member of
the Board, shall be entitled to nominate an individual to fill
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the resulting vacancy, and the provisions of Section 2.3(b) shall apply to the
election of such nominee.
Section II.4 ACTION BY THE BOARD. (a) A quorum of the Board
shall consist initially of three directors; provided that THL shall have the
right, subject to applicable law or regulation, in its sole discretion, until
such time as THL owns less than 25% of its Initial Ownership of shares of Common
Stock, to increase or decrease the number of directors necessary to constitute a
quorum.
(b) All actions of the Board shall require the
affirmative vote of at least a majority of the directors at a duly
convened meeting of the Board at which a quorum is present or the unanimous
written consent of the Board; provided that, in the event there is a vacancy on
the Board and an individual has been nominated to fill such vacancy, the first
order of business shall be to fill such vacancy.
Section II.5 CONFLICTING CHARTER OR BYLAW PROVISION. Each
Shareholder shall vote its shares of Common Stock, and shall take all other
actions reasonably necessary, to ensure that the Company's certificate of
incorporation and bylaws (copies of which are attached hereto as Exhibits A and
B) facilitate and do not at any time conflict with any provision of this
Agreement.
ARTICLE III
RESTRICTIONS ON TRANSFER
Section III.1 GENERAL. (a) Each Equity Investor understands
and agrees that the shares of Common Stock purchased pursuant to the
Subscription Agreement and the Equity Warrants received pursuant to the Equity
Warrant Acquisition Agreement have not been registered under the Securities Act
and are restricted securities. Each Shareholder agrees that it will not,
directly or indirectly, sell, assign, transfer, grant a participation in, pledge
or otherwise dispose of ("Transfer") any Shares or Equity Warrants (or solicit
any offers to buy
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or otherwise acquire, or take a pledge of any Shares or Equity Warrants) except
in compliance with the Securities Act and the terms and conditions of this
Agreement.
(b) Any attempt by any Shareholder to Transfer any
Shares or Equity Warrants not in compliance with this Agreement shall be null
and void and the Company shall not, and shall cause any transfer agent not to,
give any effect in the Company's stock records to such attempted Transfer.
(c) Notwithstanding anything herein to the contrary,
except as may be otherwise set forth in the applicable instrument, Derivatives
(other than the Equity Warrants) shall be transferable only by will, law of
descent or distribution or pursuant to Section 4.2 hereof.
Section III.2 LEGENDS. (a) In addition to any other legend
that may be required, each certificate for Shares that is issued to any
Shareholder shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL
LIMITATIONS OR RESTRICTIONS ON TRANSFER AS SET FORTH IN THE INVESTORS' AGREEMENT
DATED AS OF JANUARY 21, 1998, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM
FISHER SCIENTIFIC INTERNATIONAL INC. OR ANY SUCCESSOR THERETO."
(b) If any Shares shall cease to be Registrable
Securities under clause (i) or clause (ii) of the definition thereof, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Shares without the first sentence of
the legend required by Section 3.2(a) endorsed thereon. If any Shares cease to
be subject to any and all limitations or restrictions on Transfer set forth in
this Agreement, the Company shall, upon the written request of the holder
thereof, issue to
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such holder a new certificate evidencing such Shares without the second sentence
of the legend required by Section 3.2(a) endorsed thereon.
Section III.3 PERMITTED TRANSFEREES; TRANSFERS BY THL
ENTITIES; EXCHANGES BY THL ENTITIES. Notwithstanding anything in this Agreement
to the contrary, (a) any Non-THL Shareholder may at any time Transfer any or all
of its Shares or Equity Warrants to one or more of its Permitted Transferees so
long as (i) such Permitted Transferee shall have agreed in writing to be bound
by the terms of this Agreement pursuant to Section 7.3 and (ii) the Transfer to
such Permitted Transferee is not in violation of applicable federal or state
securities laws and (b) any THL Entity may at any time Transfer any or all of
its Shares or Equity Warrants to any third party (including THL Designated
Transferees) so long as (i) the Transfer is in compliance with Section 4.1
hereof, (ii) if the transferee is to be treated as a THL Designated Transferee,
such transferee shall have agreed in writing to be bound by the terms of this
Agreement pursuant to Section 7.3 and (iii) the Transfer is not in violation of
applicable federal or state securities laws. Any THL Entity may at any time
exchange (a "THL Exchange") with the Company any or all of its voting Equity
Securities on a share-for-share basis for shares of an equivalent class of
non-voting Equity Securities of the Company, which non-voting Equity Securities
shall have substantially the rights, preferences and limitations as set forth in
the form of certificate of designation attached hereto as Exhibit C. The Company
agrees to take all such actions, subject to Applicable Law, as are reasonably
requested by any THL Entity to effectuate a THL Exchange.
Section III.4 RESTRICTIONS ON TRANSFERS BY INSTITUTIONAL
SHAREHOLDERS. Except as provided in Section 3.3, each Institutional Shareholder
and each Permitted Transferee of such Institutional Shareholder may Transfer its
Shares and Equity Warrants only as follows:
(i) in a Transfer made in compliance with Section
4.1 or 4.2;
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<PAGE> 24
(ii) in a Public Offering in connection with the
exercise of its rights under Article 5 hereof;
(iii) following the earlier to occur of (A) the date
on which the Percentage Ownership of such Institutional Shareholder and
its Permitted Transferees is less than 25% of its Initial Ownership of
shares of Common Stock and (B) the seventh anniversary of the Closing
Date, to any Person other than any Adverse Person; or
(iv) in a Transfer made after an Initial Public
Offering in compliance with Rule 144 under the Securities Act;
provided, however, notwithstanding the foregoing, the Institutional
Shareholder may not Transfer an aggregate number of Shares of such
class of Equity Securities that, together with all prior Transfers of
such class by such Institutional Shareholder and its Permitted
Transferees pursuant to one or more Rule 144 Transfers, represents more
than (A) the aggregate number of Shares of such class Transferred by
the THL Entities and their THL Designated Transferees (other than, in
either case, to THL Designated Transferees) MULTIPLIED BY (B) such
Institutional Shareholders' Initial Proportionate Equity Interest of
such class; provided, further, that, for purposes of this subsection
(iv), the Equity Warrants shall be treated as part of the class of
shares of Common Stock and the calculations described herein shall
include the number of shares of Common Stock issuable upon exercise of
such Equity Warrants. The "Initial Proportionate Equity Interest" of a
party is such party's Initial Ownership of such class divided by the
Initial Ownership of THL of such class.
Section III.5 RESTRICTIONS ON TRANSFERS BY MANAGEMENT
SHAREHOLDERS. (a) Except as provided in Section 3.3, each Management Shareholder
and each Permitted Transferee of such Management Shareholder may Transfer its
Shares only as follows or as set forth in Section 3.5(b):
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(i) in a Transfer made in compliance with Section 4.1
or 4.2;
(ii) in a Public Offering in connection with the
exercise of its rights under Article 5 hereof;
(iii) in a Transfer made after an Initial Public
Offering in compliance with Rule 144 under the Securities Act;
provided, however, notwithstanding the foregoing, the Management
Shareholder may not Transfer an aggregate number of Shares of any class
of Equity Securities that, together with all prior Transfers of such
class by such Management Shareholder and its Permitted Transferees
pursuant to one or more Rule 144 Transfers, represents more than (A)
the aggregate number of Shares of such class Transferred by the THL
Entities and their THL Designated Transferees (other than, in either
case, to THL Designated Transferees) MULTIPLIED BY (B) such Management
Shareholders' Initial Proportionate Equity Interest of such class;
(iv) following the tenth anniversary of the Closing
Date to any Third Party other than an Adverse Person; or
(v) subject to Section 3.6, a Transfer by a
Management Shareholder to another Management Shareholder (a "Management
Transfer").
(b) Each Management Shareholder and each Permitted
Transferee of such Management Shareholder may Transfer its Shares to any Person
other than an Adverse Person upon the occurrence of a Qualifying Public
Offering.
Section III.6 COMPANY RIGHT OF FIRST REFUSAL. (a) If a
Management Shareholder (an "Offeror") desires to Transfer Shares to another
Management Shareholder pursuant to the provisions of Section 3.5(a)(v):
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(i) such Offeror shall give notice of such offer (the
"Transfer Notice") to the Company. The Transfer Notice shall state the
terms and conditions of such offer, including the name of the
prospective purchaser, the proposed purchase price per share of such
Shares (the "Offer Price"), payment terms (including a description of
any proposed non-cash consideration), the type of disposition and the
number of such Shares to be transferred ("Offered Shares"). The
Transfer Notice shall further state that the Company may acquire, in
accordance with the provisions of this Agreement, any of the Offered
Shares for the price and upon the other terms and conditions, including
deferred payment (if applicable), set forth therein.
(ii) For a period of ten Business Days after receipt of the
Transfer Notice (the "Option Period"), the Company may, by notice in
writing to the Offeror delivering such Transfer Notice, elect in
writing to purchase all, but not less than all, of the Offered Shares
at the Offer Price. The closing of the purchase of Shares pursuant to
Section 3.5, shall take place at the principal office of the Company on
the tenth day after the expiration of the Option Period. At such
Closing, the Company shall deliver to the Offeror, against delivery of
certificates duly endorsed and stock powers representing the Shares
being acquired by the Company, the Offer Price, on the same terms as
set forth in the Transfer Notice (including any non-cash consideration
described therein), payable in respect of the Shares being purchased by
the Company. All of the foregoing deliveries will be deemed to be made
simultaneously, and none shall be deemed completed until all have been
completed.
(b) The provisions of Section 3.6(a) shall not apply to a Management
Shareholder (other than a Primary Executive) if such Management Shareholder
Transfers Shares aggregating, with all other prior Transfers of Shares by such
Management Shareholder, an amount less
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than 25% of such Management Shareholder's Initial Ownership.
Section III.7 NOTIFICATIONS REGARDING TRANSFERS. To the extent
that either an Institutional Shareholder proposes a Transfer pursuant to Section
3.4(iv) or a Management Shareholder proposes a Transfer pursuant to Section
3.5(a)(iii), such Shareholder shall provide notice to THL at least five Business
Days prior to the proposed Transfer Date of the number of Shares proposed to be
Transferred. Not less than two Business Days prior to the proposed Transfer
Date, THL shall notify such Shareholder of whether the Transfer is believed to
be permitted based on the formulas set forth in Section 3.4(iv) or 3.5(a)(iii),
as applicable.
ARTICLE IV
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS; PREEMPTIVE RIGHTS
Section IV.1 RIGHTS TO PARTICIPATE IN TRANSFER. (a) If the THL
Entities propose to Transfer (a "Tag-Along Sale") shares of a class of Equity
Securities, other than Transfers of shares of such class (i) in a Public
Offering pursuant to the exercise of their rights under Article 5, (ii) to any
THL Designated Transferee, (iii) up to the Threshold Percentage or (iv) in a THL
Exchange, the Non-THL Shareholders may, at their option, elect to exercise their
rights under this Section 4.1 (each such Shareholder, a "Tag-Along Person");
provided, however, that the exception set forth in clause (iii) shall not apply
to the Primary Executives. The "Threshold Percentage" shall equal 5% in the
aggregate of the THL Entities' Initial Ownership of such class of Equity
Securities.
(b) In the event of a proposed Transfer in accordance with
paragraph (a) above, THL shall provide each Non-THL Shareholder written notice
of the terms and conditions of such proposed Transfer ("Tag-Along Notice") at
least 10 days prior to such proposed Transfer and offer each Tag-Along Person
the opportunity to partici-
22
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pate in such sale. The Tag-Along Notice shall identify the number of shares of
such class of Equity Securities to be sold in the Tag-Along Sale ("Tag-Along
Offer"), the price at which the Transfer is proposed to be made, and all other
material terms and conditions of the Tag-Along Offer, including the form of the
proposed agreement, if any. From the date of the Tag-Along Notice, each
Tag-Along Person shall have the right (a "Tag-Along Right"), exercisable by
written notice ("Tag-Along Response Notice") given to THL within 5 Business Days
(the "Tag-Along Notice Period"), to request that THL include in the proposed
Transfer the number of shares of such class of Equity Securities held by such
Tag-Along Person as is specified in such notice; provided that if the aggregate
number of shares of such class of Equity Securities proposed to be sold by the
THL Entities and all Tag-Along Persons in such transaction exceeds the number of
shares of such class of Equity Securities which can be sold on the terms and
conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion of
shares of the THL Entities and each Tag-Along Person shall be sold pursuant to
the Tag-Along Offer. "Tag-Along Portion" means, with respect to any class of
Equity Securities, the number of shares of such class held (or, without
duplication, that such Shareholder has the right to acquire from any Person) by
the Tag-Along Person or THL, as the case may be, multiplied by a fraction, the
numerator of which is the maximum number of shares of such class subject to the
Tag-Along Offer and the denominator of which is the aggregate number of shares
of such class on a Fully Diluted basis owned by all Shareholders. In the event
the THL Entities shall propose to Transfer a number of shares of such class in
excess of the Threshold Percentage, the Tag-Along Portion shall be calculated
with respect to all of the shares proposed to be Transferred by the THL
Entities. To the extent that the Tag-Along Notice provides that shares of Common
Stock and Equity Warrants will be transferred (i) the Equity Warrants and the
Common Stock shall be treated as part of a single class of Equity Securities
and, if applicable, Equity Warrants are referred to in this Section 4.1 as
"shares" of such class, (ii) the calculations described in this Section 4.1 with
respect to such
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Tag-Along Notice shall include the number of shares of Common Stock issuable
upon exercise of such Equity Warrants and (iii) the allocation between Equity
Warrants and shares of Common Stock subject to the Tag-Along Rights will be
proportional to the allocation of the number of Shares subject to the Tag-Along
Notice as compared with the number of Equity Warrants subject to the Tag-Along
Notice.
(c) If the Tag-Along Persons exercise their Tag-Along
Rights hereunder, each Tag-Along Person shall deliver, together with its
Tag-Along Response Notice, to THL the certificate or certificates representing
the Shares of such Tag-Along Person to be included in the Transfer, together
with a limited power-of-attorney authorizing THL to Transfer such Shares on the
terms set forth in the Tag-Along Notice. It is understood that to the extent THL
can do so without affecting the other terms on which the Tag-Along Sale is
proposed to be made, THL will seek to exclude from the terms of such Tag-Along
Sale any material restrictions on the ability, following such Tag-Along Sale, of
any Tag-Along Person to conduct its business in a manner consistent with past
practice. Delivery of such certificate or certificates representing the shares
to be Transferred and the limited power-of-attorney authorizing THL to Transfer
such shares shall constitute an irrevocable acceptance of the Tag-Along Offer by
such Tag-Along Persons. If, at the end of a 120 day period after such delivery,
THL has not completed the Transfer of all such shares on substantially the same
terms and conditions set forth in the Tag-Along Notice, THL shall return to each
Tag-Along Person the limited power-of-attorney (and all copies thereof) together
with all certificates representing the shares which such Tag-Along Person
delivered for Transfer pursuant to this Section 4.1.
(d) Concurrently with the consummation of the
Tag-Along Sale, THL shall notify the Tag-Along Persons thereof, shall
remit to the Tag-Along Persons the total consideration (by bank or certified
check) for the Shares of the Tag-Along Persons Transferred pursuant thereto, and
shall, promptly after the consummation of
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<PAGE> 30
such Tag-Along Sale furnish such other evidence of the completion and time of
completion of such Transfer and the terms thereof as may be reasonably requested
by the Tag-Along Persons.
(e) If at the termination of the Tag-Along Notice
Period any Tag-Along Person shall not have elected to participate in the
Tag-Along Sale, such Tag-Along Person will be deemed to have waived its rights
under Section 4.1(a), with respect to the Transfer of its securities pursuant to
such Tag-Along Sale.
(f) If any Tag-Along Person declines to exercise its
Tag-Along Rights or elects to exercise its Tag-Along Rights with respect to less
than such Tag-Along Person's Tag-Along Portion, the THL Entities shall be
entitled to Transfer, pursuant to the Tag-Along Offer, a number of shares held
by the THL Entities equal to the number of shares constituting the portion of
such Tag-Along Person's Tag-Along Portion with respect to which Tag-Along Rights
were not exercised.
(g) THL may sell, on behalf of the THL Entities and
any Tag-Along Person who exercises the Tag-Along Rights pursuant to this Section
4.1, the shares subject to the Tag-Along Offer on the terms and conditions set
forth in the Tag-Along Notice within 120 days of the date on which Tag-Along
Rights shall have been waived, exercised or expire.
Section IV.2 RIGHT TO COMPEL PARTICIPATION IN CERTAIN
TRANSFERS. (a) If (i) the THL Entities propose to Transfer not less than 50% of
their Initial Ownership of Common Stock to a Third Party in a bona fide sale or
(ii) the THL Entities propose a Transfer in which the shares of Common Stock to
be Transferred by Shareholders constitute more than 50% of the outstanding
shares of Common Stock (a "Drag-Along Sale"), THL may at its option require all
Shareholders to sell all Equity Securities proposed to be sold therein
("Drag-Along Rights") then held by every Non-THL Shareholder, and (subject to
and at the closing of the Drag-Along Sale) to compel to exercise all, but not
less than all, of the Derivatives (whether
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then vested or unvested) held by every Non-THL Shareholder and to sell all of
the Shares received upon such exercise to such Third Party, for the same
consideration and otherwise on the same terms and conditions as the THL
Entities; provided, that any Non-THL Shareholder who holds Derivatives the
exercise price per share of which is greater than the per share price at which
the Shares are to be sold to the Third Party may, if required by THL to exercise
such Derivatives, in place of such exercise, submit to irrevocable cancellation
thereof without any liability for payment of any exercise price with respect
thereto; provided, further, that, upon such Drag-Along Sale, the Primary
Executives shall have the right, but not the obligation, to require the Equity
Investors to, at THL's option, either arrange for the purchase by a third party
or purchase directly all of the Shares held by such Primary Executive as a
condition to consummation of such Drag-Along Sale and, in which case the number
of shares to be sold by each Equity Investor will be reduced on a proportional
basis. The number of shares of each class of Equity Securities to be sold by
each Non-THL Shareholder will be the Drag-Along Portion of the shares of such
class that such Non-THL Shareholder owns. "Drag-Along Portion" means, with
respect to any Non-THL Shareholder and any class of Equity Securities, the
number of Shares of such class of Equity Securities beneficially owned by such
Non-THL Shareholder multiplied by a fraction, the numerator of which is the
number of shares of such class of Equity Securities proposed to be sold by the
THL Entities on behalf of the THL Entities and the Non-THL Shareholders (as
reduced by the number of shares of such class of Equity Securities to be sold by
the Primary Executives in excess of their pro rata interest) and the denominator
of which is the total number of shares of such class of Equity Securities
beneficially owned by the Shareholders. In the event the Drag-Along Sale is not
consummated with respect to any shares acquired upon exercise of Derivatives,
such Derivatives shall be deemed not to have been exercised or cancelled, as
applicable. To the extent the Drag-Along Sale relates to Derivatives, and THL
determines not to compel the exercise thereof, the Derivatives shall be treated
as a
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separate class of Equity Securities and, if applicable, Derivatives are referred
to in this Section 4.2 as "shares" of such class.
(b) THL shall provide written notice of such
Drag-Along Sale to the Non-THL Shareholders (a "Drag-Along Notice")
not later than the fifteenth day prior to the proposed Drag-Along Sale. The
Drag-Along Notice shall identify the Transferee, the number of shares of any
class of Equity Securities, the consideration for which a Transfer is proposed
to be made for each class of Equity Securities (the "Drag-Along Sale Price(s)")
and all other material terms and conditions of the Drag-Along Sale. Subject to
Section 4.2(d), each Non-THL Shareholder shall be required to participate in the
Drag-Along Sale on the terms and conditions set forth in the Drag-Along Notice
and to tender all its Shares as set forth below. It is understood that to the
extent THL can do so without affecting the other terms on which the Drag-Along
Sale is proposed to be made, THL will seek to exclude from the terms of such
Drag-Along Sale any material restrictions on the ability, following such
Drag-Along Sale, of any Non-THL Shareholder to conduct its business in a manner
consistent with past practice. The price(s) payable in such Transfer shall be
the Drag-Along Sale Price(s). Not later than the tenth day following the date of
the Drag-Along Notice (the "Drag-Along Notice Period"), each of the Non-THL
Shareholders shall deliver to a representative of THL designated in the
Drag-Along Notice certificates representing all the Shares beneficially owned
and held by such Non-THL Shareholder, duly endorsed, (or evidence of title and
ownership of any Derivative which are subject to the Drag-Along Sale but which
are not exercised in connection therewith) together with all other documents
required to be executed in connection with such Drag-Along Sale, or if such
delivery is not permitted by applicable law, an unconditional agreement to
deliver such shares pursuant to this Section 4.2 at the closing for such
Drag-Along Sale against delivery to such Non-THL Shareholder of the
consideration therefor. If a Non-THL Shareholder should fail to deliver such
certificates to THL, the Company shall cause the books and records of the
Company to show that such
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shares are bound by the provisions of this Section 4.2 and that such shares
shall be Transferred to the purchaser of the shares immediately upon surrender
for Transfer by the holder thereof.
(c) The THL Entities shall have a period of 90 days
from the date of receipt of the Drag-Along Notice to consummate the Drag-Along
Sale on the terms and conditions set forth in such Drag-Along Sale Notice. If
the Drag-Along Sale shall not have been consummated during such period, THL
shall return to each of the Non-THL Shareholders all certificates or other
evidence of title and ownership representing shares that such Non-THL
Shareholder delivered for Transfer pursuant hereto, together with any documents
in the possession of THL executed by the Non-THL Shareholder in connection with
such proposed Transfer, and all the restrictions on Transfer contained in this
Agreement or otherwise applicable at such time with respect to shares owned by
the Non-THL Shareholders shall again be in effect.
(d) Concurrently with the consummation of the
Transfer of shares pursuant to this Section 4.2, THL shall give notice thereof
to all Shareholders, shall remit to each of the Shareholders who have
surrendered their certificates or other evidence of title and ownership the
total consideration (by bank or certified check) for the shares Transferred
pursuant hereto and shall furnish such other evidence of the completion and time
of completion of such Transfer and the terms thereof as may be reasonably
requested by such Shareholders.
(e) Notwithstanding any provision of this Agreement
to the contrary, in the event the terms on which a Drag-Along Sale is proposed
to be made shall include a provision which materially and adversely affects the
ability of any Non-THL Shareholder to compete in any line of business or
geographic area, such Non-THL Shareholder shall not be required to participate
in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along
Notice. In the event any Shareholder shall elect, pursuant to the preceding
sentence, not to participate in the Drag-Along Sale, THL Entities and their THL
Designated Transferees shall have the right to purchase, and such Shareholder
shall be obligated to sell to the THL Entities and
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their THL Designated Transferees such Shareholder's shares, at the Drag-Along
Sale Price(s) and on substantially the same terms (other than any such
non-compete provision), not later than immediately prior to the consummation of
the Drag-Along Sale. Except as provided above, in connection with any Drag-Along
Sale, all Shareholders shall be subject to (i) the same terms and conditions of
sale and (ii) the same indemnity, contribution, hold-back, escrow or similar
obligations.
Section IV.3 PREEMPTIVE RIGHTS. (a) The Company shall provide
each Shareholder with a written notice (a "Preemptive Rights Notice") of any
proposed issuance by the Company of Equity Securities (other than the issuance
of Equity Securities in connection with a THL Exchange) at least 10 days prior
to the proposed issuance date. Such notice shall specify the price at which the
Equity Securities are to be issued and the other material terms of the issuance.
(i) In the event the Company shall issue any New
Common Securities or New Preferred Securities (collectively, the "New
Securities") to any third party (including any Shareholder) prior to a
Qualifying Public Offering, the THL Entities and each Management
Shareholder shall be entitled to purchase, at the price and on the
terms at which such New Securities are proposed to be issued and
specified in such Preemptive Rights Notice, the THL Entities' or such
Management Shareholder's Preemptive Rights Portion of such class of the
New Securities proposed to be issued. "Preemptive Rights Portion"
means, with respect to New Common Securities, the pro rata portion of
New Common Securities proposed to be issued by the Company, which
amount shall be based upon such Shareholder's Initial Ownership of
shares of Common Stock as a percentage of the sum of the Initial
Ownership of shares of Common Stock of (A) the THL Entities, (B) all
Institutional Shareholders and (C) all Management Shareholders
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<PAGE> 35
and, with respect to New Preferred Securities, the pro rata portion of
New Preferred Securities proposed to be issued by the Company, which
amount shall be based upon such Shareholder's Initial Ownership of
shares of Preferred Stock as a percentage of the sum of the Initial
Ownership of shares of Preferred Stock of (A) the THL Entities and (B)
all Institutional Shareholders.
(ii) In the event that the Company shall issue any New
Securities to any third party (including any Shareholder) following a
Qualifying Public Offering, the THL Entities shall be entitled to
purchase, at the price and on the terms at which such New Securities
are proposed to be issued and specified in such Preemptive Rights
Notice, the THL Entities' Preemptive Rights Portion of such class of
the New Securities proposed to be issued.
(iii) In the event the THL Entities propose to purchase any
New Securities from the Company pursuant to Section 4.3(a)(i) or (ii)
or otherwise, the THL Entities may elect to purchase any or all of
their Preemptive Rights Portion in the form of non-voting New
Securities on the same terms and conditions as would have been
available to purchase shares of voting New Securities.
(iv) In the event the THL Entities propose to purchase any New
Securities from the Company pursuant to 4.3(a)(i) or (ii) or otherwise,
(A) prior to a Qualifying Public Offering, each Institutional
Shareholder, and (B) following a Qualifying Public Offering, each
Non-THL Shareholder shall be entitled to purchase, at the price and on
the terms at which the THL Entities propose to purchase such New
Securities and specified in such Preemptive Rights Notice, such
Shareholder's Preemptive Rights Portion of such class of the New
Securities proposed to be issued in the transaction giving rise to the
THL Entities' proposed purchase of New Securities; provided, however,
such Shareholders shall not be entitled to purchase New Securities
unless the THL Enti-
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ties complete the purchase of New Securities in accordance with the Preemptive
Rights Notice.
A Shareholder may exercise its rights under this Section 4.3
by delivering written notice of its election to purchase New Securities to the
Company, THL and each Non-THL Shareholder within five days of receipt of the
Preemptive Rights Notice. A delivery of such a written notice (which notice
shall specify the number of New Securities to be purchased by the Shareholder
submitting such notice) by such Shareholder shall constitute a binding agreement
of such Shareholder to purchase, subject to the purchase by THL of its portion
of such New Securities, at the price and on the terms specified in the
Preemptive Rights Notice, the number of New Securities specified in such
Shareholder's written notice.
(b) In the event any Non-THL Shareholder declines to
exercise its preemptive rights under this Section 4.3 or elects to exercise such
rights with respect to less than such Shareholder's Preemptive Rights Portion,
the THL Entities shall have the right to purchase, or any Non-THL Shareholder
designated by THL shall have the right to purchase, from the Company the number
of New Securities constituting the Preemptive Rights Portion with respect to
which such Non-THL Shareholder shall not have exercised its preemptive rights.
(c) In the case of any issuance of New Securities,
the Company shall have 90 days from the date of the Preemptive Rights Notice to
consummate the proposed issuance of any or all of such New Securities which the
Shareholders have not elected to purchase at the price and upon terms that are
not materially less favorable to the Company than those specified in the
Preemptive Rights Notice. At the consummation of such issuance, the Company
shall issue certificates representing the New Securities to be purchased by each
Shareholder exercising preemptive rights pursuant to this Section 4.3 registered
in the name of such Shareholder, against payment by such Shareholder of the
purchase price for such New Securities. If the Company proposes to issue
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New Securities after such 90-day period, it shall again comply with the
procedures set forth in this Section.
(d) Notwithstanding the foregoing, no Shareholder
shall be entitled to purchase New Securities as contemplated by
this Section 4.3 in connection with issuances of New Securities (i) to employees
of the Company or any Subsidiary pursuant to employee benefit plans or
arrangements approved by the Board (including upon the exercise of employee
stock options), or (ii) in connection with any bona fide, arm's-length
restructuring or refinancing of outstanding indebtedness (including convertible
indebtedness) of the Company or any Subsidiary. The Company shall not be under
any obligation to consummate any proposed issuance of New Securities, regardless
of whether it shall have delivered a Preemptive Rights Notice in respect of such
proposed issuance.
(e) The Company will use its reasonable best efforts
to provide the Preemptive Rights Notice at least 15 Business Days prior to any
proposed issuance of New Securities. In the event it is impracticable to provide
the Preemptive Rights Notice at least 15 Business Days prior to such issuance,
any Shareholder may offer to finance or arrange to finance the purchase by any
other Shareholder of such other Shareholder's Preemptive Rights Portion and such
financing or arranging Shareholder shall be entitled to receive as compensation
for such services reasonable and customary fees and expenses. No Shareholder
shall be under any obligation to provide or arrange such financing for any other
Shareholder.
Section 4.4. CERTAIN OTHER PURCHASES OF EQUITY SECURITIES. In
the event, at any time after the date hereof and prior to the Trigger Date, the
THL Entities shall acquire any Equity Securities (other than Equity Securities
acquired in a THL Exchange) from any Person other than the Shareholders, THL
shall deliver, within five Business Days of the date of such acquisition, a
notice to each Equity Investor (a "Third Party Purchase Notice") specifying the
class of Equity Securities, the number of shares of such class acquired and the
weighted average of price per share paid by the THL Entities.
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Such Third Party Purchase Notice shall constitute an offer to each such
Shareholder to purchase such Shareholder's Third Party Purchase Portion of the
number of shares of such class acquired by the THL Entities. A Shareholder may
exercise its rights under this Section 4.4 by delivering written notice of its
election to purchase its Third Party Purchase Portion within ten days of receipt
of the Third Party Purchase Notice. A delivery of such written notice (which
shall specify the number of shares of such class of Equity Securities to be
purchased by the Shareholder submitting such notice) by such Shareholder shall
constitute a binding agreement of such Shareholder to purchase, at the price and
on the terms specified in the Third Party Purchase Notice, the number of shares
of a class of Equity Securities specified in such notice. At the consummation of
the Transfer of the shares of a class of Equity Securities purchased by the THL
Entities to any Shareholder that has exercised its right hereunder, the THL
Entities shall deliver to such Shareholder certificates or other evidence of
title and ownership representing the shares of such class of Equity Securities
to be purchased against payment by such Shareholder of the purchase price for
such shares of Equity Securities. "Third Party Purchase Portion" means, with
respect to any Shareholder at any time, the number of shares of the class of
Equity Securities purchased by the THL Entities in a transaction subject to
Section 4.4, multiplied by a fraction, the numerator of which is (i) the number
of shares of such class of Equity Securities on a Fully Diluted basis that such
Shareholder beneficially owns at such time, and the denominator of which is (ii)
the total number of shares of such class of Equity Securities on a Fully Diluted
basis beneficially owned at such time by all Equity Investors. To the extent the
Third Party Purchase Notice relates to Derivatives, such Derivatives shall be
treated as a separate class of Equity Securities and, if applicable, Derivatives
are referred to in this Section 4.4 as "shares" of such class.
ARTICLE V
REGISTRATION RIGHTS
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Section V.1 DEMAND REGISTRATION. (a) If the Company shall
receive a written request by THL that the Company effect the registration under
the Securities Act of all or a portion of the THL Entities' Registrable
Securities, and specifying the intended method of disposition thereof, then the
Company shall promptly give written notice of such requested registration (a
"THL Demand Registration") at least five days prior to the anticipated filing
date of the registration statement relating to such THL Demand Registration to
the Non-THL Shareholders and thereupon will use its best efforts to effect, as
expeditiously as possible, the registration under the Securities Act of:
(i) the Registrable Securities of the THL Entities
which the Company has been so requested to register; and
(ii) subject to the restrictions set forth in Section
5.2, all other Registrable Securities of the same class as that to
which THL's request relates for which an effective Piggyback
Registration (as such term is defined in Section 5.2) request has been
made;
provided, that subject to Section 5.1(d) hereof, the Company shall not be
obligated to effect more than six THL Demand Registrations. In no event will the
Company be required to effect more than one THL Demand Registration within any
four-month period.
(b) Promptly after the expiration of the 2-day
period referred to in Section 5.2(a) hereof, the Company will notify all the
Shareholders to be included in the THL Demand Registration (the "Holders") of
the other Holders and the number of Registrable Securities requested to be
included therein. THL may, at any time prior to the effective date of the
registration statement relating to such registration, revoke such re- quest,
without liability to any of the other Holders, by providing a written notice to
the Company revoking such re-
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quest, in which case such request, so revoked, shall not be considered a THL
Demand Registration.
(c) The Company will pay all Registration Expenses in
connection with any THL Demand Registration.
(d) A registration requested pursuant to this
Section 5.1 shall not be deemed to have been effected (i) unless the
registration statement relating thereto (A) has become effective under the
Securities Act and (B) has remained effective for a period of at least 180 days
(or such shorter period in which all Registrable Securities of the Holders
included in such registration have actually been sold thereunder); provided,
that if after any registration statement requested pursuant to this Section 5.1
becomes effective (x) such registration statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or other governmental
agency or court and (y) less than 75% of the Registrable Securities included in
such registration statement have been sold thereunder, such registration
statement shall not be considered a THL Demand Registration, or (ii) if the
Maximum Offering Size (as defined below) is reduced in accordance with Section
5.1(e) such that less than 66 2/3% of the Registrable Securities of the THL
Entities sought to be included in such registration are included.
(e) If a THL Demand Registration involves an
Underwritten Public Offering and the managing underwriter shall advise
the Company and THL that, in its view, (i) the number of shares of Registrable
Securities requested to be included in such registration (including any
securities which the Company proposes to be included which are not Registrable
Securities) or (ii) the inclusion of some or all of the shares of Registrable
Securities owned by the Holders, in any such case, exceeds the largest number of
shares which can be sold without having an adverse effect on such offering,
including the price at which such shares can be sold (the "Maximum Offering
Size"), the Company will include in such registration, in the priority listed
below, up to the Maximum Offering Size:
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(A) first, all Registrable Securities requested by
THL to be registered and all Registrable Securities requested to be
included in such registration by any other Holder pursuant to an
effective Piggyback Registration request (allocated, if necessary for
the offering not to exceed the Maximum Offering Size, pro rata among
the THL Entities and such Holders on the basis of the relative number
of Registrable Securities held by such Shareholder); and
(B) second, any securities proposed to be registered
by the Company.
PROVIDED, however, that in such case, any Holder may elect to withdraw such
Holder's Registrable Securities from the registration.
(f) Upon written notice to THL, the Company may
postpone effecting a registration pursuant to this Section 5.1 on one occasion
during any period of six consecutive months for a reasonable time specified in
the notice but not exceeding 90 days (which period may not be extended or
renewed), if (i) an investment banking firm of recognized national standing
shall advise the Company and THL in writing that effecting the registration
would materially and adversely affect an offering of securities of the Company
the preparation of which had then been commenced or (ii) the Company has a bona
fide business reason for determining that it is in possession of material
non-public information the disclosure of which during the period specified in
such notice the Company believes, in its reasonable judgment, would not be in
the best interests of the Company.
(g) After the Company has effected two Demand
Registrations pursuant to this Section 5.1 of Common Stock, the
Institutional Shareholders, upon request of such Institutional Shareholders
owning a majority of the Shares acquired by such Institutional Shareholders on
the Closing Date, may request that the Company register shares of Registrable
Securities then owned by
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such Institutional Shareholders (an "Institutional Shareholder Demand
Registration"). In no event will the Company be required to effect more than one
such Institutional Shareholder Demand Registration. The provisions of this
Article 5 shall apply, mutatis mutandis, to any such Institutional Shareholder
Demand Registration.
(h) After the Transfer of Shares of Common Stock
representing more than 20% of the Shares collectively owned by the Equity
Investors of the Initial Ownership on a Fully Diluted basis owned by such Equity
Investors, the Primary Executives may request that the Company register Shares
which are Registrable Securities then owned by them (a "Primary Executive Demand
Registration"). In no event will the Company be required to effect more than
three such Primary Executive Demand Registrations. The provisions of this
Article 5 shall apply, mutatis mutandis, to any such Primary Executive Demand
Registration; provided, that, notwithstanding anything to the contrary herein,
(i) no Primary Executive Demand Registrations may be made during the six month
period following the Effective Time or within six months after the effective
date any other registration statement (other than registration statement on From
S-4 or S-8 or similar form), and (ii) the Company must use its best efforts to
effect such Primary Executive Demand Registration as soon as practicable, but in
no event later than 120 days following the date of the demand.
Section V.2 PIGGYBACK REGISTRATION. (a) If the Company
proposes to register any Equity Securities under the Securities Act, whether or
not for sale for its own account (including pursuant to a Demand Registration),
in connection with a public offering (other than a public offering pursuant to a
registration statement filed in connection with a transaction of the type
described in Rule 145 of the Securities Act or for the purpose of issuing
securities pursuant to an employee benefit plan) it will each such time, subject
to the provisions of Section 5.2(b) hereof, give prompt written notice at least
five days prior to the anticipated filing date of the registration statement
relating to such registration to all Shareholders and their respective
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Permitted Transferees (or, in the case of a Demand Registration to all
Shareholders and their Permitted Transferees other than the Shareholder making
the demand), which notice shall set forth such Shareholders' rights under this
Section 5.2 and shall offer all Shareholders the opportunity to include in such
registration statement such number of shares of Common Stock as each such
Shareholder may request (a "Piggyback Registration"). Upon the written request
of any such Shareholder made within 2 days (one of which shall be a Business
Day) after the receipt of notice from the Company (which request shall specify
the number of Registrable Securities intended to be disposed of by such
Shareholder), the Company will use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by such Shareholders, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered; provided, that (i) if such registration involves an Underwritten
Public Offering, all such Shareholders requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected as provided in Section 5.4(f) on the same terms and
conditions as apply to the Company or the other selling Shareholder, as
applicable, and (ii) if, at any time after giving written notice of its
intention to register on its own behalf any stock and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such stock, the
Company shall give written notice to all such Shareholders and, thereupon, shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration. No registration effected under this Section
5.2 on behalf of the Company shall relieve the Company of its obligations to
effect a Demand Registration, to the extent required by Section 5.1 hereof. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 5.2.
(b) If a registration pursuant to this Section 5.2
involves an Underwritten Public Offering
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(other than in the case of an Underwritten Public Offering resulting from a
Demand Registration, in which case the provisions with respect to priority of
inclusion in such offering set forth in Section 5.1(e) shall apply) and the
managing underwriter advises the Company that, in its view, the number of shares
of Common Stock which the Company and the selling Shareholders intend to include
in such registration exceeds the Maximum Offering Size, the Company will include
in such registration, in the following priority, up to the Maximum Offering
Size:
(i) first, so much of the Equity Securities proposed
to be registered for the account of the Company as would not cause the
offering to exceed the Maximum Offering Size; and
(ii) second, all Registrable Securities requested to
be included in such registration by any Shareholder pursuant to an
effective Piggyback Registration request (allocated, if necessary for
the offering not to exceed the Maximum Offering Size, pro rata among
such Shareholders on the basis of the relative number of shares of
Registrable Securities held by such Shareholder).
Section V.3 HOLDBACK AGREEMENTS. With respect to each and
every firmly Underwritten Public Offering, each Shareholder (collectively with
all of its Affiliates which are Shareholders) owning Shares representing more
than 1% of the then outstanding Shares (including Shares which would be held
upon any conversion or exercise of rights) agrees, and their Permitted
Transferees will agree, not to offer or sell any Shares (except for Shares, if
any, sold in that Public Offering) during the period which commences on the 14th
day prior to the effective date of the applicable registration statement for a
public offering of Shares (except as part of such registration) and ends on the
earlier of: (i) 180 days after the effective date of the registration statement
or (ii) any such shorter period as the Company and the lead managing underwriter
of an Underwritten Public Offering agree.
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Section V.4 REGISTRATION PROCEDURES. Whenever Shareholders
request that any Registrable Securities be registered pursuant to Section 5.1 or
5.2 hereof, the Company will, subject to the provisions of such Sections, use
its best efforts, or reasonable best efforts, as the case maybe, to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and in any
event within 60 days of the date of demand and in connection with any such
request:
(a) The Company will as expeditiously as possible prepare and
file with the SEC a registration statement on any form selected by
counsel for the Company and which form shall be available for the sale
of the Registrable Securities to be registered thereunder in accordance
with the intended method of distribution thereof, and use its best
efforts to cause such filed registration statement to become and remain
effective for a period of not less than 180 days (or such shorter
period in which all of the Registrable Securities of the Holders
included in such registration statement shall have actually been sold
thereunder).
(b) The Company will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement
thereto, furnish to each Shareholder and each underwriter, if any, of
the Registrable Securities covered by such registration statement
copies of such registration statement as proposed to be filed, and
thereafter the Company will furnish to such Shareholder and
underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as
such Shareholder or underwriter may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Shareholder. Each Shareholder shall have the
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<PAGE> 46
right to request that the Company modify any information contained in
such registration statement, amendment and supplement thereto
pertaining to such Shareholder and the Company shall use its reasonable
best efforts to comply with such request; provided, however, that the
Company shall not have any obligation to so modify any information if
so doing would cause the prospectus to contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(c) After the filing of the registration statement, the
Company will (i) cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, (ii) comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement during
the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement or supplement to such prospectus and (iii) promptly notify
each Shareholder holding Registrable Securities covered by such
registration statement of any stop order issued or threatened by the
SEC or any state securities commission under state blue sky laws and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or
qualify the Registrable Securities covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions in the United States as the Managing Underwriter or any
Shareholder or Shareholders holding such Registrable Securities
reasonably (in light of such Shareholder's intended plan of
distribution) requests and (ii) cause such Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities as may be nec-
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<PAGE> 47
essary by virtue of the business and operations of the Company and do
any and all other acts and things that may be reasonably necessary or
advisable to enable such Shareholder to consummate the disposition of
the Registrable Securities owned by such Shareholder; provided,
however, that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (d), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(e) The Company will immediately notify each Shareholder
holding such Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and promptly prepare and make available to each
such Shareholder and file with the SEC any such supplement or
amendment.
(f) In connection with (i) (A) any THL Demand Registration or
(B) any registration by the Company of Registrable Securities, the
Company shall appoint the underwriter or underwriters chosen by THL and
(ii) (A) any Institutional Shareholder Demand Registration or (B) any
Primary Executive Demand Registration, the Company shall appoint the
underwriter or underwriters chosen by Shareholders holding the majority
of the Registrable Securities to be registered; provided, that the
underwriter or underwriters identified in accordance with clauses
(ii)(A) and (ii)(B) shall be reasonably acceptable to the Company. The
Company will enter into customary agreements (including an underwriting
agreement in
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customary form) and take such other actions as are reasonably required
in order to expedite or facilitate the disposition of such Registrable
Securities, including the engagement of a "qualified independent
underwriter" in connection with the qualification of the underwriting
arrangements with the NASD.
(g) Upon execution of confidentiality agreements in form and
substance reasonably satisfactory to the Company, the Company will make
available for inspection by any Shareholder and any underwriter
participating in any disposition pursuant to a registration statement
being filed by the Company pursuant to this Section 5.4 and any
attorney, accountant or other professional retained by any such
Shareholder or underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") as shall be
reasonably requested by any such Person, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any Inspectors in connection with such registration
statement.
(h) The Company will furnish to each such Shareholder and to
each such underwriter, if any, a signed counterpart, addressed to such
underwriter and the participating Shareholders, of (i) an opinion or
opinions of counsel to the Company and (ii) a comfort letter or comfort
letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily
covered by opinions or comfort letters, as the case may be, as a
majority of such Shareholders or the managing underwriter therefor
reasonably requests.
(i) The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC and the relevant
state blue sky commissions, and make available to its securityholders,
as soon as reasonably practicable,
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an earnings statement covering a period of 12 months, beginning within
three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act.
(j) The Company may require each such Shareholder to promptly
furnish in writing to the Company information regarding the
distribution of the Registrable Securities as the Company may from time
to time reasonably request and such other information as may be legally
required in connection with such registration.
(k) Each such Shareholder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 5.4(e) hereof, such Shareholder will forthwith
discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
Shareholder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 5.4(e) hereof, and, if so directed
by the Company, such Shareholder will deliver to the Company all
copies, other than any permanent file copies then in such Shareholder's
possession, of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event that the
Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective
(including the period referred to in Section 5.4(a) hereof) by the
number of days during the period from and including the date of the
giving of notice pursuant to Section 5.4(e) hereof to the date when the
Company shall make available to such Shareholder a prospectus
supplemented or amended to conform with the requirements of Section
5.4(e) hereof.
(l) The Company will use its best efforts to list such
Registrable Securities on any securities exchange on which the Common
Stock is then listed or
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on NASDAQ if the Common Stock is then quoted on NASDAQ not later than
the effective date of such registration statement.
Section V.5 INDEMNIFICATION BY THE COMPANY. The Company agrees
to indemnify and hold harmless each Shareholder holding Registrable Securities
covered by a registration statement, its officers, directors, employees,
partners and agents, and each Person, if any, who controls such Shareholder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (and officers, directors, employees, partners and agents of such
controlling Persons) from and against any and all losses, claims, damages, joint
or several liabilities or expenses (including reasonable attorneys' fees and
expenses and reasonable costs of investigation) caused by any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission so made in strict conformity
with information furnished in writing to the Company by such Shareholder or on
such Shareholder's behalf expressly for use therein; provided that with respect
to any untrue statement or omission or alleged untrue statement or omission made
in any preliminary prospectus, or in any final prospectus, as the case may be,
the indemnity agreement contained in this paragraph shall not apply to the
extent that any such loss, claim, damage, liability or expense results from the
fact that a current copy of the final prospectus (or, in the case of a final
prospectus, the final prospectus as amended or supplemented) was not sent or
given to the Person asserting any such loss, claim, damage, liability or expense
at or prior to the written confirmation of the sale of the Registrable
Securities concerned to such Person if it is determined
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<PAGE> 51
that the Company has provided such current copy of such final prospectus (or
such amended or supplemented prospectus, as the case may be) to such Shareholder
in a timely manner prior to such sale and it was the responsibility of such
Shareholder under the Securities Act to provide such Person with a current copy
of the prospectus (or such amended or supplemented prospectus, as the case may
be) and such current copy of the final prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The Company also agrees
to indemnify any underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Shareholders provided in this
Section 5.5.
Section V.6 INDEMNIFICATION BY PARTICIPATING SHAREHOLDERS.
Each Shareholder holding Registrable Securities included in any registration
statement agrees, severally but not jointly, to indemnify and hold harmless the
Company, its officers, directors and agents and each Person (other than such
Shareholder), if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Shareholder, but only
(i) with respect to information furnished in writing by such Shareholder or on
such Shareholder's behalf expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus or (ii) to the extent that any
loss, claim, damage, liability or expense described in Section 5.5 results from
the fact that a current copy of the final prospectus (or, in the case of a
prospectus, the prospectus as amended or supplemented) was not sent or given to
the Person asserting any such loss, claim, damage, liability or expense at or
prior to the time of the written confirmation of the sale of the Registrable
Securities concerning such Person if it is determined that it was the
responsibility of such Shareholder to provide such Person with a current copy of
the final prospectus (or such amended or supplemented pro-
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spectus, as the case may be) and such current copy of the final prospectus (or
such amended or supplemented prospectus, as the case may be) would have cured
the defect giving rise to such loss, claim, damage, liability or expense. Each
such Shareholder shall be prepared, if required by the underwriting agreement,
to indemnify and hold harmless underwriters of the Registrable Securities, their
officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Company
provided in this Section 5.6. As a condition to including Registrable Securities
in any registration statement filed in accordance with Article 5 hereof, the
Company may require that it shall have received an undertaking reasonably
satisfactory to it from any underwriter to indemnify and hold it harmless to the
extent customarily provided by underwriters with respect to similar securities.
No Shareholder shall be liable under Section 5.6 for any
damage thereunder in excess of the net proceeds realized by such Shareholder in
the sale of the Registrable Securities of such Shareholder.
Section V.7 CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case
any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
this Article 5, such Person (an "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses; provided that the failure of
any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is materially prejudiced by such failure to notify. In any
such proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
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Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any and all losses, claims, damages, liabilities and expenses or
liability (to the extent stated above) by reason of such settlement or judgment.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such proceeding.
Section V.8 CONTRIBUTION. If the indemnification provided for
in this Article 5 is held by a court of competent jurisdiction to be unavailable
to the Indemnified Parties in respect of any losses, claims, damages or
liabilities referred to herein, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Company and the Shareholders holding Registrable
Securities covered by a registration statement and their related Indemnified
Parties on the one hand and the underwriters
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and their related Indemnified Parties on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and such
Shareholders on the one hand and the underwriters on the other, from the
offering of the Shareholders' Registrable Securities, or if such allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits but also the relative fault of the Company and
such Shareholders on the one hand and of such underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company and their related Indemnified
Parties on the one hand and each such Shareholder and their related Indemnified
Parties on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of each such Shareholder in connection with
such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by the Company and such
Shareholders on the one hand and such underwriters on the other shall be deemed
to be in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and such Shareholders bear to the total underwriting discounts
and commissions received by such underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Company and
such Shareholders on the one hand and of such underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and such
Shareholders or by such underwriters. The relative fault of the Company on the
one hand and of each such Shareholder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge,
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access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Shareholders agree that it would not be
just and equitable if contribution pursuant to this Section 5.8 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.8 no underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to securities purchased by such underwriter in such offering, less
the aggregate amount of any damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no Shareholder shall be required to contribute any
amount in excess of the amount by which the net proceeds realized on the sale of
the Registrable Securities of such Shareholder exceeds the amount of any damages
which such Shareholder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Each Shareholder's obligation
to contribute pursuant to this Section 5.8 is several in the proportion that the
proceeds of the offering received by such Shareholder bears to the total
proceeds of the offering received by all such Shareholders and not joint.
Section V.9 PARTICIPATION IN PUBLIC OFFERING. No Person may
participate in any Underwritten Public Offering hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
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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 reasonably
required under the terms of such underwriting arrangements and the provisions of
this Agreement in respect of registration rights.
Section V.10 COOPERATION BY THE COMPANY. In the event any
Shareholder shall Transfer any Registrable Securities pursuant to Rule 144A
under the Securities Act, the Company shall cooperate, to the extent
commercially reasonable, with such Shareholder and shall provide to such
Shareholder such information as such Shareholder shall reasonably request.
Section V.11 NO TRANSFER OF REGISTRATION RIGHTS. None of the
rights of Shareholders under this Article 5 shall be assignable by any
Shareholder to any Person acquiring securities of such Shareholder in any Public
Offering or pursuant to Rule 144A of the Securities Act.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
Section VI.1 CONFIDENTIALITY. (a) Each Shareholder hereby
agrees that Confidential Information (as defined below) furnished and to be
furnished to it was and will be made available in connection with such
Shareholder's investment in the Company. Each Shareholder agrees that it will
use the Confidential Information only in connection with its investment in the
Company and not for any other purpose. Each Shareholder further acknowledges and
agrees that it will not disclose any Confidential Information to any Person;
provided that Confidential Information may be disclosed (i) to such
Shareholder's Representatives (as defined below) in the normal course of the
performance of their duties or to any financial institution providing credit to
such Shareholder, (ii) to the extent required by applicable law, rule or
regulation (including complying with any oral or
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written questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process to which a Shareholder
is subject; provided that such Shareholder gives the Company prompt notice of
such request(s), to the extent practicable, so that the Company may seek an
appropriate protective order or similar relief (and the Shareholder shall
cooperate with such efforts by the Company, and shall in any event make only the
minimum disclosure required by such law, rule or regulation)), (iii) to any
Person to whom such Shareholder is contemplating a Transfer of its Shares
(provided that such Transfer would not be in violation of the provisions of this
Agreement and as long as such potential Transferee is advised of the
confidential nature of such information and agrees to be bound by a
confidentiality agreement in form and substance satisfactory to the Company (it
being understood that a confidentiality agreement consistent with the provisions
hereof shall be satisfactory to the Company)) or (iv) if the prior written
consent of the Board shall have been obtained. Nothing contained herein shall
prevent the use (subject, to the extent possible, to a protective order) of
Confidential Information in connection with the assertion or defense of any
claim by or against the Company or any Shareholder. Notwithstanding the
foregoing, each Shareholder or Affiliate of a Shareholder who engages
principally in the business of effecting or recommending transactions, either as
a principal or as agent on behalf of third parties, in, relating to or involving
securities (including public securities of the Company or its subsidiaries) and
including, without limitation, transactions in which such Shareholder or
Affiliate may act as an investment advisor, an investment company, a broker or
dealer in securities, an underwriter or placement agent of securities, a market
maker, a specialist, an arbitrageur, a block positioner or a provider of
securities research, may engage in such activities with respect to securities of
the Company so long as, prior to engaging in any such activities (i) such
Shareholder has established an effective "ethical wall" between individuals
receiving Confidential Information and those individuals (including Affiliates)
involved in effectuating trades or other transactions involving such securities
of the
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Company or its subsidiaries, which "ethical wall" is designed to prevent any
transfer, directly or indirectly, of Confidential Information and (ii) such
purchases, sales, dealings or other transactions are made only in accordance
with such "ethical wall" policies and procedures in accordance with applicable
law, rule or regulation.
(b) "Confidential Information" means any information
concerning the Company and Persons which are or become its subsidiaries or the
financial condition, business, operations or prospects of the Company and
Persons which are or become its subsidiaries in the possession of or furnished
to any Shareholder (including, without limitation by virtue of its present or
former right to designate a director of the Company); provided that the term
"Confidential Information" does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by a
Shareholder or its partners, directors, officers, employees, agents, counsel,
investment advisers or representatives (all such persons being collectively
referred to as "Representatives") in violation of the Merger Agreement or this
Agreement, (ii) is or was available to such Shareholder on a nonconfidential
basis prior to its disclosure to such Shareholder or its Representatives by the
Company or (iii) was or becomes available to such Shareholder on a
non-confidential basis from a source other than the Company, provided that such
source is or was (at the time of receipt of the relevant information) not, to
the best of such Shareholder's knowledge, bound by a confidentiality agreement
with (or other confidentiality obligation to) the Company or another Person.
Section VI.2 REPORTS. The Company will furnish all the Equity
Investors with the quarterly and annual financial reports that the Company is
required to file with the Securities and Exchange Commission pursuant to Section
13 or Section 15(d) of the Exchange Act promptly after the filing thereof or, in
the event the Company is not required to file such reports, quarterly and annual
reports containing the same information as
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would be required in such reports on the date that such reports would otherwise
be filed.
Section VI.3 LIMITATIONS ON SUBSEQUENT REGISTRATION. The
Company shall not enter into any agreement with any holder or prospective holder
of any securities of the Company (a) which conflicts with the provision of
Article V, (b) that would allow such holder or prospective holder to include
such securities in any registration filed pursuant to Section 5.1 or 5.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of such securities would not reduce the amount of the Registrable
Securities of the Shareholders included therein or (c) on terms otherwise more
favorable than this Agreement.
Section VI.4 LIMITATION ON PURCHASE OF EQUITY SECURITIES.
Until the earlier to occur of (i) the seventh anniversary of the Closing Date or
(ii) the date on which at least 40% of the outstanding Common Stock on a Fully
Diluted basis of the Company is held by Persons other than the Shareholders (the
"Trigger Date"), no Non-THL Shareholder shall acquire any Equity Securities
except if (A) with respect to each Institutional Shareholder, such Shareholder
may acquire Equity Securities in a purchase of Equity Securities pursuant to
Section 4.3 or 4.4 hereof, (B) with respect to each Management Shareholder, such
Shareholder may acquire Equity Securities either in a purchase of Equity
Securities pursuant to Section 4.3 or 4.4 hereof or in any other transaction so
long as THL has been notified at least five Business Days in advance and if
given a reasonable opportunity to consult with such Shareholder prior to the
purchase or (C) in a Transfer from any other Non-THL Shareholder which is
otherwise permitted under the terms of Article 3 hereof.
Section VI.5 REGULATED STOCKHOLDERS.
(a) If a Regulated Stockholder determines that it has a
Regulatory Problem, the Company agrees to take
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all such actions, subject to Applicable Law, as are reasonably requested by such
Regulated Stockholder (i) to effectuate and facilitate any transfer by such
Regulated Stockholder of any Equity Securities of the Company then held by such
Regulated Stockholder to any Person designated by such Regulated Stockholder,
(ii) to permit such Regulated Stockholder (or any Affiliate of such Regulated
Stockholder) to exchange all or any portion of the voting Equity Securities then
held by such Person on a share-for-share basis for shares of a class of
non-voting Equity Securities of the Company, which non-voting Equity Securities
shall be convertible into voting Equity Securities on such terms as are
requested by such Regulated Stockholder in light of regulatory considerations
then prevailing, and (iii) to continue and preserve the respective allocation of
the voting interests with respect to the Company provided for in this Agreement
and with respect to such Regulated Stockholder's ownership of the Company's
voting Equity Securities. Such actions may include, without limitation, (x)
entering into such additional agreements as are reasonably requested by such
Regulated Stockholder to permit any Person(s) designated by such Regulated
Stockholder to exercise any voting power which is relinquished by such Regulated
Stockholder upon any exchange of voting Equity Securities for non-voting Equity
Securities of the Company, and (y) entering into such additional agreements,
adopting such amendments to the charter documents of the Company and taking such
additional actions as are reasonably requested by such Regulated Stockholder in
order to effectuate the intent of the foregoing.
(b) If a Regulated Stockholder has the right or opportunity to
acquire any of the Company's Equity Securities from the Company, any Stockholder
or any other Person (as the result of a preemptive offer, pro rata offer or
otherwise), at such Regulated Stockholder's request, the Company will offer to
sell (or if the Company is not the seller, to cooperate with the seller and such
Regulated Stockholder to permit such seller to sell) such non-voting Equity
Securities on the same terms as would have existed had such Regulated
Stockholder acquired the Equity Securities so offered and immediately
55
<PAGE> 61
requested their exchange for non-voting Equity Securities pursuant to clause (a)
above.
(c) The Company agrees not to amend or waive the voting or
other provisions of this Agreement or the Company's charter documents if such
amendment or waiver would cause any Regulated Stockholder to have a Regulatory
Problem; provided that any such Regulated Stockholder notifies the Company that
it would have a Regulatory Problem promptly after it has notice of such
amendment or waiver.
ARTICLE VII
MISCELLANEOUS
Section VII.1 ENTIRE AGREEMENT. This Agreement, the Merger
Agreement, the Subscription Agreement and the Equity Warrant Acquisition
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.
Section VII.2 BINDING EFFECT; BENEFIT. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, successors, legal representatives and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer on any
Person other than the parties hereto, and their respective heirs, successors,
legal representatives and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
Section VII.3 ASSIGNABILITY. (a) Neither this Agreement nor
any right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by the Company or any Shareholder; provided that any Person
acquiring shares of Common Stock who is
56
<PAGE> 62
required by the terms of this Agreement to become a party hereto shall execute
and deliver to the Company an agreement to be bound by this Agreement and shall
thenceforth be a "Shareholder."
(b) Any Permitted Transferee of a Management
Shareholder who shall become a party hereto shall be deemed a "Management
Shareholder."
(c) Any Permitted Transferee of an Institutional
Shareholder who shall become a party to this Agreement shall be deemed an
"Institutional Shareholder."
Section VII.4 AMENDMENT; WAIVER; TERMINATION. (a No provision
of this Agreement may be waived except by an instrument in writing executed by
the party against whom the waiver is to be effective. No provision of this
Agreement may be amended or otherwise modified except by an instrument in
writing executed by the Company with approval of the Board of Directors and
holders of at least 50% of the shares of Common Stock held by the parties to
this Agreement at the time of such proposed amendment or modification.
Notwithstanding the foregoing or any other provision of this Agreement, THL may
at any time, including after completion of a Qualifying Public Offering, and
without any other action by any other party, effectuate an amendment to this
Agreement to delete in its entirety Section 4.3(a); provided, however, that if
THL causes such Section to be deleted, so long as the THL Entities own at least
10% of their Initial Ownership of shares of Common Stock, the THL Entities shall
not purchase any New Securities from the Company unless the Company offers each
Non-THL Shareholder the right to participate in the purchase of such New
Securities in accordance with Section 4.3(a)(iii) as if it continued to be in
effect.
(b) In addition, any amendment or modification of
any provision of this Agreement that would adversely affect THL may be effected
only with the consent of THL.
57
<PAGE> 63
(c) In addition, any amendment or modification of
any provision of this Agreement that would adversely affect any (i)
Institutional Shareholder may be effected only with the consent of such
Institutional Shareholders holding at least 66 2/3% of the shares of Common
Stock held by such Institutional Shareholders or (ii) Management Shareholder may
be effected only with the consent of the Management Shareholders (which must
include the Primary Executives) holding at least 50% of the shares of Common
Stock held by the Management Shareholders.
(d) This Agreement shall terminate on January 21,
2008 unless earlier terminated.
Section VII.5 NOTICES. (a) All notices and other
communications given or made pursuant hereto or pursuant to any other agreement
among the parties, unless otherwise specified, shall be in writing and shall be
deemed to have been duly given and received when sent by fax (with confirmation
in writing via first class U.S. mail) or delivered personally or on the third
Business Day after being sent by registered or certified U.S. mail (postage
prepaid, return receipt requested) to the parties at the fax number or address
set forth below or at such other addresses as shall be furnished by the parties
by like notice:
(i) if to the Company, to:
Fisher Scientific International, Inc.
Liberty Lane
Hampton, New Hampshire 03842
Attention: Todd M. DuChene, Esq.
Fax: (603) 929-2703
(ii) if to a Management Shareholder who holds Equity
Securities exclusively through the Rabbi Trust, to such
Shareholder's attention at the following address:
Mellon Bank
1 Mellon Bank Building
58
<PAGE> 64
500 Grant Street
Pittsburgh, Pennsylvania 15219
Fax: (412)236-4222
(iii) if to any other Management Shareholder, to such
Shareholder's attention at the following address:
Fisher Scientific International, Inc.
Liberty Lane
Hampton, New Hampshire 03842
Fax: (603) 929-2703
(iv) if to a THL Associate, to such Shareholder's attention at
the following address:
Thomas H. Lee Company
75 State Street
Suite 2600
Boston, Massachusetts 02109
Fax: (617) 227-3514
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Eric L. Cochran, Esq.
Fax: (212) 735-2000
(v) if to any other Shareholder, to such Shareholder at the
address specified by such Shareholder on the signature pages
of this Agreement.
Any Shareholder may change its notice address by providing
notice to the Company with a copy, in the case of the Non-THL Shareholders, to
Thomas H. Lee Company
75 State Street
Suite 2600
Boston, Massachusetts 02109
59
<PAGE> 65
Attention: Anthony J. DiNovi
Fax: (617) 227-3514
Any Person who becomes a Shareholder shall provide its address
and fax number to the Company, which shall promptly provide such information to
each Non-THL Shareholder.
(b) Notices required to be given pursuant to
Sections 5.1(a) and 5.1(b) and Section 5.2 by the Company shall be deemed given
only if such notices are also be given telephonically and by fax to the
following persons (or any other individual the respective entities may designate
in writing to the Company to replace such person):
(i) for the benefit of the THL Entities, to Anthony
J. DiNovi (tel: 617-227-1050; fax: 617-227-3514), with a copy to Eric
L. Cochran (tel: 212-735-2596; fax: 212-735-2000);
(ii) for the benefit of the Management
Shareholders, to Todd DuChene (tel: 603-926-2340; fax: 603-929-2703),
with a copy to Eric Press (tel: 212-403-1314; fax: 212-403-2000);
(iii) for the benefit of the DLJ Entities, to
Thompson Dean (tel: 212-892-4460; fax: 212-892-7272) and Kirk Wortman
(tel: 212-892-7041; fax: 212-892-7272), with a copy to George R. Bason,
Jr. (tel: 212-450-4000; fax: 212-450-4800);
(iv) for the benefit of Chase Equity, to Jonas
Steinman (tel: 212-622-3028; fax: 212-622-3101), with a copy to John J.
Suydam (tel: 212-408-2471; fax 212-408-2420);
(v) for the benefit of the Merrill Lynch Entities,
to Robert Tully (tel: 212-236-7304; fax: 212-236-7360) and Margaret
Nelson (tel: 212-449-9812; fax: 212-449-9813), with a copy to Deborah
Zajkowski (tel: 212-449-2973; fax: 212-449-1119).
60
<PAGE> 66
Section VII.6 HEADINGS. The headings contained in this
Agreement are for convenience only and shall not affect the meaning or
interpretation of this Agreement.
Section VII.7 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
Section VII.8 APPLICABLE LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware, without
regard to the conflicts of laws rules of such state.
Section VII.9 SPECIFIC PERFORMANCE. Each party hereto
acknowledges that the remedies at law of the other parties for a breach or
threatened breach of this Agreement would be inadequate and, in recognition of
this fact, any party to this Agreement, without posting any bond, and in
addition to all other remedies which may be available, shall be entitled to
obtain equitable relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any other equitable
remedy which may then be available.
Section VII.10 CONSENT TO JURISDICTION; EXPENSES. (a) Any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in any Federal Court sitting in the State
of Delaware or any Delaware State court sitting in Delaware, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court
61
<PAGE> 67
has been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party by any method provided in
Section 7.5 shall be deemed effective service of process on such party and
consents to the personal jurisdiction of any Federal Court sitting in the State
of Delaware, or any Delaware State court sitting in Delaware.
(b) In any dispute arising under this Agreement among any of
the parties hereto, the costs and expenses (including, without limitation, the
reasonable fees and expenses of counsel) incurred by the prevailing party shall
be paid by the party that does not prevail.
Section VII.11 REPRESENTATIVE.
(a) Each THL Entity hereby designates and appoints
(and each Permitted Transferee of each such THL Entities is hereby deemed to
have so designated and appointed) each of Anthony J. DiNovi, Scott Sperling and
Kent Weldon, as his attorney-in-fact with full power of substitution for each of
them (the "THL Entities' Representative"), to serve as the representative of
each such person to perform all such acts as are required, authorized or
contemplated by this Agreement to be performed by such person and hereby
acknowledges that the THL Entities' Representative shall be the only person
authorized to take any action so required, authorized or contemplated by this
Agreement by each such person. Each such person further acknowledges that the
foregoing appointment and designation shall be deemed to be coupled with an
interest and shall survive the death or incapacity of such person. Each such
person hereby authorizes (and each such Permitted Transferee shall be deemed to
have authorized) the other parties hereto to disregard any notice or other
action taken by such person pursuant to this Agreement except for the THL
Entities' Representative. The other parties hereto are and will be entitled to
rely on any action so taken or any notice given by the THL Entities'
Representative and are and will be
62
<PAGE> 68
entitled and authorized to give notices only to the THL Entities' Representative
for any notice contemplated by this Agreement to be given to any such person. A
successor to the THL Entities' Representative may be chosen by a majority in
interest of the THL Entities' Shareholders, provided that notice thereof is
given by the new THL Entities' Representative to the Company and to each Non-THL
Shareholder.
(b) Each DLJ Entity hereby designates and appoints
(and each Permitted Transferee of each such DLJ Entities' is
hereby deemed to have so designated and appointed) DLJ Merchant Banking II,
Inc., as his attorney-in-fact with full power of substitution for each of them
(the "DLJ Entities' Representative"), to serve as the representative of each
such person to perform all such acts (other than voting of shares of Common
Stock) as are required, authorized or contemplated by this Agreement to be
performed by such person and hereby acknowledges that the DLJ Entities'
Representative shall be the only person authorized to take any action so
required, authorized or contemplated by this Agreement by each such person. Each
such person hereby authorizes (and each such Permitted Transferee shall be
deemed to have authorized) the other parties hereto to disregard any notice or
other action taken by such person pursuant to this Agreement except for the DLJ
Entities' Representative. The other parties hereto are and will be entitled to
rely on any action so taken or any notice given by the DLJ Entities'
Representative and are and will be entitled and authorized to give notices only
to the DLJ Entities' Representative for any notice contemplated by this
Agreement to be given to any such person. A successor to the DLJ Entities'
Representative may be chosen by a majority in interest of the DLJ Entities'
Shareholders, provided that notice thereof is given by the new DLJ Entities'
Representative to the Company and to each other DLJ Entity Shareholder.
(c) Each Merrill Lynch Entity hereby designates and
appoints (and each Permitted Transferee of each such Merrill
Lynch Entities is hereby deemed to have so designated and appointed) KECALP
Inc., as his
63
<PAGE> 69
attorney-in-fact with full power of substitution for each of them (the "Merrill
Lynch Entities Representative"), to serve as the representative of each such
person to perform all such acts as are required, authorized or contemplated by
this Agreement to be performed by such person and hereby acknowledges that the
Merrill Lynch Entities Representative shall be the only person authorized to
take any action so required, authorized or contemplated by this Agreement by
each such person. Each such person further acknowledges that the foregoing
appointment and designation shall be deemed to be coupled with an interest and
shall survive the death or incapacity of such person. Each such person hereby
authorizes (and each such Permitted Transferee shall be deemed to have
authorized) the other parties hereby to disregard any notice or other action
taken by such person pursuant to this Agreement except for the Merrill Lynch
Entities Representative. The other parties hereto are and will be entitled to
rely on any action so taken or any notice given by the Merrill Lynch Entities
Representative and are and will be entitled and authorized to give notices only
to the Merrill Lynch Entities Representative for any notice contemplated by this
Agreement to be given to any such person. A successor to the Merrill Lynch
Entities Representative may be chosen by a majority in interest of the Merrill
Lynch Entities' Shareholders, provided that notice thereof is given by the new
Merrill Lynch Entities Representative to the Company and to each other Merrill
Lynch Entity Shareholder.
(d) Each Management Shareholder hereby designates
and appoints (and each Permitted Transferee of each such Management Shareholder
is hereby deemed to have so designated and appointed) Paul M. Meister, as his
attorney-in-fact with full power of substitution for each of them (the
"Management Representative"), to serve as the representative of each such person
to perform all such acts as are required, authorized or contemplated by this
Agreement to be performed by such person and hereby acknowledges that the
Management Representative shall be the only person authorized to take any action
so required, authorized or contemplated by this Agreement by each such person.
Each such person further acknowledges
64
<PAGE> 70
that the foregoing appointment and designation shall be deemed to be coupled
with an interest and shall survive the death or incapacity of such person. Each
such person hereby authorizes (and each such Permitted Transferee shall be
deemed to have authorized) the other parties hereby to disregard any notice or
other action taken by such person pursuant to this Agreement except for the
Management Representative. The other parties hereto are and will be entitled to
rely on any action so taken or any notice given by the Management Representative
and are and will be entitled and authorized to give notices only to the
Management Representative for any notice contemplated by this Agreement to be
given to any such person. A successor to the Management Representative may be
chosen by a majority in interest of the Management Shareholders, provided that
notice thereof is given by the new Management Representative to the Company and
to each other Management Shareholder.
Section VII.12 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable to any extent under applicable law, such
provision shall be interpreted as if it were written so as to be enforceable to
the maximum possible extent so as to effectuate the parties' intent to the
maximum possible extent, and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in accordance
with its terms to the maximum extent permitted by law.
65
<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
FISHER SCIENTIFIC INTERNATIONAL INC.
By: /s/ TODD M. DuCHENE
---------------------------------------
Name: Todd M. DuChene
Title: Vice President - General Counsel
and Secretary
<PAGE> 72
THL Equity Shareholders:
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By: /s/
------------------------------------
Name:
Title:
THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By: /s/
------------------------------------
Name:
Title:
<PAGE> 73
THL FSI EQUITY INVESTORS, L.P.
By: THL Equity Advisors III
Limited Partnership, as
General Partner
By: THL Equity Trust III,
as General Partner
By: /s/
------------------------------------
Name:
Title:
THL-CCI LIMITED PARTNERSHIP
By: THL Investment Management
Corp.,as General Partner
By: /s/
------------------------------------
Name:
Title:
<PAGE> 74
Management Shareholders:
By: /s/
------------------------------------
Name: Paul M. Montrone
By: /s/
------------------------------------
Name: Paul M. Meister
By: /s/
------------------------------------
Name: Kevin P. Clark
By: /s/
------------------------------------
Name: Paul F. Patek
By: /s/
------------------------------------
Name: Todd M. DuChene
<PAGE> 75
DLJ Entities' Shareholders:
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
DLJ MERCHANT BANKING PARTNERS II-A, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
DLJ OFFSHORE PARTNERS II, C.V.
By: DLJ Merchant Banking II, Inc.,
as advisory general partner
By: /s/
------------------------------------
Name:
Title:
<PAGE> 76
DLJ DIVERSIFIED PARTNERS, L.P.
By: DLJ Diversified Partners, Inc.,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
DLJ DIVERSIFIED PARTNERS - A, L.P.
By: DLJ Diversified Partners, Inc.,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
DLJ MILLENNIUM PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
<PAGE> 77
DLJ MILLENNIUM PARTNERS - A, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
DLJMB FUNDING II, INC.
By: /s/
------------------------------------
Name:
Title:
UK INVESTMENT PLAN 1997 PARTNERS
By: Donaldson, Lufkin & Jenrette Inc.,
as general partner
By: /s/
------------------------------------
Name:
Title:
<PAGE> 78
DLJ EAB PARTNERS, L.P.
By: DLJ LBO Plans Management Corporation,
as managing general partner
By: /s/
------------------------------------
Name:
Title:
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation,
as general partner
By: /s/
------------------------------------
Name:
Title:
DLJ FIRST ESC, L.P.
By: DLJ LBO Plans Management Corporation,
as general partner
By: /s/
------------------------------------
Name:
Title:
The address for each of the DLJ
Entities listed above is:
c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, New York 10172
Fax: (212) 892-7272
<PAGE> 79
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
By: /s/
------------------------------------
Name:
Title:
Address:
380 Madison Avenue
New York, NY 10017
<PAGE> 80
Merrill Lynch Entities:
ML IBK POSITIONS, INC.
By: /s/
------------------------------------
Name:
Title:
KECALP INC.
By: /s/
------------------------------------
Name:
Title:
MERRILL LYNCH KECALP L.P. 1997
By: KECALP Inc., as general partner
By: /s/
------------------------------------
Name:
Title:
The address for each of the Merrill
Lynch Entities listed above is:
255 Liberty Street
New York, NY 10080
Fax: (212) 236-7584
<PAGE> 81
Individual Shareholders:
By: /s/
------------------------------------
Name: David V. Harkins
By: /s/
------------------------------------
Name: The 1995 Harkins Gift Trust
By: /s/
------------------------------------
Name: Thomas R. Shepherd
Money Purchase Pension Plan
By: /s/
------------------------------------
Name: Scott A. Schoen
By: /s/
------------------------------------
Name: C. Hunter Boll
By: /s/
------------------------------------
Name: Scott M. Sperling
By: /s/
------------------------------------
Name: Sperling Family Limited
Partnership
By: /s/
------------------------------------
Name: Anthony J. DiNovi
By: /s/
------------------------------------
Name: Thomas M. Hagerty
By: /s/
------------------------------------
Name: Warren C. Smith, Jr.
<PAGE> 82
By: /s/
------------------------------------
Name: Seth W. Lawry
By: /s/
------------------------------------
Name: Joseph J. Incandela
By: /s/
------------------------------------
Name: Kent R. Weldon
By: /s/
------------------------------------
Name: Terrence M. Mullen
By: /s/
------------------------------------
Name: Todd M. Abbrecht
By: /s/
------------------------------------
Name: Wendy L. Masler
By: /s/
------------------------------------
Name: THL-CCI Limited Partnership
By: Wendy L. Master
Title: Vice President
By: /s/
------------------------------------
Name: Andrew D. Flaster
By: /s/
------------------------------------
Name: First Trust Co. FBO
Kristina A. Watts
<PAGE> 83
By: /s/
------------------------------------
Name: Charles Robins
By: /s/
------------------------------------
Name: James Westra
By: /s/
------------------------------------
Name: Charles A. Brizius
<PAGE> 1
EXHIBIT 21.1
FISHER SCIENTIFIC INTERNATIONAL INC.
WORLDWIDE SUBSIDIARY LIST
<TABLE>
<CAPTION>
PERCENTAGE STATE/COUNTRY
OWNERSHIP INCORPORATION
---------- --------------
<S> <C> <C>
Fisher Scientific Company L.L.C............................. 100 Delaware
Fisher Scientific Limited.............................. 100 Canada
Fisher Hamilton Inc......................................... 100 Delaware
Systems Manufacturing Corporation........................... 100 Delaware
Applied Scientific Corporation.............................. 100 California
Fisher Scientific GmbH...................................... 100 Germany
Kuhn + Bayer GmbH...................................... 100 Germany
Fisher Scientific of the Netherlands B.V.................... 100 Netherlands
Fisher Scientific B.V.................................. 100 Netherlands
Fisher Scientific Worldwide Inc............................. 100 Delaware
Acros Organics N.V..................................... 100 Belgium
Resco Trade N.V...................................... 100 Belgium
Fisher Chimica N.V..................................... 100 Belgium
Fisher Scientific Holding Company...................... 100 Delaware
Fisher Scientific Holding U.K., Limited.............. 100 United Kingdom
Fisher Scientific U.K., Limited...................... 100 United Kingdom
Orme Scientific Limited..................................... 100 United Kingdom
Fisher Scientific Holdings France S.A....................... 100 France
Bioblock Scientific S.A................................ 100 France
Fisher Scientific S.A.................................. 100 France
Fisher Technology Group Inc................................. 100 Delaware
ProcureNet, Inc............................................. 100 Delaware
SourceSys, Inc......................................... 73.15 Delaware
Structured Computer Systems, Inc....................... 100 Connecticut
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-46728, 33-86830, 333-07391, 333-18563 and 333-28789 of Fisher Scientific
International Inc. on Forms S-8 of our report dated February 26, 1999 appearing
in this Annual Report on Form 10-K of Fisher Scientific International Inc. for
the year ended December 31, 1998.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1998 AND THE INCOME STATEMENT FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 66,000
<SECURITIES> 0
<RECEIVABLES> 206,000
<ALLOWANCES> 0
<INVENTORY> 221,000
<CURRENT-ASSETS> 561,000
<PP&E> 246,000
<DEPRECIATION> 53,000
<TOTAL-ASSETS> 1,358,000
<CURRENT-LIABILITIES> 453,000
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> (325,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,358,000
<SALES> 2,252,000
<TOTAL-REVENUES> 2,252,000
<CGS> 636,000
<TOTAL-COSTS> 636,000
<OTHER-EXPENSES> 597,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,000
<INCOME-PRETAX> (60,000)
<INCOME-TAX> 11,000
<INCOME-CONTINUING> (49,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,000)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
